House builders and developers are now better protected following the decision in BDW Trading Ltd v South Anglia Housing Ltd.
With the government increasingly pushing developers towards on site Combined Heat and Power provision, until now there was no definitive legal ruling on Section 20 for long term qualifying agreements.
On the 15th July 2013 the High Court judgment clarified that the service charge consultation requirements under the Landlord and Tenant Act 1985 does not appliy to long term agreements if they are entered into before the building is constructed or let.
The analysis in this judgement reads that for S20 of the Landlord and Tenant Act to apply there must be a ?landlord?, denoting an existing lease or tenancy. Therefore, it would not be a sensible construction of the Act?s provisions that the owner of the land or building should be required to consult, when there would be nobody with whom to consult. ?Landlord? does not mean ?prospective landlord? and there is no proper basis for stretching its meaning.
This case related to a Combined Heat and Power (?CHP?) to a mixed use development known as Comet Square in Hertfordshire. South Anglia Housing Ltd had entered into a 25 year CHP agreement before leases were granted. Under the terms of the 267 residential leases subsequently granted obliged tenants to pay a proportion of the costs for the supply of Combined Heat and Power as service charges. So agreements entered into before there are leases or even a building are not Qualifying Long Term Agreement?s for the purposes of S20ZA of the Act.
Under the Act, if an agreement is held to be a Qualifying Long Term Agreement, a Landlord must consult with the Tenants before entering into the agreement. Tenant?s contribution will be capped at £100 should the landlords fail to do this. Landlords may avoid consultation or the statutory cap by making an application for dispensation to the First-Tier tribunal.
This decision brings greater clarity to an area of residential service charge consultation that has long been challenging.
Ringley are one of London's leading Managing Agents - To find out what we, as a Managing Agent think makes a good lease http://www.ringley.co.uk/planning/create_manageable_leases.shtml
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Author : Mary-Anne Bowring
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