Leaseholders unhappy with the management of their block may be entitled to appoint a manager via the First-tier tribunal, providing certain statutory criteria are met. The property management specialists at Brady Solicitors explain the process involved.
Appointment of a manager is a ‘fault based’ right. This means that leaseholders can exercise the right to apply to the First-tier Tribunal to appoint a manager if they consider the management of the block to be unsatisfactory.
The FTT has the power to appoint a manager in place of the freeholder, so long as the statutory grounds can be established, and it is ‘just and convenient’ to do so.
Unlike the right to manage process, leaseholders do not need to secure the support of a minimum number of leaseholders – any individual leaseholder is entitled to make and application to the FTT – but they must be able to demonstrate that the current management of the property is unsatisfactory.
It is also worth noting that where there is an RTM company and there is mismanagement, a single leaseholder may make the same application to appoint a manager in place of that RTM company.
To apply to the FTT for appointment of a manager, leaseholders need to show at least one of the following ‘statutory breaches’:
- The ‘relevant person’ (usually the freeholder or RTM company) is in breach of their obligations under the lease relating to the management of the building; or
- Unreasonable service charges have been made or are proposed to be made; or
- Unreasonable variable administration charges have been or are proposed to be made; or
- Any ‘relevant person’ has failed to comply with a code of management practice.
Plus, in all cases, it must be ‘just and convenient’ to appoint a manager.
The FTT also has a sweeping up power to make an order if other undefined circumstances exist that make it just and convenient for the order to be made.
Appointment of a manager – the process
The first step in the appointment of a manager process is for the leaseholder(s) to serve a ‘preliminary notice’ (a Section 22 notice) on the freeholder and/ or any other person who has management duties under the lease, detailing the areas of concern regarding the management of the property.
If the recipients of the Section 22 notice fail to put right the areas of concern within a reasonable period of time, then the leaseholder(s) can proceed with an application to the FTT asking them to appoint a manager.
The FTT will consider an application once one of the statutory breaches has been established. Thereafter the tribunal will be more concerned with the freeholder’s future proposal for management and those of the proposed manager rather than the historical breaches.
When making the application, leaseholders should put forward a potential candidate for the manager role. There is no guarantee that the Tribunal will accept the proposed candidate and it is highly likely that the FTT will want to interview them. We therefore recommend leaseholders select a professional agent to reduce the risk of rejection; lack of experience is one of the most common grounds for the Tribunal rejecting a proposed candidate.
After the appointment
Once the new managing agent is appointed, the freeholder ceases to have management control over the building to the extent set out in the FTT’s order.
The FTT can require the freeholder to provide all necessary handover documentation, accounts and other information to the new manager as is necessary for the management of the building.
What about mixed-used developments?
Leaseholders of a mixed used development can also apply to the FTT for an appointment of a manager. The FTT has the jurisdiction to appoint a manager over all parts of a mixed use site if there is a link between the residential and non-residential elements. For example, there may be a car park or plant room which serves both the residential and commercial units of a site.