Landlord and tenant – Service charges – Qualifying long-term agreement – Tenant appealing against decision of First-tier Tribunal regarding management services element of service charge – Whether agreement between landlord and service management company was qualifying long-term agreement – Appeal allowed
The appellant was the tenant of a one-bedroomed flat at 60A Hanover Gate Mansions, Park Road, London NW1 which he held under a long lease. He was one of 180 lessees at Hanover Gate Mansions, which consisted of six purpose-built blocks of Victorian and Edwardian mansion flats opposite Regent’s Park. The first respondent was the freeholder and the appellant’s landlord. The second respondent was the management company owned by the first respondent. From June 2017 management services had been provided in the blocks by F Ltd and the appellant disputed the service charge relating to F’s charges.
The lease provided for an estimated service charge to be paid in advance, with over- or under-payment dealt with by later adjustment. The appellant was charged £218.73 in 2017/18 in respect of the cost of employing F. He said that the contract between F and the second respondent was a qualifying long-term agreement pursuant to sections 20 and 20ZA of the Landlord and Tenant Act 1985, and that because no consultation had been carried out he was liable to pay only £100.
The respondents confirmed that F had commenced provision of services on 12 June 2017. However, they said that that was a trial period and that at some point a form of periodic contract would have come into being on that trial basis.
The First-tier Tribunal (FTT) found against the appellant on the basis that the contract with F was of less than one year’s duration and therefore was not a qualifying long-term agreement. There was no formal written contract, but an oral contract evidenced by performance and payment. The tribunal accepted the respondents’ argument, relying on the judgment in Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, that an oral contract based on the draft could have taken effect only when payment was made on 27 June 2017. The appellant appealed.
Held: The appeal was allowed.
(1) It was not entirely clear that the FTT had made a finding of fact that the contract was in substantially the terms of the draft contract rather than just an informal trial arrangement. But it was clear that there was no finding of fact that the parties contracted on a trial basis, and the only alternative was that there was a contract in substantially the same terms as the draft. It was difficult to see how any other finding could have been open to the FTT. There was no correspondence before the FTT evidencing a trial basis. On the contrary, the correspondence indicated that the contract was satisfactory to all and lacked only a start date; at some point that start date was filled in, so that the draft took the form in which it was supplied to the appellant and placed before the FTT; that start date was 12 June 2017; that was the date on which the work commenced. It was unlikely that F would have worked on any other than its standard terms, subject to any negotiated changes. The draft was satisfactory to all and appeared to have been accepted by performance. The FTT seemed to have accepted that the contract that took effect by performance was in the terms of the draft, but that it started too late to be a qualifying long-term agreement. Accordingly, the only point now in issue was the start date of the contract.
(2) It appeared that the FTT had misconstrued the effect of the decision of the House of Lords in Brogden where the precise point at which the contract came into effect was not in issue and it was clear from the correspondence that the supply was in accordance with the terms of a new arrangement between the parties. Brogden was not authority for the proposition that a contract took effect in the present circumstances only when goods or services were paid for. The members took it to be authority for the proposition that a contract taking effect by performance in the terms of a draft took effect only when goods and services were paid for. That was not the case. If there was a contract between F and the second respondent in the terms of the draft, and if that contract took effect by performance, in June 2017, then it took effect when performance commenced on 12 June. Accordingly, the agreement with F was a qualifying long-term agreement; consultation should have taken place; it was agreed that it did not, and therefore the appellant’s liability for that element of the 2017/18 service charge was limited to £100.
The appellant appeared in person. The respondents did not appear and were not represented.
Eileen O’Grady, barrister
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