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Advice Flat Living at home in your block LEGAL

LeasehoLderconsuLtation: howfArdoesitGo?

Do developers have to consult with leaseholders before a building is constructed? This question was answered by the recent case ofBDWTrading Ltd v South Anglia Housing Ltd. JonathanUpton explains the implications for flat owners

the high CoUrthas recentlyheldthat consultation requirements in respectof qualifyinglongtermagreements(QLTAs) do notapply to agreements enteredintofor buildingswhich have notyet beenconstructed orwhichare notlet at thetimeofthe agreement. In BDWTrading LtdvSouth Anglia Housing

Ltd [2013]EWHC2169 (Ch) a developer, BDW, builtanestatewhich includedfourresidential blocks of flats. Three of the blocks were held on a long lease to BDW, and two of those blocks were held on an underleasegranted to the defendant, SouthAngliaHousing Ltd. BDW held thefreeholdinterest in thefourthblock. BDWentered into an agreementwithathird party, UtilicomLtd,underwhichUtilicom wouldprovide hotwater (for space heating anddomestic waterservices)and electricityto each of theresidential flats on thedevelopment andBDWwouldpayamonthly charge. Those costswereultimately to be invoiced to the residents, although at thetimethe agreement wasentered into therewerenoleaseholders in anyofthe flats. If theconsultationrequirementsdid apply,

then sinceconsultationwas impossible in the absenceofany tenant,BDWwouldhavetoseek adispensationunder section20ZA(1) of the Landlord andTenantAct 1985,failingwhichit couldnot recovermorethanthe statutorycap of £100 fromanylater tenant. BDWsubmitted that section20ZA(1),which

relates to the consultation requirements for leaseholdproperty, couldnot applybecause thedefinition ofaQLTAinsection 20ZA(2) referred to “the landlord”, thereforedenoting an existing tenancy. SouthAngliaHousing Ltd argued that “the landlord” had to include future or prospective landlords, sinceotherwise there wouldbeamajor gapinthe legislation; that therewas provisionfor atribunaltodispense with consultation if it was impossible; and that the2003Regulations assumedthatthe 1985 Act didapply to buildingsnot yetinexistence or not yet let and the 1985 Act was to be construed consistently with the Regulations. Sitting as a judge of the High Court,

NStrauss QC held that theconsultation requirements didnot applyinthiscase. Since


“landlord”, “tenant”,“lease” and“tenancy” were defined in section30and section36of the1985Act in conventional terms, it seemed inconceivable-ifitwas intended that the legislation apply to agreements entered into when thepropertywas notbuiltorlet -that thepersondraftingthe Actwould nothave said so in clearterms. The section does not say that “the landlord”

is someonewhomayinfuturebecomea landlord andthere wasnoproperbasis for stretching itsmeaning.Also, although landlords could easily avoid the requirement to consult by entering into long-term agreements before lettingflats, tenantswould still have the protection of section 19 if costs were unreasonable.Ifanagreement was

common sense

This decision followsplain

already in place, tenantscould enquireabout thelevel of charges before they enteredintoa lease. This decision followsplain common

sense. It wouldbeabsurdtointerpretthe consultation provisions as imposing an obligation to consultwithnon-existent leaseholders. Therefore, in future itmay be prudent fordeveloperstoenter into long term agreements before granting leases to tenants so as to avoidthe consultation requirements. As fortenants,the decisionmeans that a tenant’s liability to contribute towardscosts incurred undersimilar long term agreements is notlimited to thestatutory capof£100, even though the tenant was not consulted. Tenants will,however,still be able to challenge whetherthe costsare reasonable under section 19 of the 1985 Act.●

JonathanUptonisabarrister attanfield Chambers specialisinginproperty disputesand is theeditor of theServiceChargessectionfor PropertyLawUK.Heisamember of theChancery BarAssociation, thePropertyBarAssociationand theLondonCommonLawandCommercialBar Association.

QLTAs do not apply to agreements enteredintofor buildingswhich

have not yet been constructed

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