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.