For the purposes of sections 20 and 20ZA of the Landlord and Tenant Act 1985 (the Act), a qualifying long-term agreement (QLTA) is an agreement entered into by or on behalf of the landlord for a period exceeding 12 months.
Landlords must consult with their tenants before entering into a QLTA if the costs payable under the agreement in any accounting period, by any one tenant, exceed £100. A failure to consult or obtain dispensation will limit the amount the landlord can recover for those services to £100 per tenant in any one accounting period.
In Ghosh v Hanover Gate Mansions Ltd and another [2019] UKUT 290 (LC) a dispute arose as to whether an agreement entered into by the second respondent, the management company, and a third party management service company was a QLTA.
Before the First-tier Tribunal (FTT), it was agreed between the parties that a draft written agreement dated 12 June 2017 existed between the second respondent and its agent for the provision of management services. Under the terms of the draft agreement the agent was to provide management services for a minimum period of 12 months from 12 June 2017 to 11 June 2018 inclusive. The draft agreement was unsigned, but the agent provided services from 12 June 2017 onwards and payment was made for the same.
The appellant argued that the agreement between the second respondent and the agent was a QLTA because it was for a period exceeding 12 months. As no consultation had occurred, his liability for the management services provided was limited to £100, rather than the £218.73 claimed for the service charge period 2017/2018.
The respondents accepted that an oral contract existed between the second respondent and the agent, but the agreement was not a QLTA. Relying on the decision of the House of Lords in Brogden v Metropolitan Railway Company (1876-77) LR 2 App Cas 666, the respondents argued that an oral contract based on the terms of the draft agreement could only have taken effect when payment for the services was made. The respondents argued that payment was made on or about the 24 June 2017 and therefore the contract was for less than 12 months. The FTT agreed.
In allowing the appeal, the Upper Tribunal confirmed that Brogden was not authority for the proposition that “a contract taking effect by performance in the terms of a draft takes effect only when goods and services are paid for”. If there was a contract between the second respondent and its agent 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 2017.
Elizabeth Dwomoh is a barrister at Lamb Chambers
