Tanfield's Nicola Muir acted for the respondent in this case.
The FTT had correctly ruled that a management agreement was for a term of more than twelve months, and therefore a long-term qualifying agreement for the purposes of s.20 of the Landlord and Tenant Act 1985.
The appellant freeholder demanded service charges totalling £24,420.83 for the period 25 March 2010 to 24 June 2014. The total included a contribution towards the fees of the two firms of managing agents, the cost of employing a team of porters and a charge for the payroll preparation of the porters.
Those managing agents had been appointed by the appellants pursuant to a management agreement, the contractual term of which being regulated by the following clause: "The contract period will be for a period of one year from the date of signature hereof and will continue thereafter until terminated upon three months' notice by either party.”
The first issue was whether the contractual term was for “more than twelve months”, as submitted by the leaseholder. If the tribunal found in favour of the leaseholder on this point, it was agreed by the freeholder that the consultation requirements under s.20ZA LTA85 had not been met.
As a second issue, the Tribunal considered whether the costs of employing porters could be included in the service charge under the terms of the lease, and lastly whether the cost of payroll preparation for the porters was properly recoverable.
The FTT had found that the management agreement was for a term of more than twelve months, placing special importance on the words “and will continue thereafter” in the clause defining the contractual term.
The FTT had further allowed the costs claimed for the services of a team of porters, but refused to allow the costs of the preparation of the porters’ payrolls. The freeholder appealed the decisions on the first and third issues and the leaseholder crossed appealed the second.
Decision on appeal
On the first issue, the Upper Tribunal agreed with the FTT, albeit on slightly different grounds. Whether or not the notice could actually be given during the initial 12 month period itself was irrelevant. The critical question was said to be whether the agreement could end on the expiry of the initial period of twelve months or whether it had to continue for a further period, even if only a single day. Because the agreement would ‘continue’ “until terminated upon three months’ notice” and not “unless terminated”, the Tribunal was satisfied that the notice could not bring the agreement to an end until a period of continuation had first commenced.
As to the second issue, the Tribunal found that the recoverability of porters’ costs could be assessed by reference to the tasks the porters performed, and whether this accorded with the fourth schedule of the lease detailing those outgoings in respect of which the lessee covenanted to pay a proportionate part by way of the service charge. As the FTT had not dealt with the scope of the porters’ duties, the matter was remitted to the FTT for further consideration.
The issue of payroll preparation was also remitted, it having been conceded that this should be recoverable if the appellants should succeed on the second issue, to the extent that such sums were reasonable in amount and reasonably incurred.
James Sandham acted for the appellant (C) and Nicola Muir for the respondent (A-M).