First-tier Tribunal Appoints New Property Manager Until 2028

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

: CHI/21UC/LVM/2013/0002

Property

:

[ADDRESS], [POSTCODE] and [ADDRESS], [POSTCODE]

Applicant: [redacted]

Respondents

:

[redacted] [ADDRESS] and [ADDRESS] (ii)

Type of Application

: Variation of an existing order for the appointment of a manager pursuant to section 24(9) of the Landlord and Tenant Act 1987

Tribunal Member(s)

:

[NAME] [NAME]

Date and venue of hearing

:

3 May 2023 at Havant Justice Centre by video hearing services

Date of Decision

:

22 June 2022

DECISION

2 Tribunal’s decision

(i) The Tribunal varies the Management Order dated 21 June 2013 (as varied) and substitutes and appoints Mr [NAME] [NAME] as the manager of [NAME] known as [ADDRESS], [POSTCODE] and [ADDRESS], [POSTCODE] (“[NAME]”) until 31 March 2028.

(ii) As a condition of the variation of the Management Order dated 21 June 2013 (as varied) the manager is required to comply with the revised Management Order dated 22 June 2023 (included in this decision).

Background

1. The Applicant sought a variation of the order made on 15 December 1999, which itself had been varied on 21 June 2013, by substituting the current Tribunal appointed manager Mr [NAME] with Mr [NAME], the reason for which is the retirement of Mr [NAME]. The application was received on 11 January 2023.

2. The Tribunal first appointed a manager of [NAME] on 15 December 1999 having found that the landlord failed to engage with the [NAME] or to effect required maintenance and major works. In evidence, Mr [RESPONDENT] stated that the landlord continues to have little or no involvement with [NAME].

The Application

3. Mr [NAME], the Tribunal appointed manager, has retired from [COMPANY] (“the practice”) and is therefore no longer in a position to manage [NAME].

4. In response to this change of circumstances, Mr [NAME] has recommended the appointment of Mr [NAME] of the same practice.

5. Mr [NAME] has submitted to the Tribunal a statement dated 17 March 2023 confirming his willingness to act and providing details of his qualification and experience.

6. Neither the [NAME] nor any of the lessee Respondents have submitted any objections to the application.

The Hearing

7. A hybrid hearing of the application was held at Havant Justice Centre, with [NAME] and [NAME] joining remotely via the CVP video platform.

3 8. Mr [NAME] reaffirmed that the [NAME] continues to play no active role in the management of [NAME] and that Mr [NAME] was unaware of any outstanding issues requiring addressing.

9. Mr [NAME] confirmed that he has over twenty years’ experience in the field of residential and mixed-use estate management, predominantly throughout London and the South East, Having worked alongside Mr [NAME] prior to his retirement, Mr [NAME] has a thorough understanding of the building and a good working relationship with the [NAME]. Mr [NAME] is familiar with the lease and the requirements for cyclical maintenance, the [NAME] having already issued s.20 statutory consultation notices to [NAME] in regard to scheduled works of internal redecoration. If appointed, Mr [NAME] intends carrying out quarterly inspections.

10. Mr [NAME] is supported by five property managers and an accounts department of sixteen staff. Mr [NAME] holds appropriate qualification and the [NAME], the required accreditation. Professional indemnity insurance of £10 million, on an each and every claim basis, is held by the [NAME].

11. Mr [NAME] confirmed his understanding to the Tribunal that he would be personally accountable to the Tribunal and that he must act independently of the parties. Mr [NAME] stated that he was not aware of any conflicts in interest which would preclude his appointment and that he is aware of his responsibility to avoid conflict of interest in the placing of contracts and discharging his other duties throughout his appointment.

12. Mr [NAME] confirmed that he had considered the draft Management Order provided by the Tribunal prior to the hearing and, in such regard, Mr [NAME] made the following comments:

i. Provision should be included for [NAME] to be managed in accordance with the current business terms of the [NAME] and, additionally, provide for an annual review and adjustment of the management fee in line with the market.

ii. Inclusion of a condition formalising the practice of collecting service charges in advance.

13. Mr [NAME] stated that the current management fee is £5,337.50 + VAT per annum.

14. In addition, a fee of 2.5% + VAT in regard to works necessitated by Section 20 Landlord and Tenant Act 1985 is payable.

15. Mr [APPELLANT] proposed that a further additional fee be payable in recognition of the additional work imposed by recent legislative changes. By way of example, Mr [NAME] referred to an annual inspection

4 of each fire door estimated, in total, at three hours and charged at £250 + VAT per hour, that being Mr [NAME] chargeable rate.

Decision

16. The Tribunal determines that the Management Order of 31 June 2013 (amended) is varied and Mr [NAME] [NAME] of [COMPANY] is appointed as the Manager of [NAME] until 31 March 2028.

Reasons for the Decision

17. Section 24(9) of the Landlord and Tenant Act 1987 states: The appropriate tribunal may, on the application of any person interested, vary or discharge (whether conditionally or unconditionally) an order made under this section; and if the order has been protected by an entry registered under the Land Charges Act 1972 of the Land Registration Act 2002, the tribunal may by order direct that the entry shall be cancelled.

(9A) The tribunal shall not vary or discharge an order under subsection (9) on the application of any relevant person unless it is satisfied –

(a) that the variation or discharge of the order will not result in a recurrence of the circumstances which led to the order being made, and

(b) that it is just and convenient in all the circumstances of the case to vary or discharge the order.

18. The Tribunal find that there have been no objections to this application by either the [NAME] or any lessee Respondents.

19. The Tribunal is satisfied that Mr [NAME] has demonstrated adequate competency, qualification and experience for this appointment. Accordingly, the Tribunal find Mr [NAME] to be a suitable appointee.

20. The Tribunal is further satisfied that Mr [NAME] is supported by a team of property managers and an accountants’ department. In oral evidence Mr [NAME] stated that the [NAME] holds both appropriate regulatory accreditation and professional indemnity insurance.

21. The Tribunal has received no reports of dissatisfaction with Mr [NAME] appointment or with the management of [NAME], and no complaints against the [NAME].

22. The [NAME] has expressed no intent to resume active involvement in the management of [NAME].

5 23. Consequently, the Tribunal is satisfied that the variation sought will not result in a recurrence of the circumstances that led to the original Management Order being made, Furthermore, the Tribunal finds that it is just and convenient to make the variation sought with the following points noted.

24. The Tribunal approve the proposed management fee of £5,337.50 + VAT, subject to an annual review.

25. The Tribunal approve an additional fee in regard to work necessitated by Section 20 Landlord and Tenant Act 1985. Such fee calculated as follows:

i. 2.5% of the first £100,000 of the final contract sum net of VAT and 1% of any additional balance of the contract sum, subject to a minimum of £750 (or a figure calculated at £50/flat if greater) with £400 payable after circulation of the Notice of Intention and the balance payable upon completion of the consultation process.

26. The Tribunal do not concur with the Applicant that an additional annual fee of £750 + VAT in regard to inspection of the fire doors is justified. Mr [NAME] stated that he will inspect [NAME] on a quarterly basis. The Tribunal find no reason as to why the fire door inspections should not be undertaken during one such visit. Alternatively, if an additional visit is required, this could be undertaken by a few earner on an hourly rate of less than £250. However, the Tribunal accept that recent legislative changes have placed an additional responsibility on managing agents in such regard and, in recognition of such burden and in relation to the current service charge year only, an additional fee of £250 + VAT is approved. In future service charge years, such costs should be subsumed within the annual management fee.

27. In accordance with Mr [NAME] request a copy of the varied Management Order is hereby attached.

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] to the First-tier Tribunal at the Regional office which has been dealing with the case.

6 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.

4. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : CHI/21UC/LVM/2013/0002 Property : [ADDRESS], [POSTCODE] and [ADDRESS], [POSTCODE] Applicants : [redacted] : None Respondent : [redacted] [ADDRESS] and [ADDRESS] (ii) Representative : None The Manager : Mr [COUNSEL] Tribunal members : Mrs [NAME] Mr [NAME], Regional Surveyor Date of Order : 22 June 2023

MANAGEMENT ORDER

Interpretation

1. In this Order:

“[NAME]” means the flats and other premises known as known as [ADDRESS], [POSTCODE] and [ADDRESS], [ADDRESS], Eastbourne, East Sussex, BN21 and shall include [the building, outhouses, gardens, amenity space, drives, pathways landscaped areas, flower beds, passages, bin-stores, common parts,

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storage rooms basements, electricity and power rooms; and all other parts of [NAME]].

“The Landlord” shall mean [RESPONDENT] or their 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 [NAME].

“The Manager” means Mr [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] of [APPELLANT] is appointed as Manager of [NAME].

3. The Manager’s appointment shall start on 22 June 2023 (“the start date”) and shall end on 31 March 2028 (“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 management of [NAME].

6. The Manager is empowered to: (a) Demand service charge payments in advance.

7. The Manager shall manage [NAME] in accordance with: (a) the terms of this Order and the Directions set out below; (b) the respective obligations of the Landlord and the Tenants under the Leases whereby [NAME] 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 Chartered Surveyors (“RICS”) and approved by the Secretary of State pursuant to section 87 Leasehold

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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.

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

9. 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.

10. 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.

11. 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 management of [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.

12. The Manager is appointed to take all decisions about the management of [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 (c) where the Manager is in doubt as to the proper construction and meaning of this Order. Contracts

13. Rights and liabilities arising under contracts, including any contract of insurance and/or any contract for the provision of any services to [NAME], to which the Manager is not a party, but which are relevant to

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the management of [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.

14. The Manager may place, supervise and administer contracts and check demands for payment of goods, services and equipment supplied for the benefit of [NAME].

Pre-contract enquiries

15. The Manager shall be responsible for responding to pre-contract enquiries regarding the sale of a residential flat at [NAME].

Legal Proceedings 16. The Manager may bring or defend any court or tribunal proceedings relating to management of [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.

17. Such entitlement includes bringing proceedings in respect of arrears of service charge [and rent] attributable to any of the Flats in [NAME], 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.

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

Remuneration

19. The Tenants are responsible for payment of 100% of the Managers’ fees, which are to be payable under the provisions of this Order but

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which may be collected under the service charge mechanisms of their Leases.

20. The sums payable are as follows:

(a) an annual fee of £5,337.50 for performing the duties set out in paragraph 3.4 of the RICS Code (so far as applicable), such fee to be reviewed annually;

(b) 2.5% of the first £100,000 of the final contract sum net of VAT and 1% of any additional balance of the contract sum, subject to a minimum of £750 (or a figure calculated at £50/flat if greater) in relation to any work necessitated by Section 20 Landlord and Tenant Act 1985;

(c) £250.00 fee payable for the service charge year 2023/2024 in regard to inspection of fire doors; and

(d) VAT on the above fees;

(e) Any other additional fees, proposed to be recovered under the service charge mechanism, to be subject to the approval of the Tribunal. For the avoidance of doubt, this excludes fees charged to individual [NAME].

Ground Rent and Service charge 21. The Manager shall collect the ground rents payable under the residential Leases.

22. 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.

23. 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 to collect arrears of service charge and insurance that have accrued before their appointment; and

24. The Manager may set, demand and collect a reasonable service charge to be paid by the Landlord (as if he were a lessee), in respect of any

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unused premises in part of [NAME] retained by the Landlord, or let on terms which do not require the payment of a service charge.

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

Administration Charges 26. The Manager may recover administration charges from individual Tenants for their costs incurred in collecting ground rent, 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 27. In the event of a dispute regarding the payability of any sum payable under this Order by the [NAME], 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.

28. 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.

29. In the event of dispute regarding the conduct of the management of [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.

30. 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 31. The Landlord must comply with the terms of this Order.

32. On any disposition [other than a charge] of the Landlord’s estate in [NAME], the Landlord will procure from the person to whom [NAME] is to be conveyed, a direct covenant with the Manager, that

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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 [NAME] is to be conveyed.

33. 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.

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

DIRECTIONS TO MANAGER

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

Conflicts of Interest

36. 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

37. The Manager must operate a complaints procedure in accordance with, or substantially similar to, the requirements of the Royal Institution of Chartered Surveyors.

Insurance

38. The Manager must maintain appropriate building insurance for [NAME] and ensure that the Manager’s interest is noted on the insurance policy.

39. 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.

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Accounts 40. 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 which ground rent, service charge contributions, Insurance Rent, and all other monies arising under the Leases shall be paid; and (d) hold all monies collected in accordance with the provisions of the Code.

Repairs and maintenance

41. The Manager must:

(a) By 1 September 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 [NAME], as well as any roads, accessways, mechanical, electrical and other installations serving [NAME], 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 [NAME], 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 [NAME], 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

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(d) ensure that the Landlord, and the Tenants, are consulted on any planned and major works to [NAME] and to give proper regard to their views.

42. 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

43. By no later than eight weeks from each service charge year end the Manager must prepare and submit a brief written report to the Tenants, and the Landlord, on the progress of the management of [NAME] up to that date, providing a copy to the Tribunal at the same time.

End of Appointment

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

(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 management of [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).

45. 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.

46. 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.