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Clarity surrounding Qualifying Long Term Agreements (QLTA)

Corvan (Properties) Limited v Abdel-Mahmoud
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In the Court of Appeal earlier this year it was decided that the management agreement in question was for more than 12 months and therefore a QLTA. The agreement stated that it was for one year which will “continue thereafter until terminated by notice.” The specific drafting of this clause was crucial to the outcome of the case. Particularly the word “will.”

Corvan (the freeholder) had agreed on a contract for the provision of services, ie the management of the building, the costs of which were to be recovered through service charges.

Any agreement that is for a minimum term of more than 12 months must be subject to proper consultation, or the amount recoverable from leaseholders will be limited to £100 per leaseholder per year.

Clause 5 of the agreement in question stated that “The contract 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.” Therefore, it was interpreted that the agreement could not be terminated until a minimum period of 15 months had passed.

Managing Agents should be so careful about the wording of these clauses, the drafting of them is often overlooked, but the consequences can be significant. It does not necessarily mean that the term of an agreement cannot last longer than 12 months, provided that it can be brought to an end before the expiry of one year.

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