Appointment of a Manager instead of RTM

The Commonhold and Leasehold Reform Act 2002 introduced the new none fault Right to Manage legislation.

The idea was that if you had not less than 50% of the Qualifying Tenants interested they could form an RTM company and then take over the day to day management. This was seen as an alternative to enfranchisement or even a stepping stone to the same.

However as with enfranchisement whilst at first this can seem a good idea it is worth thinking about what in practice this will mean. In particular since RTMs involve leaseholders working together this is not always appropriate for reasons similar to those given in our earlier blog post on the Cons attached to enfranchisement. In particular you may all need to work together and make difficult decisions about the management of the building.

Sometimes the leaseholders find themselves in a position where they all agree that the current management of the building is not working. Often this can be down to neglect or actual mismanagement. Whilst there may be differing opinions as to the way to move forward it may be possible to use the Landlord and Tenant Act 1987 (“The Act”) to impose some control.

The starting point is for one or more leaseholders to serve a Notice (section 22 of the Act) upon the Landlord and any Managing Agent appointed. This should set out the defaults complained of and invite them to set out how they intend to remedy the same. A reasonable period must be allowed.

Once that has expired the Leaseholders can then apply to the LVT under section 24 of the Act for the appointment of the manager. It will be for the Leaseholders to propose a professional managing agent who is prepared to accept an instruction. Generally the LVT will issue Directions and these will require the proposed agent to confirm that they agree to being appointed and ask them to confirm the terms upon which they would be appointed, provide a CV and other information. There will also be Directions requiring the Leaseholders to file evidence of the breaches complained of and for the Landlord/Current agent to reply. We pause at this point to highlight that this is a fault based procedure and the LVT must be satisfied that there are breaches and it is just and convenient to make an order.

There will then be a hearing (note generally the LVT has no powers to deal with matters summarailly) and the LVT will hear evidence. Usually they will require the proposed manager to attend and give evidence so that the LVT is satisfied that they are a proper person and able to adequately manage. The Manager is an appointee of the LVT and will operate pursuant to the terms of their Order.

Once appointed it will then be for the Manager to manage. They must ensure compliance with all terms of the lease and of course statute and will normally be expected to manage in accordance with one of the recommended codes of good practice for management.

The manager should act independently to pursue his or her duties. This often can be useful as the obligation to make decisions etc as to the management will be down to the manager and not the Leaseholders (or Freeholder). This means that sometimes difficulties can arise and the Manager is unsure what to do. If the terms of the appointment under the Order appointing do not make clear they are entitled to make application to the LVT to seek further Directions.

As can be seen whilst RTM provides a useful tool for leaseholders it is not suitable for all circumstances particularly today in some blocks which have many absentee leaseholders. Appointment of a manager can ensure that a building is properly managed particularly when the leaseholders (or some) are satisfied that it is not being done properly but they themselves do not want to become involved in the management or cannot agree on exactly how the building should be managed.

As with all things relating to residential Landlord and Tenant we at PainSmith are happy to advise Landlords or Tenants about such applications or the options open to them.

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