First-tier Tribunal Extends Property Management Order for Five Years

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BJ/LVM/2023/0004 HMCTS : Face to Face Hearing Property : 57 [ADDRESS], [POSTCODE] Applicants :

[redacted] [NAME] [COUNSEL] (Flat B) [COUNSEL] (Flat C) Representative : [COUNSEL] (Court appointed Manager) Respondent : [redacted] : No appearance Interest Persons : [COUNSEL] [NAME] [NAME] and [COUNSEL] [NAME] : No appearance Type of [NAME] : Variation of Order for appointment of manager Tribunal members : Judge Robert Latham Oliver Dowty MRICS Date and Venue of Hearing : 15 May 2023 at 10 [ADDRESS] [POSTCODE] Date of decision : 15 May 2023

DECISION

2 Decisions of the Tribunal (1) The Tribunal extends the current Management Order which was made on 3 April 2023 until 30 on the terms of the order annexed hereto. (2) The Tribunal determines that the Respondent shall pay the Applicants £300 within 28 days of this Decision, in respect of the reimbursement of the tribunal fees paid by the Applicants. The [NAME]

1. Since 14 April 2014, [NAME] at 57 [ADDRESS], [POSTCODE] ("[NAME]") has been managed by a Manager appointed by this tribunal. [NAME] is a [ADDRESS] house which has been converted into three residential units and one commercial unit. It was initially managed by Mr [NAME]. Since 26 April 2017, [NAME] has been managed by Mr [NAME]. He was initially appointed for a period of two years. On 3 April 2018, this was extended for a further period of five years.

2. On 8 March 2023, the Applicants applied for the Management Order to be varied to extend the current order for a further period of 5 years. The Applicants consider that that Mr [NAME] appointment has been a success. They have concerns about the management of [NAME] being returned to the Respondent. An extension is sought to ensure the continued good management of [NAME].

3. On 10 March 2023, a Procedural Judge gave [NAME]. He joined [NAME] and [NAME] as [NAME]. They apparently hold a lease in respect of the commercial premises, but vacated them some months ago. They have played no active part in these proceedings.

4. On 7 April 2023, the Applicants filed their Bundle of Documents (157 pages) with the materials required by the [NAME]. By 21 April 2023, the Respondent was directed to file his Bundle in Response. He has failed to do so. The Hearing 5. The Applicants were represented by Mr [NAME], the Manager appointed by the Tribunal. The [NAME] has been issued by Mr [NAME] on behalf of the Applicants. He stated that he had been authorised to issue the [NAME] on their behalf and that he has kept them informed of the progress of the [NAME], including the level of fees that he proposes. On 6 April, he sent a copy of the [NAME] to the Applicants. Mr [NAME] confirmed that the Applicants were aware of the hearing, but none had felt it necessary to attend.

3 6. The Respondent has played no part in the proceedings and did not appear. The Tribunal notes that the Respondent failed to engage with the two previous applications to extend the Management Order. Mr [RESPONDENT] confirmed that the Respondent is aware of the [NAME], as he has suggested that he might appoint [NAME] agents. Mr [NAME] heard nothing further. The Law 7. An [NAME] to extend the appointment of a manager takes effect as a variation of the Current Order. Section 24(9) of the 1987 Act provides: The appropriate tribunal may, on the [NAME] of any person interested, vary or discharge (whether conditionally or unconditionally) an order made under this section … 8. [ADDRESS] of Appeal considered the Tribunal’s discretion afforded by section 24(9) in [ADDRESS]’ Association v St Anthony’s Homes Ltd [2003] 2 EGLR 28, where the Tribunal had extended a management order and the landlord had appealed that decision. Keane LJ stated: "[11] It is to be noted that the legislature has not thought it fit to embody in section 24(9) the various criteria set out in section 24(2). There is a clear contrast between the requirements when an order is made and when an order is varied. It seems to me that the section is drawing a distinction between [NAME] an order and varying an order. Although it might perhaps be said that, in some circumstances, the court is always [NAME] an order when it varies an existing order, that cannot be the correct interpretation in the context of this statutory provision. [12] There are no explicit criteria in section 24(9) in contrast to section 24(2). Moreover, if an [NAME] is made by a relevant person (such as a landlord) to vary or discharge an existing order, the legislature has expressly required the tribunal to be satisfied of certain matters: see section 24(9A). The inclusion of those express requirements in subsection (9A) and the omission of anything of that sort in subsection (9) itself has to be seen as deliberate, and it confirms the contrast between section 24(2) and section 24(9). [13] Sections 24(2) and 24(9) deal with quite different situations. Section 24(2) is concerned with [NAME] an order where one does not exist, whereas section 24(9) is dealing with an order that is already in existence because the tribunal has already been satisfied that the tests in section 24(2) have been met. [14] I quite accept that, in exercising its discretion under section 24(9), a tribunal must have regard to relevant considerations: that is trite law …. But when one looks at paras 20 and 21 of the tribunal's

4 decision, it is quite clear that this tribunal did have such regard. However, section 24(2) did not require it to be satisfied that at least one of those thresholds had been passed. Nor can I see any reason why this particular type of variation, the extension of a manager’s term, should have to meet the criteria in section 24(2). Mr [NAME] has conceded that there is no limit on the length of time for which a manager may be appointed in the first place. In those circumstances, why should one require the section 24(2) tests to be met all over again.” 9. We remind ourselves that Part II of the 1987 Act is a “problem solving jurisdiction” (see Chuan-Hui v K Group Holdings Inc [2021] EWCA Civ 403; [2021] 1 WLR 5981 per Henderson LJ at [29]). In [NAME] v Bowring [2015] UKUT 530 (LC), HHJ Gerald noted at [22] that the purpose of appointing a manager is to: “…enable that property to be managed subject to the control of the tribunal in circumstances where the landlords’ management or discharge of its obligations under the provisions of the lease have been found wanting. Looking at matters very broadly, the whole purpose of the jurisdiction is to enable the F-tT to ensure that what has hitherto been done inadequately and perhaps improperly is done adequately and properly”. The Background 10. [NAME] at 57 [ADDRESS], [POSTCODE] is a [ADDRESS] house which has been converted into three residential units and one commercial unit. Only one of the three Applicants occupy their flats. The commercial unit on the ground floor is required to pay 8.3% towards the service charge.

11. It seems that the internal floor space of the commercial unit exceeds 25% of the internal floor space of the Premises. This has precluded an [NAME] for the Right to Manage under the Commonhold and Leasehold Reform Act 2002.

12. In 2014, the Tribunal appointed a manager because the landlord had failed to manage [NAME] in a proper manner and had failed to keep it in a proper state of repair. Both the exterior and the interior and [NAME] had been neglected. The commercial unit was not contributing to the service charge.

13. The Applicants are satisfied with the manner in which [NAME] has been managed by the Manager. A proper service charge account has been established. In 2019, a package of exterior and internal repairs was executed. A health and safety audit has been completed. Fire safety has been addressed. [NAME] has been insured.

5 14. The commercial premises are still in arrears with their service charge contribution. In 2019, the outstanding arrears were discharged by a [NAME]. The current arrears at £4,688. However, some £30k has been accumulated in a reserve fund and the Applicants are willing to cover the shortfall until the Manager can recover the arrears. The [NAME] who occupied the commercial unit, have now left. The status of the current occupant is unclear.

15. The Applicants have no confidence that [NAME] will be properly managed if the management order is discharged. The Respondent has failed to engage with the current [NAME]. He failed to engage with the previous applications.

16. The Manager's management plan will focus on the following: "1. Finances: Continue the day-to-day financial management of the building by setting annual budgets in accordance with the lease and management order, collecting and accounting for service charges and pursuing non-payers.

2. Insurance: Maintain suitable insurance cover for the building.

3. Health and Safety: Implement the health and safety improvements recommended in the General Risk Assessment and Electrical Installation Condition Report undertaken to date, and schedule updated risk assessments continue to meet industry standards.

4. Major Works: To arrange external and internal refurbishment works when they fall due under the 10-year plan established for [NAME].

5. AOB: Continue to undertake minor repairs both cyclical and ad hoc in nature and maintain the provision of regular management activities." The Tribunal’s Determination 17. This Tribunal only appoints a manager as a last resort when it is apparent that this is just and convenient to ensure that a property is properly managed. It is exceptional that management orders extend to a period in excess of ten years. We are satisfied that in the current case it is necessary to extend the management order for a further five years. The Right to Manage option is not available because of the commercial premises. The three Applicants support the extension. The Respondent has again failed to engage with the [NAME]. He has come up with no proposals for the effective management of [NAME].

6 18. The Tribunal has considered the terms of the proposed management order. This has been amended to reflect the terms suggested in the Practice Statement, dated 11 January 2022.

19. We have also considered the suggested remuneration. Mr [NAME] informed the Tribunal that this had been discussed with the Applicants. We have reduced the basic management fee from £518 to £500 per unit per annum, exclusive of VAT. However, we have agreed for it to be adjusted annually in line with RPI. Tenants must recognise that a Tribunal appointed manager is likely to charge somewhat more than a [NAME] agent to reflect the practical difficulties in [NAME] [NAME] and which have led to the [NAME].

20. We note that there are occasions when the Manager may use an in-house contractor whether a surveyor or builder. There is no objection to this provided that the Manager recognises the potential conflict of interest and ensures that best value is secured. He must also ensure that there is transparency.

21. Clause 9 of the Management Order gives any interested party permission to apply to the Tribunal to vary or discharge the Order.

22. The Tribunal will serve this decision on the Manager who is representing the Applicants, the Respondent and the [NAME]. We direct the Manager to serve the decision on the three Applicants. [NAME] for refund of fees 23. The Applicants apply for a refund of the fees that they have paid in [NAME] this [NAME], pursuant to Rule 13(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. The Applicants have succeeded with their [NAME] and the Tribunal is satisfied that it is appropriate to make such an order. Judge Robert Latham 15 May 2023

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.

7 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).