Lease – Service charge – Qualifying long term agreement – Section 20ZA of the Landlord and Tenant Act 1985 — Claimant making long-term service agreement in relation to buildings not constructed or not let at time of agreement – Whether “the landlord” including future or prospective landlords – Whether consultation requirements applying – Judgment for claimant
The first claimant constructed a development comprising a mixed-use estate including four residential blocks. By an agreement made between the first claimant and a company (U Ltd), U Ltd agreed to be the sole provider of hot water and electricity to each of the residential flats on the development and the first claimant agreed to pay a monthly charge for a term of 25 years. The lessees (including the defendant) agreed to pay a proportion of the cost of providing and maintaining the plant for the supply of the heat and power to the flats and the cost of the domestic electricity, hot water and central heating consumed at the flat (that was the subject of the lease) with all associated costs.
Section 19 of the Landlord and Tenant Act 1985 provided that no more than reasonable service charges were payable by a tenant to a landlord. Section 20 provided for consultation requirements to apply to qualifying long-term agreements (“QLTA”), under which costs would be incurred which would form the basis of service charges, to be designated by the secretary of state. A QLTA was defined by section 20 ZA as “an agreement entered into, by or on behalf of, the landlord or a superior landlord, for a term of more than 12 months”.
The claimant brought proceedings to determine whether that applied to a long-term agreement entered into in relation to buildings which had not yet been constructed, or which were not let at the time of the agreement. The claimant argued that the section could not apply because it referred to “the landlord”, denoting an existing tenancy, and because it would not be a sensible construction of the provisions that the owner of the land or building should be required to consult, where there would be nobody with whom to consult.
The defendant submitted that there was no requirement for an identifiable tenant or subtenant at the time the agreement was entered into; “the landlord” had to include future or prospective landlords to avoid a major gap in the legislation. If consultation was impossible, the Leasehold Valuation Tribunal could dispense with it on application. The Service Charges (Consultation Requirements) (England) Regulations 2003 (SI 2003/1987) assumed that it did apply to buildings not yet in existence or not yet let and the 1985 Act had to be construed consistently with them.
Held: Judgment was given for the claimant.
(1) The claimants’ submissions were correct and accordingly the QLTA definition did not apply to the agreement that was the subject matter of the action. The section did not say that “the landlord” was someone who might in the future become a landlord, and there was no proper basis for stretching its meaning. The regulations passed under the 1985 Act assumed that it did have that meaning but, although potentially relevant to its interpretation, appeared to have been drafted without much attention to the statutory provisions and therefore carried no weight or conviction as evidence of the legislative intention: Paddington Basin Developments Ltd v West End Quay Estate Management Ltd [2010] EWHC 833 (Ch); [2010] 2 EGLR 35; [2010] 27 EG 86 and Daejan Investments Ltd v Benson [2013] UKSC 14; [2013] 1 EGLR 4 considered.
(2) The consultation requirements of the 1985 Act had no application in the present case. On the evidence, the consultation on draft regulations strongly suggested that their draftsman had not focussed on the issue at all, but simply assumed that the 1985 Act applied to long term agreements entered into when no part of the building was let, without applying his mind to whether that was so. Further, the wording of the consultation demonstrated that the person who wrote it had been unaware that there had been any issue whether the Act applied where there was no letting and simply assuamed, without considering the meaning or intention of the principal legislation, that it did apply. Therefore, neither the regulations nor the consultation document had any persuasive power as an aid to the interpretation of the principal Act, and did not come remotely near dislodging what was otherwise the clear meaning of section 20ZA: Hanlon v The Law Society [1981] AC 124 applied; R (on the application of Eddison First Ltd v Central Valuation Officer [2003] 4 All ER 209 considered.
Philip Rainey QC and James Fieldsend (instructed by Osborne Clarke) appeared for the claimants; Ranjit Bhose QC (instructed by Devonshires) appeared for the defendant.
Eileen O’Grady, barrister
