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Paddington Basin Developments Ltd and others v West End Quay Estate Management Ltd [2010] EWHC 833 (Ch) [2010] 17 EG 94

DATE: 20 Apr 2010

The first defendant was the estate management company for three blocks of flats within the Paddington Basin development in London. The second defendant was the tenant of one of the 467 flats in the blocks. Under the terms of their leases, he and the other tenants were obliged to pay a service charge, part of which was an estate service charge payable to the first defendant. This was stated to include, in addition to the costs of maintaining the common parts of the estate, "any payments to be made by the Landlord and/or the relevant Management Company to the company… which manages and maintains the whole area known as the Paddington Basin". That company was the third claimant, which managed the entire development on behalf of the first claimant as the long leaseholder; the lease of the three blocks held by the second defendant's landlord had been carved out of the first claimant's interest by way of assignment. The first defendant was obliged, under an estate management deed of September 2005, to make payments to the third claimant for the maintenance of the common areas of the development. The deed could be terminated by six months' notice given by any party at the end of each 25-year period; accordingly, its minimum duration was 25 years. The payment for the deed's first year of operation was £270,000 pa. The first defendant made the first of the due payments, and several thereafter, but stopped paying in March 2006. The claimants brought proceedings to recover the arrears. By their defence, the defendants contended that the deed was a qualifying long-term agreement for the purposes of the Landlord and Tenant Act 1985 and the Service Charges (Consultation Requirements) (England) Regulations 2003, in respect of which the consultation requirements had been neither complied nor dispensed with, such that the lessees' contribution was capped at £100 each. Mr Justice Lewison held that an agreement was a qualifying long-term agreement, as defined in section 20ZA of the 1985 Act, if it was entered into by or on behalf of the landlord or a superior landlord and it was for a term of more than 12 months. The estate management deed was an "agreement" because it contained contractual rights and obligations that bound the parties. The first defendant, as a management company with the right to enforce the payment of a service charge, was a "landlord" within the extended definition of that term in section 30. It had entered into the deed in its capacity as such, in that the deed was connected with its rights and responsibilities as landlord. Since the deed could not be terminated until 25 years had expired, it was an agreement for more than 12 months. All elements of the section 20ZA definition were satisfied and the deed was a qualifying long-term agreement.