A recent decision by The Upper Tribunal (Lands Chamber)
Good news for local authorities and social housing providers! In a decision by the Upper Tribunal (Lands Chamber), for the purpose of service charge consultation requirements in the Landlord and Tenant Act 1985 (the 1985 Act), a local authority framework agreement may be considered as a qualifying long term agreement (QLTA).
The 1985 Act requires the owners of long residential leases to be consulted before major works, which will be paid for through the service charge, are undertaken. A failure to do this may restrict the maximum that a lessor can recover to £250 per leaseholder.
In addition, if a landlord intends to enter into a QLTA (for example a long term maintenance contract), then a failure to consult in advance with the lessee, before the QLTA is entered into (as well as prior to undertaking work under it), can result in the landlord being restricted to recovering through the service charge just £100 per year per leaseholder. The ramifications for failing to consult can therefore be significant.
Consultation requirements for works under a QLTA are notably less onerous than those which are not. This is in no small part due to the fact that a consultation process will have already been undertaken prior to the QLTA itself being entered into.
The Upper Tribunal Decision
Royal Borough of Kensington & Chelsea v Lessees of 1-124 Pond House, Pond Place, London SW23 and Others  0395 UKUT
RBKC owned a number of tenanted blocks and intended to enter into a number of framework agreements, under which it intended to place orders for future works. Prior to entering the agreements RBKC made an application to the First Tier Tribunal (Lands Chamber) for the determination of a number of issues, including whether a framework agreement was a QLTA. The Upper Tribunal decided that:
- A framework agreement could be a QLTA
- It would have to be determined on a case by case basis whether costs stemming from a framework agreement were costs arising under the framework agreement. To benefit from the less onerous consultation requirements costs must be incurred under the framework agreement. ‘Under’ in this context is to have its ordinary meaning and there must be sufficient nexus between the agreement and the work. It is therefore vital that if works are to be classified as falling within the ambit of a framework agreement that the work covered by the agreement is defined with sufficient particularity to demonstrate that the works in a particular case fall to be considered under it.
- It is perfectly feasible that works could be incurred under a framework agreement even if the works were also governed by a separate call off agreement.
The case does not determine that each and every framework agreement is a QLTA and there may still be disputes over whether a particular scheme of major works is work carried out under a framework agreement. However the case is positive news for local authorities and social housing providers because the use of framework agreements is common and this decision does open the way to enabling compliance with the 1985 Act to be achieved through much less onerous consultation requirements with residential tenants.