Managing agent contract compels us to use them for another year?

[Sil328]

Along with 7 other flats I own the freehold of my apartment. We formed a management company which engaged a managing agent to look after maintenance, however this has been a disaster and we do not want to renew our 1 year contract with them which ends in April. Checking the terms of the contract, though, they state that “the agreement will end at the expiry of the term subject to three months’ written notice being given.” We have missed that deadline, so does this mean we have no option but to renew for another year, as once into that year the contract can only be stopped by mutual agreement or a breach from one side or the other. Surely we can’t be forced to pay for something we don’t want? Can we not just refuse to pay for the next year, or cancel now and perhaps pay 3 months’ fees only, even though that takes us into the 2^nd year?

[R0b]

You don't get to sign a contract with terms and conditions and then choose not to abide by them because you don't like what they say. Unfortunately if none of you bothered to read the terms and conditions properly then that is pretty much tough luck. This is very much common in commercial arrangements so yes the agent can do this.

You can refuse to pay for next year but don't be surprised if the managing agent tries to sue you/the management company for the balance. Alternatively you can try to negotiate your way out of it and maybe they will accept 3 months notice.

[Sil328]

Most agreements like this you would expect to pay for the year you are contracting the service for, then be able to give 3 months' notice to terminate the agreement (even though by doing that you immediately disincentivise the service provider who will put in less effort for those last 3 months as they know you are going). So when the non-legally minded residents looked over this contract they read the '3 months notice' without scrutinising it more closely. Of the 8 residents I was the only one who strongly argued against this agreement but was outvoted. We missed the '3 month from expiry' date because I think everyone was so occupied with all the issues they have caused us. Some contracts can be challenged as being unfair, and I would argue that in the position we are in now, if we said now that we do not wish to continue with them we would be stuck with them for another 14 months. That seems wrong.

[R0b]

I have to completely disagree with some of your points. You've formed a management company and engaged with a managing agent on a business to business transaction. Of course there might be contracts that run for an initial period i.e. 12 months and then run on a monthly basis after that but it is also very common for contacts to automatically renew for 12 month periods if you didn't give the appropriate notice.

If you argue the renewal term is unfair then you are unlikely to get very far. The courts are less inclined to interfere with B2B contracts than if it were a consumer situation. Not reading the contract properly or lack of understanding is also not an excuse for claiming a term is unfair as you could have obtained legal advice prior to signing. The fact you were outvoted is not an excuse and I would also repeat what I said above, in that 12 month renewal terms are very common if not the norm in B2B transactions.

Unless there is something else in the contract allowing you to terminate then your only other option may be not to pay them and refuse, but I suspect there would be consequences because that could be deemed a repudiation of breach and it could possibly allow the managing agent to claim a much larger sum of money such as the remaining 12 months fees for the renewal period. Also be mindful if any of you have signed personal guarantees that could hold you personally responsible for the losses.

[Sil328]

Thank you for the feedback, that's helpful. It looks like we may have to argue that they have failed to fulfil the terms of our contract with them in year 1 with regard to the service they sold themselves as providing. After all, we gave them a list of all the faults that required addressing back in July and they still haven't managed to address any of them. This includes leaking roofs causing considerable internal damage with tenants unable to use their rooms. They've also frequently failed to communicate or answer queries and made numerous mistakes with quotes etc. A shambles, basically. We are obviously all kicking ourselves that we did not notice in time that the 9 month threshold had passed. With a bit of luck they might want to offload us anyway and we can come to some form of agreement. If not, we are in trouble.