We have recently seen a rise in the number of enquiries from long leaseholders dissatisfied with the management of their building. Often after the leaseholders have themselves taken over the management.
Many of our readers will be aware that the Commonhold and Leasehold Reform Act 2002 introduced Right to Manage (RTM). This was a non-fault ground that if the majority of leaseholders in a building wished to take over management then in effect they could do so. The process was thought to be straight forward but the rise in cases before the First Tier Tribunal Property Chamber and subsequent appeals to the Upper Tribunal are a clear indication that many freeholders will not give up management without a fight. Even when the process has been followed dissatisfaction can still exist with some leaseholders unhappy with the conduct of others.
So what other options are there? The Landlord and Tenant Act 1987 provides an alternative route. To follow this it is first necessary to show that in some way the body managing the development is not complying with its statutory duties and requirements under the lease. Any one leaseholder is entitled to follow this procedure.
Initially a Notice must be give to the freeholder and the person managing under section 22 of the 1987 Act. This notice needs to give details of what the perceived difficulties are and suggest how the manager can remedy the same. If the landlord and manager do not then remedy the breaches within a reasonable period of time an application can be made to the First Tier Tribunal Property Chamber inviting them to appoint a manager.
At the hearing the Applicant has to justify to the Tribunal that it is “just and convenient” to appoint a manager. Generally the Tribunal will want to be satisfied that the current appointee has not been complying with the lease and statute. The Tribunal will also take account the views of other leaseholders and the freeholder. The Tribunal will consider all points to try and determine if the imposition of a manager will improve the lot of the leaseholders to ensure good management of the building.
It is for the Applicant to source a person to be a manager. Generally the Tribunal will want to appoint a professional who can demonstrate that they fully understand what is required of them, will follow one of the approved statutory codes of management (such as the RICS Residential Service Charge Code), have sufficient professional expertise and hold insurance. The proposed manager will normally be required to attend any hearing and in effect be interviewed by the Tribunal to satisfy them as to the suitability. The reason for this is that the Manager (who may also be given powers as a Receiver) is an appointee of the Tribunal and answerable to them in the first instance rather than the parties to the leases. The management order will set out comprehensively the terms of appointment including prescribing the fees the manager can charge, the length of the appointment and other rights give to them. If anything is not covered or difficulties arise any party (including the manager) can then apply to the Tribunal for further directions. Typically an appointment will initially be for two or three years and before the Order lapses it is possible for the parties to apply for an extension of the same.
The benefit is that an entirely independent manager is appointed who is personally answerable (as the Order always names a specific individual) to the Tribunal. We have seen a rise in situations where the leaseholders have taken over management (either as a result of an RTM or collective enfranchisement) but issues have arisen. All too often we come across situations where factions arise who do not wish to strictly comply with the lease or statute. When such agreements are unanimous this can work but there are risks. In these circumstances the imposition of a manager may be better for all parties to resolve disputes. It is also worth noting that the leaseholder(s) who apply will themselves have no liability for the management. In forming and setting up an RTM their will be costs which the participating leaseholders are joint and severally liable for and those leaseholders whop become Directors of an RTM also have responsibilities under the rules and regulations governing companies.
These situations typically are complicated but appointment of a manager can be an effective method of resolving long residential leasehold management problems. We at PainSmith are happy to advise on any such matters, including assisting in finding managers prepared to accept such appointments.