Do all long-term agreements require leaseholder consultation?

Not if there was no landlord nor any leaseholders at the time they were created, explains Brady Solicitors.

Our leasehold law experts were recently asked to advise if a long-term management agreement created before a development was built, should fall under the regulations for Qualifying Long Term Agreements (QLTAs).

As readers will be aware, under s.20ZA(2) of the Landlord and Tenant Act, if a landlord enters into any contract or agreement for a period of more than 12 months, and that will cost any one individual leaseholder more than £100, then they must follow the consultation procedures.

Failure to consult can mean that the landlord is only able to recover £100 from each leaseholder.

An exception to this (under Reg.3(1)(d) of the Regulations) is where an agreement has been created at a point when there are no leaseholders, and the agreement does not exceed five years.

What if an agreement meets the first point of no leaseholders, but lasts more than five years?

This was tackled in the 2013 High Court case of BDW Trading Ltd v South Anglia Housing Ltd, which concerned a 25-year combined heat and power agreement entered into by South Anglia before any leases were granted, and before the building was constructed.

The issue was whether that meant that the agreement was a Qualifying Long Term Agreement and should have been consulted upon – and the costs, therefore, capped at £100 per leaseholder.

The judge in the BDW Trading case examined the wording of the Act and found that the word ‘landlord’ meant someone who was an actual landlord at the time that the agreement was made. And that there was ‘no proper basis for stretching its meaning’ to cover potential landlords.

The decision in the case referred to above remains good law and is binding on all lower courts.

The agreement could not be a QLTA (however long the term of the agreement) because there was no landlord in existence at the time of the agreement.

If agreements are entered into when there is no building yet constructed, and therefore no leaseholders either, it follows that they cannot be QLTAs, even if they exceed five years.

In the simplest of terms, without a landlord or leaseholders, there is no ability to consult.

For freeholders, RMCs and managing agents owning and managing new build developments, this question of pre-existing management agreements is something that is likely to pop up from time to time.

Our legal experts can give you accurate and focused advice on your individual situation to ensure you are informed and protected. To get in touch with us, please email us here.

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