First-tier Tribunal Appoints New Manager for Poorly Managed Property

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL [NAME_1] CHAMBER ([NAME_1]) Case reference : LON/00AU/LAM/2019/0015 [NAME_1] : 9 Highbury Grange, London, [POSTCODE] Applicants : [redacted] (2) [NAME_2] : [NAME_3] Respondent : [redacted] : Did not attend and was not represented Type of application : Appointment of Manager Tribunal members : Tribunal Judge I [NAME_6] Venue : 10 [ADDRESS] [POSTCODE] Date of decision : 14 October 2019

DECISION

2 Introduction

1. This is an application made by the Applicants under section 24 of the Landlord and Tenant Act (as amended) (“the Act”) for an order in respect of 9 Highbury Grange, London, [POSTCODE] (“the [NAME_1]”).

2. The [NAME_1] is described as a 19th century Thomas Cubitt villa converted into 7 flats. Four of the flats are retained by the Respondent, who is the freeholder, and the remaining 3 flats are held on long residential leases. The Applicants are the [NAME_7] of Flat 1. The other interested parties to the application are [NAME_8] and [NAME_9] and [NAME_10] and [NAME_12] who are the leaseholders of Flats 9A and 9B respectively.

3. The [NAME_1] has a somewhat unfortunate history. By a similar application made jointly by the Applicants and others against the Respondent, which was compromised by the parties, the Tribunal made an order dated 7 October 2015 appointing [NAME_13] of [NAME_14], as the Manager for a term of 3 years.

4. The Applicants asserted that [NAME_13] carried out little or no effective management of the [NAME_1] during his tenure. Therefore, the Applicants made an application to vary the order dated 7 October 2015 by replacing [NAME_13] with a [NAME_15] from the firm of [COMPANY_20].

5. The application to vary was listed for a hearing but this had to be adjourned because [NAME_15] was out of the country on the hearing date. In the interim, the term of the order dated 7 October 2015 expired and the management of the [NAME_1] reverted to the Respondent. By reason of this, the Tribunal no longer had jurisdiction to vary the order and the application did not succeed. The Applicants were, therefore, obliged to make this application afresh for the appointment of a new manager.

6. On 30 April 2019, the Applicants served a preliminary notice on the Respondent pursuant to section 22 of the Act for the appointment of a manager. The grounds set out in the notice effectively repeated the same complaints made that gave rise to the order of 7 October 2015 being made because of [NAME_13]’s alleged management failures. No response was forthcoming from the Respondent.

7. On 26 June 2019, the Applicants made this application to the Tribunal. The grounds relied on are annexed to this decision and need not be repeated here. On 2 July 2019, the Tribunal issued Directions and, in addition, the [NAME_7] of Flats 9A and 9B were served with a copy of the application and the directions order. The Respondent has not complied with any of the Directions or participated in the proceedings in any way.

3 The Law 8. Section 24 of the Landlord and Tenant Act 1987 provides:

"(1) A leasehold valuation tribunal may, on an application for an order under this section, by order 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 the

premises, or

(b) such functions of a receiver,

or both, as the Tribunal thinks fit.

(2) A leasehold valuation tribunal may only make an order under this section in the following circumstances, namely-

(a) where the tribunal is satisfied-

(i) that any relevant person either is in breach of any

obligation owed by him to the tenant under his tenancy

and relating to the management of the premises in

question or any part of them...

(ii) ...

(iii) that it is just and convenient to make the order in all the

circumstances of the case;

(ab) where the tribunal is satisfied-

(i) that unreasonable service charges have been made, or

are proposed or likely to be made; and

(ii) that it is just and convenient to make the order in all the

circumstances of the case;

(aba)...

(abb)...

(ac) where the tribunal is satisfied-

(i) where any relevant person has failed to comply with any

relevant provision of a code of practice approved by the

Secretary of State under section 87 of the Leasehold

Reform, Housing and Urban Development Act 1993

(codes of management practice), and

circumstances of the case;

(b) where the tribunal is satisfied that other circumstances exist which make it just and convenient for the order to be made.

4 Hearing Procedural 9. The hearing took place on 10 October 2019. The Applicants were represented by [NAME_3]. The Respondent did not attend and was not represented. [NAME_17] from Flat 9A attended the hearing but did not participate in the proceedings save to state that he supported the application to appoint a new manager.

10. By an email dated 8 October 2019, [NAME_10] and [NAME_18] made an application to be joined in the proceedings and/or to object to the application on the basis that various items of disrepair set out in the Third Schedule to the Applicants’ section 22 notice were not breaches committed by the Respondent.

11. The Tribunal dismissed the application for two reasons. Firstly, [NAME_10] and [NAME_18] did not attend the hearing to prosecute the application and it was in any event not supported by any evidence. Secondly, the objection raised was not one they could [NAME_19] take on behalf of the Respondent. In other words, they had no standing to do so as they are not the landlord. 12. [NAME_4] withdrew the Applicants’ application to debar the Respondent from defending the proceedings because of its non- compliance with the Tribunal’s directions.

13. The Tribunal was then told that [NAME_15], the proposed manager, had left the employment of [COMPANY_20] and that [NAME_21] from the same firm was being proposed instead. She had prepared a witness statement dated 9 October 2019, which the Tribunal was told had been served on the Respondent and interested parties by courier on the same date. 14. [NAME_4] made an application for permission to admit the witness statement of [NAME_21] in evidence. The application was granted because the Tribunal was satisfied that to do so did not cause either the Respondent or the interested parties any real prejudice. The witness statement effectively repeated what was set out in the witness statement of [NAME_15], which had been served in accordance with the Tribunal’s directions. 15. [NAME_4] stated that the Applicants were no longer pursuing ground 2 in support of the application.

Decision 16. The Tribunal then proceeded to hear the Applicants’ evidence, which was not challenged.

5 17. [NAME_21] confirmed her professional qualifications and her 8 years’ experience in managing various types of residential properties. She also confirmed that she was aware of the troubled history of the management of the [NAME_1]. She did not know why [NAME_13] had not carried out any of the urgent major works identified in the condition survey report prepared by [NAME_23] dated 27 May 2015 in relation to the earlier application to appoint a manager. 18. [NAME_21] estimated that total fees of approximately £40,000 would be required to [NAME_19] asses the condition of the [NAME_1] before major works could be undertaken. It was her intention to make an initial service charge demand for this expenditure. When asked by the Tribunal how this was going to be achieved if the Respondent or one or more of the other leaseholders did not or could not pay the demand, she said that the Applicants were prepared to fund any debt recovery litigation to an extent. However, she accepted that either if such funds were not forthcoming or were insufficient, no works could be carried out to the [NAME_1].

19. The Second Applicant, [NAME_24], then gave evidence. He confirmed [NAME_13]’s failure to implement the major works required and his failure to provide an adequate explanation for this. [NAME_25] suggested that he did not want to offend the Respondent. 20. [NAME_25] said that [NAME_26] and the Respondent had indicated that they could not afford the cost of the proposed major works. He said the Applicants would pay any service charge demand issued by [NAME_21]. When he was asked by the Tribunal about the extent to which they would be prepared to allow these funds to be used for the purpose of debt recovery proceedings against any defaulting party, he said this would be between 15-20% of their contribution. [NAME_25] said that he understood that none of the major works could be commenced until all service charge demands had been paid by the Respondent and other leaseholders.

21. Given that the same circumstances still existed at the [NAME_1] that gave rise to the order dated 7 October 2015 being made and the fact that the Applicants’ evidence was unchallenged, the Tribunal found that grounds 1, 3 and 4 relied on in support of the application had been proved and, therefore, section 24(2)(a)(i) of the Act had been satisfied. In any event, for the same reasons, the Tribunal was also satisfied that it was just and convenient for an order to be made appointing a manager for the [NAME_1].

22. Furthermore, the Tribunal was also satisfied that [NAME_21] possessed the relevant knowledge and experience to be appointed as the Manager of the [NAME_1]. However, the Tribunal did not consider that a term of 6 years for her appointment was appropriate for two reasons. Firstly, they were mindful of her propensity to change jobs after a relatively short time with her previous employers. Secondly, in their judgement, the Tribunal considered that a period of 3 years was sufficient for any

6 competent manager to collect any service charge contributions possibly by litigation and to implement the proposed urgent major works. Otherwise, the Applicants could potentially be left again in the position of having the benefit of an order appointing a manager but with no effective management taking place. Of course, it is open to the Applicants to make an application in time to vary the Tribunal’s order to extend the appointment of [NAME_21] if necessary.

23. The Tribunal’s order and the terms of [NAME_21]’s appointment is annexed to this decision. Section 20C – Costs 24. Given the Respondent’s non-participation in these proceedings and in the event that it seeks to recover any costs it may have incurred from the leaseholders, the Tribunal consider its just and equitable to make an order preventing it from being able to recover any such costs either through the service charge account or otherwise. Although there was no evidence that the Respondent had incurred any costs in responding to the application, this did not discount the possibility of such a claim being made at a later date. By making the order now, the Applicants would be spared having to incur both further costs and time in having to make an application under section 20C to challenge any such costs.

Name: Tribunal Judge I Mohabir

Date: 14 October 2019

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME_1] 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 application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case. The application for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the person making the application. If the application is not made within the 28 day time limit, such application 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 application for permission to appeal to proceed, despite not being within the time limit.

7 The application for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the [NAME_1] and the case number), state the grounds of appeal and state the result the party making the application is seeking. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).

8

CASE REFERENCE: LON/00AU/LAM/2019/0015 IN THE FIRST-TIER TRIBUNAL [NAME_1] CHAMBER ([NAME_1]) BETWEEN: [NAME_27] and [NAME_2] Applicant and [COMPANY_5] (Freeholder) Respondent (1) [NAME_8] and [NAME_9] (Flat 9A) (2) [NAME_10] and [NAME_12] (Flat 9B) Interested Parties ORDER for the Appointment of a Manager

UPON the making of an application by the Applicant dated 27 June 2019 for the appointment of a manager under s.24 of the Landlord and Tenant Act 1987 in respect of 9 Highbury Grange London [POSTCODE] (the “[NAME_1]”); AND UPON the First-tier Tribunal ([NAME_1] Chamber) being satisfied that the Respondent landlord is in breach of obligations owed by it to the Applicant under their lease and relating to the management of the [NAME_1]; AND UPON the Tribunal being satisfied that it is just and convenient in all the circumstances to make an Order pursuant to section 24 of the 1987 Act. In this Order: A. “the [NAME_1]” includes all those parts of the [NAME_1] known as 9 Highbury Grange, London [POSTCODE] and registered at HM Land Registry under Title Number NGL383069 B. “the Landlord” means [COMPANY_5] (company registration no. 01128306) or in the event of the vesting of the reversion in another, this landlord’s successors in title. C. “the Manager” means [NAME_28] of [COMPANY_29], 407-409 [ADDRESS] [POSTCODE]. D. “the Long Lease Flats” means (1) the Lower Ground Floor Flat A, (2) the Lower Ground Floor Flat B; and (3) the Second and Third Floor Flat 1. E. “the Landlord’s Retained Flats” means Flats C, D, E and F in the [NAME_1] (otherwise known as Flats 3, 4, 5 and 6); F. “the Expenditure Attributable to the Landlord’s Retained Flats” means 55.68% of the total expenditure that is charged to the [NAME_7] as service charge under the leases of the Long Lease Flats (assessed by reference to the rateable value apportionment set out in the Third Schedule of the Lease of Flat 1, 9 Highbury Grange dated 21 May 1981;

9 F. “the 2015 Order” means the (now expired) order of the Tribunal dated 7 October 2015, appointing a manager in respect of the [NAME_1] IT IS HEREBY ORDERED as follows: 1 In accordance with s.24(1) of the Landlord and Tenant Act 1987 the Manager is appointed as manager of the [NAME_1]; 2 The appointment of the Manager shall continue for an initial term of 3 years from the date of this Order and thereafter his appointment is to be subject to review by the Tribunal; 3 That the Manager shall manage the [NAME_1] 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 [NAME_7] under the leases demising the Long Lease Flats and in particular with regard to repair, redecoration, provision of services to and the security and insurance of, the [NAME_1]; (c) The duties of managers set out in the Service Charge Residential Management Code, 3rd edition or such other replacement Code published by the Royal Institute of Chartered Surveyors and approved by the Secretary of State pursuant to section 87 of the Leasehold Reform Housing and Urban Development Act 1993. 4 The Landlord / its agents shall not interfere with or obstruct the Manager’s ability to manage the [NAME_1] and shall, among other things, cooperate with all reasonable and necessary requests for access to the Landlord’s Retained Flats that are made by the Manager in connection with his appointment. 5 The Landlord / its agents shall pay to the Manager the Expenditure Attributable to the Landlord’s Retained Flats, such sums to be demanded by the Manager in the same manner as the service charges are to be demanded under the leases demising the Long Lease Flats. 6 The Manager shall within six weeks of the date of the Appointment Date appoint a [NAME_19] [NAME_19] and [NAME_19] surveyor to carry out a full structural survey of the [NAME_1] (“the Survey”) 7 The Manager shall within six weeks of the Appointment Date appoint a [NAME_30] to value the building for insurance purposes. 8 The Manager shall within a reasonable time of the Appointment Date commission an expert boundary report to establish the full extent of the [NAME_1].

10 9 An Order is made under s.20C of the Landlord and Tenant Act 1987 that the Respondent’s costs before the Tribunal shall not be added to the service charges. 10 The Manager shall apply forthwith to the Land Registry for the registration of this Order pursuant to section 24(3) of the 1987 Act and the applicable provisions of the Land Registration Act 2002 in relation to title number NGL383069.0 11. The [NAME_7] of the Long Lease Flats shall pay to the Manager the service charge payable under the lease of their respective flat in accordance with the provisions of their lease together with and at the same time and in the same manner as the service charge the Manager’s fee. For the avoidance of doubt, the Manager shall not be obliged or entitled to demand or collect any ground rent payable by the [NAME_7] of the Long Lease Flats to the Landlord.

12. Sections 18 to 30 of the Landlord and Tenant Act 1985 (and any regulations made thereunder) shall apply to any sums demanded by the Manager as if any references to “the landlord” are to “the Manager”.

13. The Manager shall within 6 months after the termination of his appointment provide to the [NAME_7] of the Long Lease Flats and the Landlord closing accounts up to the last day of his appointment. The Landlord and any lessee may within 3 months of receiving the said closing accounts make a reasonable request for further information and/ or raise reasonable queries on the closing accounts. The Manager shall reply to any such requests as soon as reasonably practicable and in any event no later than 3 months of receiving such a request. The Landlord and any lessee may apply to the Tribunal for further directions for the purposes of challenging any of the costs incurred in the event that they consider the Manager’s reply is unsatisfactory.

14. The Landlord shall within two weeks of the date of this Order provide details of where all communications from the Manager may be sent, and ensure that any communications sent to this address are dealt with promptly and fully.

11 DIRECTIONS 1. That from the date of 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 of the [NAME_7] of the Long Lease Flats (hereinafter “the [NAME_7]”), the Landlord or the Tribunal.

2. That not later than four weeks after the date of this Order the parties to this Application shall provide all necessary information to and arrange with the Manager an orderly transfer of responsibilities. No later than this date, the [NAME_7] and the Landlords shall transfer to the Manager all the accounts, books, records and funds (including without limitation, service charge reserve fund).

3. The rights and liabilities of the Landlord arising under any contracts of insurance, and/or any contract for the provision of any services to the [NAME_1] shall upon the date four weeks from the date of this Order become rights and liabilities of the Manager.

4. That the Manager shall be entitled to remuneration (which for the avoidance of doubt shall be recoverable as part of the service charges of the leases of the Long Lease Flats and from the Landlord in respect of the Landlord’s Retained Flats) in accordance with the Schedule of Functions and Services attached.

5. That at the expiry of 3 months from the date of this Order, the Manager shall prepare a brief written report for the parties hereto on the progress of the management of the [NAME_1] up to that date and shall submit the same to the parties by no later than one calendar month following the expiry of the initial 3 month period.

12 SCHEDULE OF FUNCTIONS AND SERVICES A. SERVICE CHARGE 1.1 Prepare an annual service charge budget, administer the service charge and prepare and distribute appropriate service charge accounts to the [NAME_7] as per the percentage share of under the terms of their leases and to the Landlord in respect of the Landlord’s Retained Flats. 1.2 Demand and collect service charges, insurance premiums and any other payments (other than ground rent) due from the [NAME_7] and from the Landlord in respect of the Landlord’s Retained Flats. Instruct solicitors to recover unpaid rents and service charges and any other monies due to the landlord upon the landlord’s instructions. 1.3 Instruct solicitors to recover from the Landlord unpaid sums due to the Manager in respect of the Landlord’s Retained Flats. 1.4 Place, supervise and administer contracts and check demands for payment for goods, services and equipment supplied for the benefit of the [NAME_1] within the service charge budget.

B. ACCOUNTS 2.1 Prepare and submit to the Landlord and owners of the Long Lease Flats an annual statement of account detailing all monies received and expended on its behalf. The accounts to be certified by an external auditor if required by the Manager. 2.2 Produce for inspection, receipts or other evidence of expenditure. 2.3 All monies collected by the Manager will be accounted for in accordance with the Accounts Regulations as issued by the [NAME_34], subject to the Manager receiving interest on the monies whilst they are in his client account. Any reserve fund monies shall be held in a separate client account with interest accruing to the parties contributing. C. REPAIRS AND MAINTENANCE Urgent repairs: 3.1 The Manager shall undertake the works detailed in Appendix C of the Expert Witness Report prepared by [NAME_23] dated 27 May 2015 (‘the Urgent Works’), as varied by Appendix 1 to this Order. A copy of Appendix C of the Expert Witness Report prepared by [NAME_23] dated 27 May 2015 is annexed hereto. The works shall proceed as follows: 3.1.1 The Manager shall submit to the [NAME_31] within 21 days hereof, a detailed specification of the Urgent Works for their approval or revision, such approval or revision not to be unreasonably withheld or made. 3.1.2 The Manager shall comply with all appropriate legislation and consult with the [NAME_31] in accordance with section 20 of the Landlord and Tenant Act 1985 (and any regulations made thereunder) prior to commencing the Urgent Works. 3.1.3 The Manager shall notify the [NAME_31] of a date on which she intends to commence the Urgent Works within 28 days of the end of the appropriate consultation period, such commencement date to be no later than nine months from the end of the appropriate consultation period. 3.1.4 The Manager shall undertake the Urgent Works in accordance with the specification approved or revised by the [NAME_31] as

14 aforesaid in a tidy efficient and workmanlike manner and to the standard required by the leases of the Long Lease Flats; 3.1.5 From the date of commencement of the Urgent Works, the Manager shall at least every 14 days update the [NAME_31] as to the progress of the Urgent Works; 3.1.6 Following receipt of such an update the [NAME_31] shall be entitled to require access to the [NAME_1] (on no fewer than 48 hours’ notice) in order to conduct an inspection of the progress of the Urgent Works, which access the Manager shall facilitate. 3.1.7 The Manager shall notify the [NAME_31] on conclusion of the Urgent Works. The [NAME_31] shall be given necessary access to inspect the Urgent Works in order to approve the same. The Urgent Works shall only be considered complete on provision of signed approval from the [NAME_7] and Landlord to that effect, such approval not to be unreasonably withheld or delayed. 3.2 Routine Maintenance: 3.2 The Manager shall: 3.2.1. Inspect the [NAME_1] at not less than 4 monthly intervals, with 3 inspections per annum being included in the services under the basic fee at 4.1; 3.2.2. deal with routine repair and maintenance issues and instruct contractors to attend and rectify problems; 3.2.3. deal with all building maintenance relating to the services and structure of the building;

15 3.2.4. give consideration to works to be carried out to the [NAME_1] in the interest of good estate management and making the appropriate recommendations to the landlord and the [NAME_7]; 3.2.5. set up a planned maintenance programme to allow for the periodic re- decorations of the exterior and interior common parts, such planned maintenance programme to be on a 3 year rolling basis, i.e. at the beginning of each year the Manager shall set up a revised plan covering the next 3 years. D. FEES 4.1 The Manager shall be entitled to receive a management fee in the sum of £4,500 plus VAT per year. 4.2 Major works carried out to the [NAME_1] (where it is necessary to prepare a specification of works, obtain competitive tenders, serve relevant notices on [NAME_7] informing them of the works and supervising the works) will be subject to a charge in respect of the professional fees of an architect, surveyor, or other appropriate person in the administration of a contract for such works. Such fees will be negotiated in accordance with current market rates and, if necessary, competitively tendered. 4.3 VAT to be payable on all the fees quoted above, where appropriate, at the rate prevailing on the date of invoicing.

E. COMPLAINTS PROCEDURE 5.1 The manager shall operate a complaints procedure in accordance with the requirements of the Royal Institution of Chartered Surveyors. Details of the procedure are available from the Manager on request.

16 Appendix C of the Expert Witness Report prepared by [NAME_23] dated 27 May 2015

17

18

19

20

21 Appendix 1

22 1 Appendix C of the expert witness report prepared by [NAME_23] dated 27 May 2015 is varied from the date of this order through the addition of the following items: 1.1 All additional works as are found to be necessary as a result of the Survey. 1.2 The installation of new incoming Mains Electricity (3 phase 100amps) supply to the building to be in accordance with UK Power recommendations and a Ryefield Board be installed. 1.3 The re-landscaping the front of the [NAME_1] to accommodate incoming utility services, electricity supply etc. This will include removing the subterranean vault. This replaces items 7, 8 and 9 in Schedule 1 Appendix C of the 2015 Order. 1.4 The provision of an East facing side perimeter boundary wall and retaining walls where necessary 1.5 The provision of two gates posts and a copping stone to match original dimensions 1.6 Provision of a double front gate which is integrated into the existing Front-Wall and gate post 1.7 Provision of a new place for external bin storage to the front of the [NAME_1] 1.8 Provision for a discreet outside bike storage facility to the rear of the [NAME_1] 1.9 Lifting and relaying the stone front steps, with like for like materials used, treads removed, the supporting brickwork made stable, new treads inserted and replaced on a suitable damp-proof backing which deflects water away from the building – the correct design for which is available from No. 7 Highbury Grange. 1.10 The provision of wrought iron hand railings on both sides of the entrance steps to the main building 1.11 Renovation of pillars and capping stones to pillars on the boundary wall between the [NAME_1] and 7 Highbury Grange. 1.12 The provision of two gatepost pillars to match the existing example 1.13 Provision of cast iron railings to the perimeter street wall 1.14 Removal of soil down-pipe from north rear facing wall 1.15 The Building to have uniform external decoration, and all exterior masonry paint to be lime-white. 1.16 Provision of a replacement working lock to secure the mailbox and all residents to be supplied with keys

23 1.17 Provision and return the means of access to the rear of the [NAME_1] as defined in the London Borough of Islington’s Architect’s schedule of works dated 6 March 1986. Items to be removed from Appendix C 2 Para 19 of Appendix C is amended so the reference to [NAME_32] is removed.