First-tier Tribunal Appoints Manager for Property Mismanagement

OUTCOME: Allowed

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case reference : LON/00BK/LAM/2018/0009

Property : 77 [ADDRESS] [POSTCODE]

Applicants : [redacted]

Representative : [COUNSEL] in person

Respondent: [redacted]

Also present : [NAME] [NAME] (leaseholder of Flat A) and [NAME] (proposed manager)

Type of [NAME] : Appointment of Manager

Tribunal members :

Judge P [NAME]

[NAME]

[NAME] JP CQSW

Haring Date and Venue : 7th September 2018 at 10 [ADDRESS] [POSTCODE]

Date of decision : 10th October 2018

DECISION

Decision

1. In accordance with section 24(1) Landlord and Tenant Act 1987 [APPELLANT] of [APPELLANT] (“the Manager”) is appointed as manager of [NAME] at 77 [ADDRESS] [POSTCODE] ("[NAME]”).

2. The order shall continue for a period of 2 years from 10th October 2018. If the parties wish to apply for any extension of the order, they are encouraged to do so at least three months before the order expires.

3. The Manager shall manage [NAME] in accordance with:

(a) the directions and schedule of functions and services attached to this order;

(b) the respective obligations of the landlord and the leases by which the flats at [NAME] are demised by the Respondent and in particular with regard to repair, decoration, provision of services and insurance of [NAME]; and

(c) the duties of a manager set out in the Service Charge Residential Management Code (“the Code”) or such other replacement code published by the Royal Institution of Chartered Surveyors and approved by the Secretary of State pursuant to section 87 Leasehold Reform Housing and Urban Development Act 1993.

4. The Manager shall register the order against the landlord’s registered title as a restriction under the Land Registration Act 2002, or any subsequent Act.

5. An order is hereby made under section 20C Landlord and Tenant Act 1985 that the Respondent’s costs (if any) before the Tribunal shall not be added to the service charges.

Background

6. The Applicants seek an order appointing [NAME] of [COMPANY] as a Manager in relation to [NAME] under section 24 of the Landlord and Tenant Act 1987 (“the Act”). They also seek an order preventing the Respondent from recovering his costs (if any) in connection with these proceedings through the service charge.

7. A preliminary notice under section 22 of the Act was served on the Respondent on 16th May 2018.

8. The building is a purpose-built block with a commercial unit on the ground floor and 4 residential flats above. The Applicants are 3 of the 4 residential leaseholders. At the hearing Mr [NAME] said that the other leaseholder, Mr [NAME] of Flat C, is frequently away for long periods and has not been involved with, or opposed, this [NAME].

Applicant’s case

9. The Applicants rely in part on a previous decision of the Tribunal dated 23rd April 2018 on an [NAME] by [NAME] and [NAME] [NAME] for the determination of liability to pay service charges. In that decision the Tribunal determined that a large number of service charge items which had been demanded were not payable. The Tribunal in that case also determined that certain work had not been carried out by (or on behalf of) the Respondent to a reasonable standard and also criticised the Respondent’s lack of documentation and invoices. One particular charge was described by the Tribunal as “clearly extortionate”. The Tribunal also described as well-founded (based on the evidence) the complaint by Mr [RESPONDENT] and Ms [RESPONDENT] that the Respondent had been very aggressive and caused significant stress to the residents of the building.

10. At the hearing Mr [RESPONDENT] said that the Respondent had virtually ignored the previous Tribunal decision and had made aggressive demands which directly contradicted the findings contained in the previous Tribunal decision. The Respondent had been abusive and very hard to deal with, and the police had become involved and warned him not to come to the building. Any work carried out on behalf of the Respondent had been carried out by people without appropriate qualifications. The building was uninsured for a year.

11. Mr [NAME] referred the Tribunal to relevant documents in the hearing bundle, including evidence of service of the preliminary notice, examples of abusive correspondence and a demand for a sum which the Tribunal had already declared not to be payable. Mr [NAME] confirmed that the leaseholder of Flat C was aware of this [NAME].

Respondent’s position

12. The Respondent has made no written submissions whatsoever in response to the [NAME] for the appointment of a manager or in response to the Applicants’ own submissions. He was not present or represented at the hearing. The case officer telephoned him on the morning of the hearing and established that he was aware that the hearing was taking place that morning.

The proposed Manager

13. The Tribunal asked Mr [NAME] a number of questions in order to establish whether he would be a suitable manager in the event that the Tribunal decided that a manager should be appointed. Mr [NAME] said that he had been a director of a full-service estate agency since November 2014 and that he oversees the whole business. The agency has a portfolio of 28 blocks, ranging from 4 to 32 units and it has a 24-hour emergency maintenance helpline. Mr [NAME] is an Associate of the Institute of Property Managers. Various other points were also discussed.

Reasons for decision

14. Under section 22(1) of the Act, “Before an [NAME] for an order under section 24 is made in respect of any premises to which this Part applies by a tenant of a flat contained in those premises, a notice under this section must (subject to subsection (3)) be served by the tenant on (i) the landlord and (ii) any person (other than the landlord) by whom obligations relating to the management of the premises or any part of them are owed to the tenant under his tenancy.”. We are satisfied that this sub-section has been complied with, and the Respondent has not contested this point.

15. The relevant parts of section 24 of the Act provide as follows:-

“(1) A tribunal may, on an [NAME] for an order under this section, by order (whether interlocutory or final) appoint a manager to carry out in relation to any premises to which this Part applies (a) such functions in connection with the management of [NAME], or (b) such functions of a receiver, or both, as the tribunal thinks fit.

(2) A tribunal may only make an order under this section … (a) where the tribunal is satisfied … that any relevant person is in breach of any obligation owed by him to the tenant under his tenancy and relating to the management of the premises … and that it is just and convenient to make the order in all the circumstances of the case; (ab) where the tribunal is satisfied that unreasonable service charges have been made, or are proposed or likely to be made and that it is just and convenient to make the order in all the circumstances of the case … (ac) where the tribunal is satisfied that any relevant person has failed to comply with any relevant provision of a code of practice … and that it is just and convenient to make the order in all the circumstances of the case, or (b) where the tribunal is satisfied that other circumstances exist which make it just and convenient for the order to be made.”

16. On the basis of the information provided by the Applicants, which has not been contested by the Respondent, we are satisfied that the Respondent is in breach of obligations owed by him to the Applicants, in particular by failing to maintain the communal areas to a satisfactory standard and failing to manage [NAME] generally to an acceptable standard. He has also made unreasonable service charge demands and has dealt incompetently with accounting issues. He has also failed to follow correct procedures when carrying out works and has used people without suitable qualifications to carry out work. He has also ignored some of the findings of a previous Tribunal and has engaged with the Applicants in an aggressive and – at times – abusive manner. We are also satisfied that the Respondent’s failings and behaviour make it just and convenient in all the circumstances of the case to make an order appointing a manager over [NAME].

17. The Tribunal also needs to be satisfied that the manager proposed by the Applicants would be a suitable person to perform the role of manager as the purpose of the Tribunal’s power is to try to ensure that the building is properly managed. Having cross-examined Mr [NAME] we are satisfied that he would be a suitable person. Whilst this would his first appointment as a manager and there are aspects of the role with which he would need to become slightly more familiar, we consider that his property management experience to date coupled with his positive attitude should lead to major improvements in the way in which [NAME] is managed.

18. As regards the length of the appointment, the Applicants and Mr [NAME] suggested just 1 year for the initial appointment, but our concern is that this may well not be long enough for Mr [NAME] to turn things around, and they accepted at the hearing that 2 years might be more appropriate.

19. In relation to costs, it is unlikely that the Respondent has incurred any as he has not engaged with the process. However, if and to the extent that he has incurred any costs these should not be added to the service charge. The Applicants were fully justified in bringing this [NAME] and they have conducted themselves well, whilst the Respondent has simply not dealt with or even commented on the serious management failings identified by the Applicants.

Name: Judge P [NAME]: 10th October 2018

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have.

If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case.

The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME].

If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28 day time limit; the tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit.

The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, [NAME] and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking.

If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).

DIRECTIONS

1. From the date of the appointment and throughout the appointment the Manager shall ensure that he has appropriate professional indemnity cover in the sum of at least £1,000,000 and shall provide copies of the current cover note upon a request being made by any lessee of [NAME], the Respondent or the Tribunal.

2. That no later than four weeks after the date of this order the parties to this [NAME] shall provide all necessary information to and arrange with the Manager an orderly transfer of responsibilities. No later than this date, the Applicants and the Respondent shall transfer to the Manager all the accounts, books, records and funds (including, without limitation, any service charge reserve fund).

3. The rights and liabilities of the Respondent arising under any contracts of insurance, and/or any contract for the provision of any services to [NAME] shall upon 10th October 2018 become rights and liabilities of the Manager.

4. The Manager shall account to the Respondent for the payment of any ground rent received by him (if it is in fact paid to him) and shall apply the remaining amounts received by him by (other than those representing his fees) in the performance of the Respondent’s covenants contained in the said leases.

5. The Manager shall be entitled to remuneration (which for the avoidance of doubt shall be recoverable as part of the service charges of leases of [NAME]) in accordance with the Schedule of Functions and Services attached.

6. Within 28 days of the conclusion of the management order, the Manager shall prepare and submit a brief written report for the Tribunal, on the progress and outcome of the management of [NAME] up to that date, to include final closing accounts. The Manager shall also serve copies of the report and accounts on the lessor and lessees, who may raise queries on them within 14 days. The Manager shall answer such queries within a further 14 days. Thereafter, the Manager shall reimburse any unexpended monies to the paying parties or, if it be the case, to any new tribunal-appointed manager, or, in the case of dispute, as decided by the Tribunal upon [NAME] by any interested party.

7. The Manager shall be entitled to apply to the Tribunal for further directions.