The Landlord and Tenant Act 1985 lays down rules that apply to residential service charges. It seeks to protect tenants against paying more than is reasonable for services and requires landlords to consult with them before carrying out certain types of work or entering into “qualifying long-term agreements”.
The Services Charges (Consultation Requirements) (England) Regulations 2003 explain the requirements in more detail. They provide that, if a landlord proposes to carry out works that would cost an individual tenant more than £250 in any 12-month period, the landlord must formally consult all those expected to contribute. If the landlord fails to consult, or is not given a dispensation by the tribunal, it will be unable to recover more than the statutory limit of £250 from each tenant. Similar provisions apply where a landlord intends to enter into a qualifying long–term agreement for the provision of services, save that the costs cap in such cases is £100 per leaseholder in any 12-month period.
Section 20ZA of the Landlord and Tenant Act 1985 defines a “qualifying long-term agreement” as an agreement for a term of more than 12 months, without providing any further guidance. In Corvan (Properties) Ltd v Abdel-Mahmoud [2017] UKUT 228 (LC); [2017] PLSCS 124, the Upper Tribunal had to decide whether a management agreement, which provided that “the contract period will be for a period of one year from the date of signature hereof and will continue thereafter until terminated upon three months’ notice by either party”, was a qualifying long-term agreement for the purposes of the legislation.
The case turned on whether the initial fixed-term period was capable of being terminated at the end of the first year, or whether the contract would have to subsist for a period of at least 15 months – and was, as a result, a qualifying long-term agreement.
The tribunal accepted the tenant’s argument that the contract would have to subsist for at least 15 months. The management agreement was for an initial period of a year, but stated that it “will continue thereafter until terminated”. As a result, the continuation of the management agreement beyond the initial fixed term did not depend on whether a termination notice was served during the initial fixed-term period. The words used by the parties signified that any such notice was incapable of bringing the management agreement to an end until a period of continuation after the end of the 12 months had commenced. And, on that construction, the management agreement was for a period of at least a year and a day, and was therefore for a term of more than 12 months.
The decision demonstrates that determining whether a contract is for a term of more than 12 months requires careful analysis – and that each case will be decided on the basis of the wording used by the parties in their particular contract. It was common ground that the consultation requirements had not been met in this case. Therefore, the statutory cap imposed by the 2003 regulations applied.
Allyson Colby is a property law consultant
