There are a raft of statutory restrictions on the recovery of service charges.  One of those restrictions is section 20 of the Landlord and Tenant Act 1985, and applies to qualifying works and qualifying long term agreements (often shortened to QLTA).

Section 20 places a limitation on the recovery of service charges.

So far as qualifying long term agreements are concerned, if a landlord wants to recover more than £100 from any lessee in any accounting period then the consultation requirements must either have been:

  1. complied with in relation to the agreement; or
  2. dispensed with by the Tribunal.

What is a Qualifying Long Term Agreement?

A qualifying long term agreement (or QLTA for short) means an agreement entered into, by or on behalf of the landlord or a superior landlord, for a term of more than 12 months.

What are the consequences of any failure to consult or obtain dispensation?

If consultation is not undertaken, or dispensation obtained from the Tribunal, then the contributions recoverable from lessees via the service charge are capped at £100 per lessee per accounting period.

It is important therefore to recognise when agreements are qualifying long term agreements and to either undertake consultation in accordance with the consultation requirements, or alternatively obtain dispensation from the Tribunal.

When is an agreement a QLTA?

The issue of when an agreement is a qualifying long term agreement was scrutinised by the Court of Appeal in Corvan.  Our blog on Corvan is available to read here.