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Lawbite: Less is not more when it comes to Qualifying Long Term Agreements

  • United Kingdom
  • Real estate litigation

04-02-2019

Bracken Hill Court at Ackworth Management Company Ltd v Dobson [2018] UKUT 333 (LC)

The Upper Tribunal (Lands Chamber) has upheld an appeal from a management company and determined that contracts of less than 12 months are not Qualifying Long Term Agreements (“QLTA”) under section 20ZA(2) of the Landlord and Tenant Act 1985 (“the 1985 Act”), even in circumstances where the parties have a history of renewing a 364 day contract each year.

The appellant, Bracken Hill, is the management company for the landlord of a block of flats let to the respondent tenants under eight separate leases. Bracken Hill appointed Blue Property Management UK Limited (“Blue Property”) as its managing agent pursuant to an oral agreement of 364 days which was renewed annually over the phone.

Blue Property charged the tenants £1,500 per annum in management charges.

The tenants claimed that the management charges should be limited to £800 per annum pursuant to s.20ZA(2) of the 1985 Act as the agreement amounted to a QLTA. Under the 1985 Act each tenant’s contribution to management charges is limited to £100 p.a. unless the relevant consultation procedures have been complied or dispensed with.

The Upper Tribunal determined that as the contract did not last longer than 12 months it could not be a QLTA. Although as a matter of history the parties had renewed the contract each year, the contract was only 364 days long and it would not last any longer than that unless the parties agreed between themselves. Therefore the management fee of £1,500 per annum was properly chargeable.

Key points

  • a reminder that only agreements which are more than 12 months in length are Qualifying Long Term Agreements under the 1985 Act
  • in this case an expectation that “in all likelihood the contract would be renewed” was not a guarantee of renewal and as such did not alter the position that the minimum period of the agreement was less than 12 months.  However, an agreement with a binding obligation to renew is likely to result in a different outcome.  As such care needs to be taken in drafting such agreements if landlords or management companies wish to avoid the consultation procedure under the 1985 Act
  • the First Tier Tribunal (FTT) can dispense with the requirements for consultation if it is satisfied that it is reasonable to do so