UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2012] UKUT 339 (LC)

UTLC Case Number: LRX/121/2011

 

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

LANDLORD AND TENANT – service charge – “qualifying long term agreement” – sections 20 and 20ZA Landlord and Tenant Act 1985

 

 

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF A

LEASEHOLD VALUATION TRIBUNAL FOR THE LONDON

RENT ASSESSMENT PANEL

 

BETWEEN:

 

POYNDERS COURT LIMITED Appellant

and

GLS PROPERTY MANAGEMENT LIMITED Respondent

 

 

 

 

Re: Block of Flats,

Poynders Court,

Poynders Road,

London SW4 8NL

 

 

Determination on written representations

 

Sitting at:

© CROWN COPYRIGHT 2012

The following cases are referred to in this decision:

Paddington Walk Management Limited v The Governors of Peabody Trust [2010] L&TR 6

London Borough of Hammersmith & Fulham v Monk [1992] 1 All ER 1

 

The following cases were cited but not referred to in this decision:

Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896

Daejan Investments Limited v Benson [2011] EWCA Civ 38; [2011] 1 WLR 2330

Majorstake Limited V Curtis [2008] UKHL 10; [2008] 1 AC 787

Paddington Basin Developments v West End Quay [2010] EWHC 833; [2010] 1 WLR 2735

 

DECISION

Introduction

1.           The landlord-Appellant appeals against the 4^th February 2011 decision (the “Decision”) of the Leasehold Valuation Tribunal (the “LVT”) that the 13^th September 2005 management agreement (“Management Agreement”) it had entered into with Bells Commercial Limited (“Bells”) to manage the subject premises is a “qualifying long term agreement” within the meaning of sections 20ZA(3) of the Landlord and Tenant Act 1985 (“the 1985 Act”).

2.           On 20^th October 2011, the LVT having refused permission to appeal, the President of the Upper Tribunal (Lands Chamber) granted permission to appeal because “there is a realistic prospect of success, and the issue is potentially of wide implication”.  It was ordered that the appeal be by way of review only and by way of written submissions which have been filed by both parties.

The statutory provisions

3.           There are limitations on the recovery of costs from tenants via service charges where a “qualifying long term agreement” has been entered into unless the landlord has complied with the certain consultation requirements or those requirements have been dispensed with: section 20 of the 1985 Act.

4.           A “qualifying long term agreement” (“QLTA”) “means … an agreement entered into, by or on behalf of the landlord or a superior landlord, for a term of more than 12 months” section 20ZA(3) of the 1985 Act.  In this case, the LVT applied the statutory cap on the recovery of costs because the landlord had not complied with the consultation provisions before entering into the Management Agreement.

The Decision

5.           In paragraph 8 of its Decision, the LVT summarised the relevant terms of the Management Agreement thus:

“8. … The fees under the agreement are £175 per annum per unit plus VAT and this totals £5,000 plus VAT. Clause 10.9 states that “Fees would be reviewable after a two year period and thereafter annually, subject to there being no changes in relevant legislation”. The agreement does not specify the period of the agreement.  However, it does state in clause 12.1 that “Either party can terminate this Agreement on three month’s written notice”.

 

6.           The reasoning of the LVT is to be found in paragraph 22 of its Decision:

“22. The main issue for the Tribunal to determine is whether or not the management agreement is a “Qualifying Long Term Agreement”.  It would appear that the agreement that we are considering is in very similar terms as that agreement considered in LVT decision in Karen Griffiths v Stayton Homes Limited (LON/00AC/LSC/2009/0711).  We are not bound by the decision of another Tribunal.  In the agreement under current consideration there is no stipulated term and [it] would appear to be a rolling contract, subject to a break clause. It could be envisaged that this is a contract that would go beyond an initial twelve month period.  That would appear to be the intention of the parties, particularly when clause 10.9, which allows for the fees to be reviewed after two years, is considered. This Tribunal is satisfied that by taking all the elements of the contract together, that there was an intention that it was to be for a period of greater than one year and is therefore a Qualifying Long Term Agreement.”

The parties’ arguments

7.           The Appellants submitted that the Decision was wrong because the term of the Management Agreement was not fixed from the outset as being more than 12 months but was a “rolling contract” which did not fall within the section 20ZA(3) definition. Whilst the Management Agreement contemplated a duration exceeding 12 months, there was no “agreement” that it would last more than 12 months.  If the test is mere “contemplation” then that would cover all manner of services such as utilities, cleaning and so on.

8.           Reliance was also placed upon Paddington Walk Management Limited v The Governors of Peabody Trust [2010] L&TR 6 which held that a contract “for an initial period of one year from 1 June and will continue on a year-to-year basis with the right to termination by either party on giving three months’ written notice at any time” was not a QLTA.  It was pointed out that the Management Agreement could be terminated at any time before (or after) one year.

9.           The Respondent submitted that the Management Agreement should be construed in its factual matrix from which it was clear that the parties intended that it last more than 12 months.

Discussion, and decision

10.        The Management Agreement is silent as to its term or duration in the sense that it does not explicitly define how long it is to last.  However, its effect is that Bells has contracted or agreed to provide the services therein defined forever, or indefinitely. Whether the provision of those services will be for more than 12 months depends upon the nature of the services to be provided under the terms of the Management Agreement.  It is clear from those terms that they will or are intended to be provided for a period which extends beyond 12 months: they relate to the ongoing preparation and collection of the annual service charge, management and maintenance of the building, obtaining insurance, enforcement of the leases and so on for an annual fee which is fixed for two years whereafter it will be reviewed annually with no provision for apportionment on early termination.

11.        As such, it is an agreement to provide those services for a term of more than 12 months.  It is distinct from the Paddington case where the term was expressly defined as 12 months which plainly could not exceed 12 months. The Management Agreement is not, as the Appellants submitted, a “rolling contract”, which connotes an initial term of specified duration automatically followed by, or rolling over into, a further term. Whether an agreement is for a term which is more than twelve months depends upon the wording and substance of the contract.  In this context, “term” simply means “how long will it last for”, there being no requirement for certainty.

12.        This is not altered by the fact that the Management Agreement may be terminated at any time by giving three months’ prior notice. There is a distinction between duration and termination.  The section 20ZA definition is directed at the question of whether an agreement has been entered into for a term or duration of more than 12 months.  That question is not answered by saying it can be terminated on three months’ notice: it is not an agreement to provide the services for three months, but an agreement to provide them forever, or indefinitely, unless and until terminated by three months’ prior notice.

13.        The Appellant submits that this approach would embrace casual or routine contracts for the provision of utilities, cleaning services and such like.  Whether or not that is so depends upon the wording and substance of any such contracts, which are not before this Tribunal.  That said, it would be surprising if such contracts would constitute a QLTA as such are usually ad hoc, casual contractual arrangements.

14.        The Appellant also impressed upon this Tribunal the analysis of Her Honour Judge Marshall QC in the Paddington case and Lord Bridge in London Borough of Hammersmith & Fulham v Monk [1992] 1 All ER 1 where his Lordship held that where there is a fixed term tenancy of one year and thereafter from year to year unless determined by notice at the end of any subsequent year neither party has bound himself beyond one year.  In my judgment, these are not on point as they concern tenancies or contractual arrangements where an initial period is fixed, or defined, whereas in this case the contractual obligation to provide the services is not fixed or defined but is indefinite unless, of course, terminated.

15.        I therefore dismiss the appeal.  Both Supplemental Submissions address two additional findings of the LVT relating to administration charges and the making of an order under section 20C of the 1985 Act.  No permission to appeal either point was granted by the President as neither formed the subject matter of the application for permission to appeal to the Upper Tribunal.  I therefore consider them no further.

16.        The Respondent seeks an order under section 20C of the 1985 Act in respect of the Appellant’s costs of the appeal to this Tribunal, it being otherwise accepted that such costs are recoverable under the service charge provisions of the subject lease.  No argument in response has been provided.  I make such order because in this case it was in my judgment not reasonable for the Appellant to have appealed the Decision, and the Appellant has made it clear that one of the reasons for appealing the Decision was because this was a point of general interest and I do not see that the costs of such should fall upon the tenants in this case.

Dated 1 October 2012

 

His Honour Judge Nigel Gerald