By J
27/07/2013

No-one to talk to

BDW Trading Ltd v South Anglia Housing Ltd [2013] EWHC B10 (Ch) is important and deserves much wider coverage than it has otherwise got.
Before turning to the facts, lets just remind ourselves of the provisons of ss 20, 20ZA, Landlord and Tenant Act 1985. In essence, if a landlord wants to enter a qualifying long term agreement (define as, with certain exceptions, an agreement for a term of more than 12 months under which any leaseholder will pay more than £100 p.a.), then he must either consult his leaseholders in the prescribed manner or obtain dispensation from the First-Tier Tribunal (Property Chamber) (or LVT in Wales). If he fails to do so, then the recoverable service charges are capped.
The judgment isn’t very well written or structured but, so far as I can see (and simplifying massively), BDW had built a development containing a number of blocks. South Anglia were the leaseholders of two  of those blocks (it seems they were going to let the flats on assured/assured shorthold tenancies). Before South Anglia took their leases (or before there was any agreement for a lease; possibly even before the blocks were built), BDW entered into a 25-year agreement with a utility company to supply heat, hot water, etc to the blocks. South Anglia were then going to have to pay for that via the service charge.
Now, South Anglia alleged that the 25-year contract with the utility was a QLTA and, as there had been no consultation with them, there was a cap on their service charges. The High Court disagreed. There was no landlord/tenant relationship at the time of the 25-year contract and no-one who could have been consulted. If the consultation provisions were intended to apply in this manner they would have said so.
Ok, well, I see that. But remember what I said about the begining about there being specific exceptions to the consultation provisions? Well, one of those exceptions is reg.3(1)(d), Service Charges (Consultation Requirements) (England) Regulations 2003, “[a]n agreement is not a qualifying long term agreement… if

(i) when the agreement is entered into, there are no tenants of the building or other premises to which the agreement relates; and

(ii) the agreement is for a term not exceeding five years.

 

J is a barrister. He considers housing law to be the single greatest kind of law known to humankind and finds it very odd that so few people share this view.

5 Comments

  1. Francis Davey

    Is this not a garbage decision?

    It does not help that the judgment does not really explain how the issue arises and in what context.

    However, it seems to me the drafters of the regulations absolutely anticipated that the consultation requirements would apply to agreements made before there were any tenants. That is what regulation 3(1)(d) is all about.

    Anyone with any knowledge of service charge consultation requirements has, I assume, always been aware of this point and internalised it roughly as a rule that prevents landlords making pre-letting agreements that last more than 5 years. An obvious anti-avoidance provision and very sensible.

    The judge is, in my view, hopelessly confused to think that there needs to be any stretching of the meaning of “landlord” to make this work. S.20 applies to a situation where a landlord claims a service charge under an agreement. There is nothing there which says that they were a landlord when the agreement was made. That is to read into the act words that are not there.

    Yes, this does put a landlord making a long-term agreement of more than 5 years pre-letting in a more difficult position. Good. That is the whole point of the regulations. They either need to obtain dispensation or have any payments made under the agreement capped. If the agreement is entirely reasonable and above board there’s should be no problem obtaining a dispensation which is hardly a difficult procedure.

    The idea that the tenants can object that service charges don’t meet the s19 reasonableness requirement is a red herring. Why bother with s.20 at all if s.19 will do the trick.

    Reply
    • J

      “Why bother with s.20 at all if s.19 will do the trick?” I agree. But haven’t we lost that debate in Daejan?

      Reply
        • LHA

          As to Daejan yes you are absolutely right. I have often said that S19 and S20 are erroneously treated as seperate issues when they are not. The Court in Daejan took that view.

  2. LHA

    I actually think the High Court is right, there is a logical problem with the wording of the regulations and there being no lessees. Moreover how do you build a scheme with say CHP on a five year contract… :) it creates an unacceptable risk.

    Reply

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