BDW Trading Ltd v South Anglia Housing Ltd 
BDW Trading Ltd v South Anglia Housing Ltd EWHC 2169 (Ch): Consultation Requirements for QLTS’s
Summary: The consultation requirements in respect of qualifying long term agreements (“QLTAs”) do not apply to agreements entered into in relation to buildings which have not yet been constructed or which are not let at the time of the agreement.
The first claimant (BDW) constructed an estate which included four residential blocks of flats. Three of the blocks were held on a long lease to BDW, and two of those blocks were held on an underlease granted to the defendant. BDW held the freehold interest in the fourth block. BDW entered into an agreement with a third party, Utilicom Ltd, under which Utilicom would provide hot water (for space heating and domestic water services) and electricity to each of the residential flats on the development and BDW would pay a monthly charge. Those costs were ultimately invoiced to the lessees. At the time the agreement was entered into there were no lessees in any of the flats.
If the consultation requirements did apply, then since consultation was impossible in the absence of any tenant, BDW would have to seek a dispensation under s.20(1) of the 1985 Act, failing which it could not recover more than the statutory cap (£100) from any later tenant. BDW submitted that the section could not apply because the definition of a QLTA in s.20ZA referred to “the landlord”, denoting an existing tenancy. The tenants argued that “the landlord” had to include future or prospective landlords, since otherwise there would be a major gap in the legislation; that there was provision for a tribunal to dispense with consultation if it was impossible; and that the 2003 Regulations assumed that the 1985 Act did apply to buildings not yet in existence or not yet let and the 1985 Act was to be construed consistently with the Regulations.
(N Strauss QC): The consultation requirements had no application to the instant case. Since “landlord”, “tenant”, “lease” and “tenancy” were defined in s.30 and s.36 of the 1985 Act in conventional terms, it seemed inconceivable, if it was intended that the legislation apply to agreements entered into when the property was not built or let, that the draftsman would not have so provided in clear terms. The section does not say that “the landlord” is someone who may in future become a landlord and there was no proper basis for stretching its meaning. Further, although landlords could easily avoid the requirement to consult by entering into long-term agreements before letting flats, tenants would still have the protection of s.19 if costs were unreasonable. Also, if an agreement was in place, tenants could enquire about the level of charges before they entered into a lease.
The Regulations and the consultation paper issued by the Office of the Deputy Prime Minister on the proposed regulations in August 2002 (which contains the same provision that became Regulation 3(1)(d) except that there was no exemption for agreements for less than 5 years) were admissible as an aid to interpretation on the ground that they were sufficiently contemporaneous with the 1985 Act. It was undeniable that reg.3(1)(d) assumed that the 1985 Act did apply to agreements entered into where there were no tenants. Where, however, as in the instant case, there was little doubt as to the meaning of the Act and considerable stretching of the language was required to produce an ambiguity, any admissible documents were likely to be of very little weight. Neither the Regulations nor the consultation document had any persuasive power as an aid to the interpretation of the Act, and did not come remotely near dislodging what was otherwise the clear meaning of s.20ZA.
This decision accords with plain common sense. Notwithstanding the failure of the Regulations to exempt such circumstances from the requirements, it would be absurd to interpret the consultation provisions as imposing an obligation to consult with non-existent consultees. It may be prudent for developers to enter into long term agreements before granting leases to tenants so as to avoid the consultation requirements.