Corvan case brings clarity to 12 month consultation rule

The Corvan case is a reminder that property management contracts must be capable of termination within 12 months, if leaseholders are not consulted.

Rolling contracts are common in property management. Freeholders and their management companies understand the need to consult with leaseholders before entering into contracts that will last more than 12 months, and cost a leaseholder more than £100.

The Corvan* case highlighted the challenge of defining this 12 month period.

In this case, the freeholder had appointed a managing agent on a 12 month contract. There was no leaseholder consultation.

The leaseholders challenged this lack of consultation, claiming that the contract was not a ‘true 12 months’ and therefore should have been through consultation.

The contract between the freeholder and the managing agent stated that the contract:

“Will be for a period of one year from the date of signature.. and will continue thereafter until terminated upon three months’ notice by either party”.

The freeholder argued that the agreement was clearly for one year and could be ended on the last day, by giving three months’ notice.

The leaseholders argued that the earliest date the contact could come to an end would be 15 months after signature – if notice was given on the last day of the contract.

The FTT agreed with the leaseholders.

The freeholder brought an appeal to the Upper Tribunal but this was dismissed and the FTT’s decision upheld.

The Upper Tribunal concluded that whilst contract period was ‘”expressly stated to be for a period of one year” the clause goes on to state that the same contract period is “to continue thereafter”. The earliest date that notice could be given was the day following the 12 month period – thus tipping the contract into QLTA territory.

On 15 May 2018, the case was finally concluded in the Court of Appeal, with the earlier decisions upheld.

The Court of Appeal found that the agreement, whilst only intended to be 12 months in length, could not in effect be terminated within the 12 month period.

Whilst this brings certainty to both freeholders and leaseholders, it also means that agreements need to be drafted very carefully to ensure that they can be brought to an end on or before the last day of a 12 month period.

For expert legal advice on your property management challenges, please get in touch with the team at Brady Solicitors.

*Corvan (Properties) Ltd v Abdel-Mahmoud

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