Brady Solicitors’ Michael Young has recently been advising a client on their appointment as a manager under an order made by the First–tier Tribunal (Property Chamber). In this article, Michael explains the wide scope of powers given to managers under the Landlord and Tenant Act 1987.
Whilst the client required advice on general issues such as the landlord’s name on service charge demands, and insurance requirements held under the terms of the lease; they also required more general information on FTT-appointed managers. Although Tribunal appointed managers are not a common occurrence, especially in light of the introduction of Right to Manage companies under the Commonhold Leasehold Reform Act 2002 – they nonetheless still can happen.
The most recent and significant court decision in this area was Sennadine Properties Ltd v Heelis [2015] UKUT 55 (LC). This Court of Appeal decision highlighted the power of an order granted by the FTT and how in effect it can vary the terms and covenants within the lease.
The facts of the case are quite straightforward.
The building in question was a London mixed-use property with three long term residential apartments and a commercial unit. The Landlord was a Jersey registered company.
The leaseholders applied to the FTT claiming the building had fallen into serious and dangerous disrepair, which posed various health and safety risks.
The FTT found in favour of the leaseholders due to breach of obligations by the landlord, and appointed a manger for the whole building, including the commercial units.
The landlord appealed the decision, not on principle, but that it was too wide on four basic grounds;
- Manager was to receive the commercial unit rents and only required to account to the landlord on an annual basis.
- An obligation was imposed on the landlord, which was not contained in the lease, to contribute 25% towards services and insurance.
- A restriction was entered at The Land Registry to prevent registration of any dispositions or charges without the manager’s written consent. They argued this was disproportionate as the order was registered to the title and would bind any successor.
- The manager had control to consent under the lease for alienations and alterations. It was never pleaded by the leaseholders in the proceedings that the Landlord had ever unreasonably withheld consent.
The appeal was ultimately dismissed and the court directed the landlord to the wide scope held in section 24(1) of the Landlord and Tenant Act 1987 – stating it was not about what was proportionate to the terms of the lease, but what the leaseholder should expect as required management of the building.
The difference between right to manage and an appointed manager
This case perhaps highlights the difference between right to manage and an appointed manager.
A manager in effect is there to rectify the management of the building, and the court will take a strong line in supporting this.
If the starting point is sufficiently low, it may be highly difficult for an RTM to bring the balance of required management duties back into line. The leaseholders could be faced with a long arduous, and heavy work fronted process with an RTM.
Appointment of a Manager creates something that can resolve the issues in a timely manner.
Proof of serious disrepair
The bar for having a manager appointed is sufficiently high to ensure this is not done by disgruntled leaseholders, annoyed at their management. The leaseholder has to prove that the building is in such a state of disrepair it can create a danger both in health and safety and equity.
It is crucial that landlords and leaseholders are aware of this judicial tool, as it continues to prove it can tear up the rules and start again with buildings in serious trouble.
