Corvan (Properties) Ltd v Abdel-Mahmoud

For section 20 ZA(2) of the Landlord and Tenant Act 1985, the relevant term is the minimum contractual commitment. An agreement qualifies where it requires continuation beyond 12 months. It is not enough that services are intended to continue, or that the maximum possible duration may exceed a year.

Wording providing that a one-year contract period will continue thereafter until terminated makes continuation beyond the first year mandatory. Notice given during that year cannot take effect before it ends.

The freeholder appealed against a decision of the Upper Tribunal (Lands Chamber), which had dismissed its appeal from the First-tier Tribunal’s disallowance of part of residential service charges. The charges included management fees under an agreement stating that the contract period would last for one year from signature and continue thereafter until terminated on three months’ notice.

The parties agreed that the statutory consultation requirements had not been followed. The central questions were whether the clause created a term exceeding 12 months and whether section 20 ZA(2) of the Landlord and Tenant Act 1985 concerns the minimum contractual commitment or the maximum possible duration.

The appeal was dismissed unanimously. McFarlane LJ gave the judgment, with Rafferty LJ and Lindblom LJ agreeing.

1. Construction. Applying the objective approach in Arnold v Britton [2015] UKSC 36, the court construed the clause by reference to its natural and ordinary meaning, contractual and commercial context, purpose, known circumstances and commercial common sense, disregarding subjective intention.
2. The words that the contract period “will continue thereafter until terminated” imposed a mandatory continuation beyond the initial 12 months. Notice could be given before the end of that period, but it could not take effect until after the year had ended. The agreement therefore created a term of one year plus an indefinite period subject to three months’ notice, and was a qualifying long-term agreement under section 20 ZA(2) of the Landlord and Tenant Act 1985.
3. The proposed implication of “unless terminated”, or substitution of “unless” for “until”, was unjustified. The natural meaning of the words did not support it, and the contract operated effectively without the proposed implication.
4. Statutory issue. If necessary, the relevant test under section 20 ZA(2) would be the minimum length of the contractual commitment, rather than the maximum possible duration or the substance of the services. An indeterminate agreement terminable within its first year would not satisfy the requirement. This alternative conclusion was not strictly necessary once the contractual construction had been determined.
5. Langton v Carleton (1873) L.R. 9 Ex. 57 concerned materially different wording. Brown v Symons (1860) 8 C.B.(N.S.) 208 did not bind the Court of Appeal, and its reasoning was not adopted. The court also noted the refusal in Re Searle [1912] 1 Ch. 610 to apply the relevant dicta by analogy to landlord and tenant.

• Court of Appeal (Civil Division): dismissed the appeal.
• Upper Tribunal (Lands Chamber): dismissed the landlord’s appeal on 2 June 2017; decision reported at [2017] UKUT 228 (LC).
• First-tier Tribunal (Property Chamber): disallowed part of the service charges because the management agreement was a qualifying long-term agreement and the consultation requirements had not been observed.