A QLTA is any contract or agreement relating to service charge matters entered into by a landlord for a period of more than 12 months. And consultation under what are called S20 procedures is required for QLTAs if the amount payable by any one lessee exceeds or would exceed more that £100 in any one year.
So, a contract for two years for the gardening for 10 flats, were every lessee pays an equal share of the service charge costs and each lessee pays £90 per year is a QLTA but does not require consultation. But if the same contract is for a block of flats where the penthouse pays 20% of the service charge requiring the penthouse to pay £180 per year and consultation is then required.
VAT must be added to any figures before deciding whether the consultation threshold has been reached.
What sorts of contracts could be QLTAs?
- Managing agents’ contracts
- Door entry system
- Window cleaning & gardening
- Electricity for common areas
What contracts are not QLTAs?
Contracts of employment are specifically excluded by regulations.
What consultation is required for QLTAs?
A notice of intention what at least 30 days for lessees to make comments upon the proposed contract and to nominate possible contractors. A notice of proposals including at least two estimates from contractors with at least 30 days for lessees to make observations upon them. Unless the landlord chooses the lowest price for the contract, a notice of reasons to each lessee.
What if I ignore the consultation requirement?
You may get away with it but why take the chance? If any lessee challenges the contract, then they have the right to refuse to pay no more than £100 per year towards that contract.
Can’t I get dispensation from tribunals?
FTTs can dispense with the whole or part of them S20 consultation procedures and dispensation can be given before or after the event. There is no prescribed dispensation procedure or set of letters or notices to follow.
FTTs can dispense with the whole or part of the S20 procedures so if you can comply with part of them you should always do so. The FTT may not give dispensation of the whole if you could have followed parts of the consultation procedures.
The following have been found not to be good reasons to give dispensation:
- An honest mistake
- Compliance with the spirit of S20
- The landlord was an RMC that took the decision to go ahead
- The lowest quote was chosen
Surely the consultation requirements do not apply to RMCs?
Just because an RMC has decided to enter into a long-term agreement does not excuse it from the legal requirement for S20 procedures. Even if a majority or all the lessees in a block vote to go ahead does not mean that S20 can be forgotten about. A disgruntled lessee after the event can refuse to pay more than the threshold figure of £100 per year. If the chosen contractor makes a mess of things, then lessees may refuse to pay.
Managing agents should always advise RMCs that they must follow S20 procedures for QLTAs in full. Failure to do so may mean they cannot recover the expenditure incurred and the directors may be open to claims for negligence.
What about contracts we inherited on new developments?
If we have just taken over the management company on a new development and the developer has locked us into a 15-year contract for entry phone system and a five-year contract with managing agents w3e would like to get rid of. There are special rules for QLTAs for new developments. A contract entered into for a period of less than five years that was entered into at a point when there were no lessees at all in the block is not a QLTA. So, a developer may for good reasons need to get things arranged before selling any flats, but the contacts should be for no more than five years. If the contracts are for more than five years then they are not illegal, but lessees can refuse to pay more than £100 per year towards the costs.
At a time when the government does not think it important enough to introduce regulations to protect service charge monies, QLTAs are an example of regulations that produce mostly bad outcomes for lessees.