What is a QLTA

QLTA-Quite Likely To Annoy

QLTA means qualifying long term agreements and is part of the regulations about consultation, known as S20 regulations. They are quite likely to annoy resident management companies, lessees and managing agents, writes John Mills, Technical Consultant ARMA.

Directors of a self-managing RMC you may have found a good gardener at last. He is willing to give you a better price if you offer him a two-year contract. But that would be a QLTA and you should stop and consult all lessees with at least two official notices before you can go ahead. You do not want the hassle and the paperwork.

Or your RMC has held the AGM that everyone in the block attended. A unanimous vote was carried in favour of continuing with the current managing agent and you could get better terms if you agree to two years rather than a one-year extension. But that would be a QLTA and you should stop and consult all lessees with at least two official notices before you can go ahead. You would have the silly situation of having your current agent sending notices asking if any lessees want to nominate another agent, and your current agent being asked to work without a contract until the consultation period was over.

Your managing agent wants to tender a lift maintenance contract for all the blocks that it manages. If it offers a three-year contract it will get a better price and the benefit would be passed on to lessees. But that would be a QLTA and the agent should stop and consult all lessees across every block with at least two official notices before it could go ahead. Notices will have to be specific to each block because the landlord or RMC is different for each one. The agent decides that the extra administration is not worth the bother.

What is a QLTA ?

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 than £100 in any one year.

So a contract for two years for gardening for 10 flats, where 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 10 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
  • Lifts
  • Door entry systems
  • Cleaning,
  • 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 with 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 requirements?

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 a 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?

We have just taken over the management company on a new development and the developer has locked us into a 15-year contract for an entry phone system and a five-year contract with managing agents we 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 contracts should be for no more than five years. If the contracts are for more than 5 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.