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Bracken Hill Court at Ackworth Management Company Limited v Dobson & Ors [2018] UKUT 333 (LC)

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26th February 2019

Summary

The Upper Tribunal determined whether a management agreement amounted to a qualifying long term agreement.

Facts

The Appellant management company had entered into a contract with managing agents for the provision of management services at the block in question. The tenants argued that the management agreement was a qualifying long term agreement (“QLTA”).

On the morning of the hearing before the First-tier Tribunal, the management company provided a witness statement from the managing agent stating that, in fact, the agency agreement was renewed annually by telephone and lasted no longer than 364 days before being renewed.

Issues

Whether the management agreement a QLTA in the light of the evidence filed by the managing agent.

First instance

The FTT admitted the witness statement of the managing agents into evidence despite its late service and held that the telephone conversation between the management company and the managing agents created “a continuous contract lasting 365 days, renewed on the 365^th day each year”. On that basis, the FTT found that the contract was a QLTA.

Decision [on appeal]

On Appeal to the Upper Tribunal, HHJ Huskinson reiterated the decision of the Court of Appeal in Corvan (Properties) Limited v Abdel-Mahmoud [2018] EWCA Civ 1102, in which it was held that in determining whether an agreement is a QLTA it is necessary to consider the proper construction of the management agreement and decide whether the agreement is for a term exceeding 12 months. This involves considering whether the term must exceed 12 months rather than whether in substance the parties intended or expected that the agreement would last longer than 12 months.  The deciding factor is the minimum length of the commitment under the contract.

In this case, the FTT had accepted the agent’s evidence that the agreement was renewed annually and the parties agreed that the contract would last no longer than 364 days. Even if the parties expected the agreement to be renewed yearly and yearly renewal had been their historical practice, that was not the same as a contract for a term exceeding 12 months. Accordingly, the FTT was wrong to find that the management agreement was a QLTA and the FTT’s decision was overturned. In any event, a continuous contract lasting 365 days would still not be a QLTA as it was not for a term of more than 12 months.

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