How long is long enough?

31 May 2018

It is trite law that if a landlord of residential property wants to recover the cost of employing a managing agent, for example, they must comply with the requirements of the Landlord and Tenant Act 1985.

This Act prohibits landlords from recovering more than £100 per tenant unless they are consulted on any qualifying long term agreement that is entered into, by or on behalf, of the landlord or a superior landlord for a term of more than 12 months.

In the recent case of Corvan (Properties) Ltd v Abdel-Mahmoud the Court of Appeal had to decide whether a clause in a management agreement which stated:-

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

meant the agreement constituted a qualifying long-term agreement for the purposes of the Act.

The First-Tier Tribunal (Property Chamber) and Upper Tribunal held that it did. This was appealed by the landlord.

The Court of Appeal, agreeing with the First Tier Tribunal and Upper Tribunal dismissed the appeal.

The Court of Appeal placed emphasis on the wording “and will continue” and came to the conclusion that it introduced a mandatory requirement that the agreement would continue beyond the initial 12 months. To hold otherwise the Court considered would be to do “violence” to the words “and will continue”.

This decision serves as a useful warning to landlords to make sure they check the wording of any proposed agreement carefully. When using rolling contracts careful consideration should be given to the wording to make sure a term is not created which, in reality, cannot be terminated at the end of a year.

In the event that you require any advice or assistance in relation to qualifying long terms agreements, you can contact Adam Palmer (an Associate in the Real Estate Dispute Resolution Team) to discuss matters on +44(0)20 7354 3000.

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