First-tier Tribunal Appoints Manager for Property Maintenance

OUTCOME: Allowed

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

:

CHI/00ML/LAM/2022/0005

Property

:

[ADDRESS], Hove, [POSTCODE]

Applicant

Representative

:

:

[COUNSEL] & [COUNSEL]

[NAME] Manager

: [NAME]

Respondents

:

[redacted]

:

Appointment of Manager section 24 of the Landlord and Tenant Act 1987. S20C Landlord and Tenant Act 1985

Tribunal Member

Hearing Date

:

:

Judge D [NAME] [NAME]

15th September 2022

Date of Decision

:

8th November 2022

DECISION

2 Background

1. The Applicants made an application for a manager to be appointed. This is a building converted into two flats, one of which is held on a long lease by the applicants. The other flat is owned by the freeholder Mr [APPELLANT].

2. The Applicant refers to various failings of management and that relations have broken down. A Section 22(1) Notice was served on 25 January 2022 and the Applicants now seek an Order appointing a manager of the property in accordance with section 24 of the Landlord and Tenant Act 1987.

3. The Applicants propose [APPELLANT] of [ADDRESS], Bexhill on Sea, East Sussex, [POSTCODE] as the [NAME] manager.

4. Directions were issued on 28th June 2022 listing this matter for hearing.

5. During August 2022 the parties submitted a consent order confirming that both parties agreed to the Tribunal appointing [NAME] as a Tribunal Manager. Judge Tildesley OBE refused to endorse the consent order reminding the parties it was for the Tribunal to be satisfied that a manager must be appointed.

6. Shortly before the hearing on 5th September 2022 the Respondent sought an adjournment. This was refused. Further the Respondent looked to file a statement dated 12th September 2022. He was no longer in agreement to a manager being appointed.

7. The Tribunal had before it an electronic bundle of 304 pages and references in [ ] are to pages within that bundle.

8. Miss [NAME] represented herself and Mr [NAME] and Mr [NAME] appeared in person. Mr [NAME] was also in attendance throughout the hearing.

9. The hearing took place at Havant Justice Centre with the parties listed above present together with Judge Whitney and Mr [NAME]. Mr [NAME] appeared remotely by video. The hearing was recorded.

THE LAW

10. The relevant law is contained within Section 24 of the Landlord and Tenant Act 1985 which is annexed hereto.

THE HEARING

11. At the start of the hearing the Tribunal confirmed it would allow Mr [NAME] to rely upon his statement.

3 12. It was explained it would hear from [NAME], then Mr [NAME] and then the panel would question Mr [NAME]. Each party questioned the other on their respective cases. Below is a summary of the evidence given.

13. Miss [NAME] explained she had owned her flat since 2014. She suggested that there was long outstanding major works and little maintenance had been undertaken. There were no reserve funds held and managers appointed by Mr [NAME] had ceased acting, she suggested because Mr [NAME] would not allow them to properly manage the freehold. She referred to various emails [256- 258] showing managers resigning. She relied on her witness statement [88].

14. [NAME], in summary of her case, stated that there were long term issues as to maintenance with multiple breaches of the RICS Code. She was not satisfied that Mr [NAME] would change his ways and believed a Tribunal appointed manager was the only way for the major work which is required to the Property to be completed.

15. Mr [NAME] told the Tribunal he had lived in his flat since 1987 and purchased the freehold in 2004. He suggested the managers he appointed only resigned after meeting the Applicants. He referred to having appointed [NAME] at the start of the year but had no documentation supporting this. He confirmed he had not taken any advice upon this application as he felt the money would be better spent on undertaking work to the Property. He accepted major works were required to the Property.

16. Mr [NAME] was adamant he had signed an agreement with [NAME] and asked them to get on with undertaking major works. This was to be all works referred to in a 2016 survey of which the parties were aware, but a copy was not in the bundle. It referred to damp proofing works, works to the hallway, exterior rendering, guttering and painting. He accepted he had been aware of the need for works to be undertaken since 2015.

17. Mr [NAME] explained there was a dispute with the previous owner of the Applicants flat and he referred to a settlement he reached whereby he lost about £10,000 owed to him. He accepted that there have been failings on his part such as production of accounts. He accepted he had not been able to cope.

18. Mr [NAME] explained [NAME] wanted to obtain advice on the terms of the lease but he would not fund this. He believed that the major works should be undertaken relying upon the specification of works produced by [NAME] (not within the bundle) and he would pay his share of the costs.

4 19. Mr [NAME] did accept that a line needed to be drawn and for matters to start again. He stated he would welcome things being done. He confirmed he has funds available to cover the costs of major works and once all completed he hopes to sell his flat.

20. Mr [NAME] explained he had a sum of £1798.38 in a treasurers account he used for service charges. Some of this money had been paid by him. He accepts moving forward he could not self manage hence he wants to appoint a managing agent.

21. Mr [NAME] was questioned by the Tribunal.

22. He explained he had about 12 years experience and had been a Member of IRPM for 3 years. He managed about 100 blocks consisting of about 1300 units. They were scattered over South East England with the majority in the Hastings, Bexhill and Eastbourne area. He explained he managed a couple of blocks of up to 50 units and several tower blocks as well as converted houses.

23. He employed 3 other persons and has various links with [NAME] and structural engineers whom he uses from time to time.

24. He has £2million of indemnity insurance and this would cover him personally for any Tribunal appointment. His firm is a member of [NAME].

25. He inspected the Property on 9th September 2022. It was apparent the building required maintenance and stated the photographs within the bundle demonstrated this. In his view the surveys would need updating and then a Section 20 consultation would be required.

26. Mr [NAME] explained he understood he would be answerable to the Tribunal. He needs to ensure there is no conflict with any party and must be wholly impartial. In his view an appointment of 2 years is required to ensure the works can all be properly undertaken. His fee would be £1300 plus vat per annum with charges for the section 20 major works and other administration charges.

27. He confirmed he has no current appointments by the Tribunal.

28. Neither the Applicant nor the Respondent had any questions for Mr [APPELLANT] although both were given the opportunity.

DECISION

29. We thank both parties for their measured submissions.

5 30. It was apparent to the Tribunal that there was a degree of hostility between the parties which, as is all too familiar, came about due to failures in communications.

31. The Respondent accepted he had been served with the Section 22 Notice.

32. We are satisfied that it is just and convenient for a manager to be appointed.

33. The Respondent has by his own admission been wholly overwhelmed by [NAME]. He acknowledged the need for external help. Despite this we were not satisfied that he had taken any real steps to appoint a manager. Whilst managers had been appointed in the past for the past 5 years or so there had been no manager and so no works had been undertaken. This is despite the Respondent acknowledging that in 2016 he was given advice by a [NAME], [NAME], advising works. Mr [NAME] in his evidence accepted these works should be undertaken and yet even now nothing had been done to undertake the same.

34. Taking account of this history it seems plain that a manager needs to be appointed to ensure the required major works are undertaken to place the Property in good order. That is the object for the appointment of this manager.

35. We have considered carefully whether it is appropriate to appoint Mr [NAME]. The panel was impressed by his evidence. Whilst he has no previous appointments Mr [NAME] clearly understood his responsibilities and the requirements of his role. His fees are in our judgment reasonable and his estimate of the time required sensible in all the circumstances.

36. We have considered what other terms should be included within any order. It is of course not Mr [NAME] role to resolve any outstanding accounting issues in respect of the Respondents management. He effectively starts with a blank sheet. We are satisfied that he will require funds to ensure the survey can be updated and the works moved forward. To that end we will include provision within the order that each party shall pay £5,000 as an interim payment to the manager and the manager may at any time request further interim sums upon providing a budget to the parties.

37. The order will include provision that Mr [NAME] shall provide to the Tribunal and the parties a written report on the anniversary of his appointment which shall last for two years. All are reminded that any party may seek further directions from the Tribunal and if any party wishes to extend this order application should be made 3 months prior to the order expiring.

6 38. In conclusion we find that a manager should be appointed and appoint Mr [NAME] on the terms of the attached order.

RIGHTS OF APPEAL

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application by email to [EMAIL]

2.The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

3.If the person wishing to appeal does not comply with the 28 day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

:

CHI/00ML/LAM/2022/0005

Property

:

[ADDRESS], Hove, [POSTCODE]

Applicant

Representative

:

:

[COUNSEL] & [COUNSEL]

[NAME] Manager

: [NAME]

Respondents

:

[redacted]

:

Tribunal Member

Hearing Date

:

:

Judge D [NAME] [NAME]

15th September 2022

Date of Decision

:

8th November 2022

MANAGEMENT ORDER

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Interpretation

1. In this Order:

“The Property” means the flats and other premises known as known as [ADDRESS], Hove, [POSTCODE] and registered at HM Land Registry under title number SX101042 and shall include [ the building, outhouses, gardens, amenity space, drives, pathways landscaped areas, flower beds, passages, bin-stores, common parts, storage rooms basements, electricity and power rooms; and all other parts of the property.

“The Landlord” shall mean [RESPONDENT] or his successors in title to the reversion immediately expectant upon the Leases.

“The Tenants" shall mean the proprietors for the time being of the Leases whether as lessee or under-lessee and "Tenant” shall be construed accordingly.

“The Leases" shall mean all leases and/or underleases of flats in the Property.

“The Manager” means [NAME]

“The Tribunal” means the First-tier Tribunal (Property Chamber)

ORDER

2. In accordance with section 24(1) of the Landlord and Tenant Act 1987 (“the Act”) [APPELLANT] is appointed as Manager of the Property.

3. The Manager’s appointment shall start on 25th December 2022 (“the start date”) and shall end on 24th December 2024 (“the end date”).

4. For the avoidance of doubt this Order supplements but does not displace covenants under the Leases and the Tenants remain bound by them. Where there is a conflict between the provisions of the Order and the Leases, the provisions of the Order take precedence.

5. The purpose of this Management Order is to provide for the [NAME] which includes taking steps to complete major works required to the Property to bring the same into reasonable order.

6. The Manager shall manage the Property in accordance with: (a) the terms of this Order and the Directions set out below;

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(b) the respective obligations of the Landlord and the Tenants under the Leases whereby the Property is demised by the Landlord (save where modified by this Order); (c) the duties of a Manager set out in the Service Charge Residential Management Code (“the Code”) (3rd Edition) or such other replacement code published by the Royal Institution of [NAME] (“RICS”) and approved by the Secretary of State pursuant to section 87 Leasehold Reform Housing and Urban Development Act 1993 (whether the Manager is a Member of the RICS or not); and (d) the provisions of sections 18 to 30 of the Landlord and Tenant Act 1985.

7. From the date this Order comes into effect, no other party shall be entitled to exercise a management function in respect of the Property where the same is the responsibility of the Manager under this Order.

8. The tribunal requires the Manager to act fairly and impartially in the performance of their functions under this Order and with the skill, care and diligence to be reasonably expected of a Manager experienced in carrying out work of a similar scope and complexity to that required for the performance of the said functions.

9. The Manager or any other interested person may apply to vary or discharge this Order pursuant to the provisions of section 24(9) of the Act.

10. Any application to extend or renew this Order must be made before the end date, preferably at least three months before that date, and supported by a brief report of the [NAME] during the period of the appointment. Where an application for an extension or renewal is made prior to the end date, then the Manager’s appointment will continue until that application has been finally determined.

11. The Manager is appointed to take all decisions about the [NAME] necessary to achieve the purposes of this Order. If the Manager is unable to decide what course to take, the Manager may apply to the Tribunal for further directions, in accordance with section 24(4), Landlord and Tenant Act 1987. Circumstances in which a request for such directions may be appropriate include, but are not limited to:

(a) a serious or persistent failure by any party to comply with an obligation imposed by this Order; (b) circumstances where there are insufficient sums held by the Manager to discharge their obligations under this Order and/or for the parties to pay the Manager’s remuneration; and

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(c) where the Manager is in doubt as to the proper construction and meaning of this Order. Contracts

12. Rights and liabilities arising under contracts, including any contract of insurance and/or any contract for the provision of any services to the Property, to which the Manager is not a party, but which are relevant to the [NAME], shall upon the date of appointment become rights and liabilities of the Manager, save that:

(a) the Landlord shall indemnify the Manager for any liabilities arising before commencement of this Order; and (b) the Manager has the right to decide, in their absolute discretion, the contracts in respect of which they will assume such rights and liabilities, with such decision to be communicated in writing to the relevant parties within 56 days from the date this order.

13. The Manager may place, supervise and administer contracts and check demands for payment of goods, services and equipment supplied for the benefit of the Property.

14. The Manager shall be responsible for responding to pre-contract enquiries regarding the sale of a residential flat at the Property.

Legal Proceedings 15. The Manager may bring or defend any court or tribunal proceedings relating to [NAME] (whether contractual or tortious) and, subject to the approval of the Tribunal, may continue to bring or defend proceedings relating to the appointment, after the end of their appointment.

16. Such entitlement includes bringing proceedings in respect of arrears of service charge attributable to any of the Flats in the Property, including, where appropriate, proceedings before this tribunal under section 27A of the Landlord and Tenant Act 1985 and in respect of administration charges under schedule 11 of the Commonhold and Leasehold Reform Act 2002 or under section 168(4) of that Act or before the courts and shall further include any appeal against any decision made in any such proceedings.

17. The Manager may instruct solicitors, counsel, and other professionals in seeking to bring or defend legal proceedings and is entitled to be reimbursed from the service charge account in respect of costs, disbursements or VAT reasonably incurred in doing so during, or after, this appointment. If costs paid from the service charge are

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subsequently recovered from another party, those costs must be refunded to the service charge account.

Remuneration

18. The Tenants are responsible for payment of the Managers’ fees, which are to payable under the provisions of this Order but which may be collected under the service charge mechanisms of their Leases.

19. The sums payable are:

(a) an annual fee of £650 plus vat at the prevailing rate per flat for performing the duties set out in paragraph 3.4 of the RICS Code (so far as applicable); (b) any additional fees contained in a schedule to this Order for the duties set out in paragraph 3.5 of the RICS Code (so far as applicable); and (c) VAT on the above fees. Ground Rent and Service charge

20. The Manager shall not collect the ground rents payable under the residential Leases.

21. The Manager shall collect all service charges and insurance premium contributions payable under the Leases, in accordance with the terms and mechanisms in the Leases.

22. Whether or not the terms of any Lease so provides, the Manager shall have the authority to:

(a) demand payments in advance and balancing payments at the end of the accounting year; (b) establish a sinking fund to meet the Landlord’s obligations under the Leases; (c) allocate credits of service charge due to Tenants at the end of the accounting year to the sinking fund; (d) alter the accounting year; and (e) issue interim demands for payment at any time upon production of a budget requiring further funds beyond those already paid to the Manager;

23. To ensure that the Manager has adequate funds to manage the Property, the Manager may immediately collect £ 5,000 from each

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Tenant. Any sum demanded by the Manager shall be payable within 28 days.

24. The Manager is entitled to recover through the service charge the reasonable cost and fees of any [NAME], architects, solicitors, counsel, and other professional persons or firms, incurred by them whilst carrying out their functions under the Order.

Administration Charges 25. The Manager may recover administration charges from individual Tenants for their costs incurred in collecting service charges and insurance which includes the costs of reminder letters, transfer of files to solicitors and letters before action. Such charges will be subject to legal requirements as set out in schedule 11 of the Commonhold and Leasehold Reform Act 2002.

Disputes 26. In the event of a dispute regarding the payability of any sum payable under this Order by the lessees, additional to those under the Leases (including as to the remuneration payable to the Manager and litigation costs incurred by the Manager), a Tenant, or the Manager, may apply to the tribunal seeking a determination under section 27A of the Landlord and Tenant Act 1985 as to whether the sum in dispute is payable and, if so, in what amount.

27. In the event of a dispute regarding the payability of any sum payable under this Order by the landlord, other than a payment under a Lease, the Manager or the Landlord may apply to the tribunal seeking a determination as to whether the sum in dispute is payable and, if so, in what amount.

28. In the event of dispute regarding the conduct of the [NAME] by the Manager, any person interested may apply to the Tribunal to vary or discharge the order in accordance with section 24(9) of the Landlord and Tenant Act 1987.

29. In the event of a dispute regarding the reimbursement of unexpended monies at the end of the Manager’s appointment, the Manager, a Tenant, or the Landlord may apply to the Tribunal for a determination as to what monies, if any, are payable, to whom, and in what amount.

DIRECTIONS TO LANDLORD 30. The Landlord must comply with the terms of this Order.

31. On any disposition other than a charge of the Landlord’s estate in the Property, the Landlord will procure from the person to whom the

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Property is to be conveyed, a direct covenant with the Manager, that the said person will (a) comply with the terms of this Order; and (b) on any future disposition (other than a charge) procure a direct covenant in the same terms from the person to whom the Property is to be conveyed.

32. The Landlord shall give all reasonable assistance and co-operation to the Manager in pursuance of their functions, rights, duties and powers under this Order, and shall not interfere or attempt to interfere with the exercise of any of the Manager’s said rights, duties or powers except by due process of law.

33. The Landlord is to allow the Manager and their employees and agents access to all parts of the Property and must provide keys, passwords, and any other documents or information necessary for the practical [NAME] in order that the Manager might conveniently perform their functions and duties, and exercise their powers under this Order.

34. Within 28 days from the date of this Order the Landlord must provide all necessary information to the Manager to provide for an orderly transfer of responsibilities, to include the transfer of:

(a) all accounts, books and records relating to the Property, including a complete record of all unpaid service charges; and

(b) all funds relating to the Property including uncommitted service charges and any monies standing to the credit of a reserve or sinking fund.

(c) Copies of any and all surveys undertaken including that prepared by [NAME] in or about 2016.

DIRECTION TO CHIEF LAND REGISTRAR

35. To protect the direction in paragraph 34 for procurement by the Landlord, of a direct covenant with the Manager, the Registrar is ordered to enter the following restriction in the register of the Landlord’s estate under title no(s) SX101042. The restriction is to have overriding priority against any search with priority or pending application for a disposition of the registered estate (other than a charge) that has been lodged after the 30th March 2022.

“No disposition of the registered estate (other than a charge) by the [NAME] of the registered estate, or by the [NAME] of any registered charge, not being a charge registered before the entry of this restriction, is to be completed by registration without a certificate signed by the applicant for registration or their conveyancer that the

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provisions of paragraph 31 of an Order of the Tribunal dated 8th November 2022 have been complied with”

DIRECTIONS TO MANAGER

36. The Manager must adhere to the terms of the Order above.

Registration

37. The Manager must make an application to HM Land Registry for entry of the restriction referred to in paragraph 38, within 14 days of the date of this Order.

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Conflicts of Interest

38. The Manager must be astute to avoid any Conflict of Interest between their duties and obligations under this Order, and their contractual dealings. Where in doubt, the Manager should apply to the Tribunal for directions.

Complaints

39. The Manager must operate a complaints procedure in accordance with, or substantially similar to, the requirements of the Royal Institution of [NAME].

Insurance

40. The Manager must maintain appropriate building insurance for the Property and ensure that the Manager’s interest is noted on the insurance policy.

41. From the date of appointment, and throughout the appointment, the Manager must ensure that he/she has appropriate professional indemnity insurance cover in the sum of at least £2 million and shall provide copies of the certificate of liability insurance to the Tribunal, and, upon request, to any Tenant or the Landlord. The Certificate should specifically state that it applies to the duties of a Tribunal appointed Manager.

Accounts 42. The Manager must:

(a) prepare and submit to the Landlord and the Tenants an annual statement of account detailing all monies receivable, received and expended. The accounts are to be certified by the external auditor, if required under the Leases; (b) maintain efficient records and books of account and to produce for these for inspection, to include receipts or other evidence of expenditure, upon request by the Landlord or a Tenant under section 22 Landlord and Tenant Act 1985; (c) maintain on trust in an interest-bearing account at such bank or building society, as the Manager shall from time to time decide, into whichservice charge contributions, Insurance Rent, and all other monies arising under the Leases shall be paid; and

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(d) hold all monies collected in accordance with the provisions of the Code.

Repairs and maintenance

43. The Manager must:

(a) by 30th March 2023 draw up a planned maintenance programme for the period of the appointment, allowing for the periodic re-decoration and repair of the exterior and interior common parts of the Property, as well as any roads, accessways, mechanical, electrical and other installations serving the Property, and shall send a copy to every Tenant and to the Landlord; (b) subject to receiving sufficient prior funds: (i) carry out all required repair and maintenance required at the Property, in accordance with the Landlord’s covenants in the Leases, including instructing contractors to attend and rectify problems, and is entitled to recover the cost of doing so as service charge payable under the Leases or in accordance with the Order. (ii) arrange and supervise any required major works to the Property, including preparing a specification of works and obtaining competitive tenders. (c) liaise with all relevant statutory bodies in the carrying out of their management functions under the Order; and (d) ensure that the Landlord, and the Tenants, are consulted on any planned and major works to the Property and to give proper regard to their views.

44. The Manager has the power to incur expenditure in respect of health and safety equipment reasonably required to comply with regulatory and statutory requirements.

Reporting

45. By no later than 12 months from the date of appointment (and then annually) the Manager must prepare and submit a brief written report to the Tenants, and the Landlord, on the progress of the [NAME] up to that date, providing a copy to the Tribunal at the same time.

End of Appointment

46. No later than 56 days before the end date, the Manager must:

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(a) apply to the tribunal for directions as to the disposal of any unexpended monies;

(b) include with that application a brief written report on the progress and outcome of the [NAME] up to that date (a “Final Report”); and

(c) seek a direction from the tribunal as to the mechanism for determining any unresolved disputes arising from the Manager’s term of appointment (whether through court or tribunal proceedings or otherwise).

47. Unless the tribunal directs otherwise the Manager must within two months of the end date:

(a) prepare final closing accounts and send copies of the accounts and the Final Report to the Landlord and Tenants, who may raise queries on them within 14 days; and (b) answer any such queries within a further 14 days.

48. The Manager must reimburse any unexpended monies to the paying parties, or, if it be the case, to any new Tribunal appointed Manager within three months of the end date or, in the case of a dispute, as decided by the Tribunal upon an application by any interested party.

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Schedule of Additional Fees

 Completion of LPE1 £275.00 plus v.a.t.  S20 Admin Fees not exceeding 10% plus v.a.t of the contract price  Notice of Transfer & Charge £150 inc of v.a.t.