First-tier Tribunal Rejects Request for Manager Appointment

OUTCOME: Dismissed

© CROWN COPYRIGHT 2025

FIRST-TIER TRIBUNAL [NAME] CHAMBER ([NAME]) Case reference : CAM/26UK/LAM/2023/0005 [NAME] : [ADDRESS], Watford, Hertfordshire WD18 OFQ Applicants : [redacted] 2. [NAME] 3. [NAME] [NAME]

Respondents : [redacted] 2. [COMPANY] : 1. [COUNSEL], Counsel 2. [COUNSEL], Counsel Type of [NAME] : Appointment of Manager Tribunal members : Judge K. [NAME] Date of hearing : 19 February 2025 Date of decision : 3 March 2025

DECISION AND REASONS

2 Decisions of the Tribunal

1. The Tribunal does not make an order for the appointment of a manager. The [NAME] is dismissed.

2. The Tribunal does not make an order under section 20C of the Landlord and Tenant Act 1985, to limit the landlord’s costs that may be recoverable through the service charge 3. The [NAME] for reimbursement of Tribunal fees is refused.

REASONS The [NAME] and hearing 4. By [NAME] dated 1 August 2023, the Applicants applied to the Tribunal to appoint a manager under section 24 of the Landlord and Tenant Act 1987 (‘the 1987 Act’). The manager proposed by the Applicants is [NAME], a consultant for [COMPANY].

5. The original [NAME] was made by (1) [NAME] (2) [NAME] (3) [NAME] (4) [NAME] [NAME]. Upon her request, Ms [APPELLANT] was removed as an applicant by the Tribunal on 30 August 2024. The Tribunal was informed at the hearing that Mr [NAME] has moved address since the [NAME] was made and he is no longer involved. However, the Tribunal is unable to locate an [NAME] from Mr [NAME] to be removed from the record and his name therefore remains.

6. The Applicants are leaseholders within [NAME] at [ADDRESS], being a purpose-built development comprising 143 residential flats and 9 commercial units (‘[NAME]’). Mr [NAME] holds leases for two flats at [NAME]. The First Respondent is a ‘Right to Manage’ company (‘[COMPANY]’) that acquired the right to manage in 2014. The Applicants were directors in [COMPANY] before resigning. [COMPANY] appointed [COMPANY] (‘[NAME]) as their managing agents with effect from July 2023.

7. The Applicants sought the order due to alleged (i) breaches of covenant and obligations by the landlord (ii) failure to comply with provisions of the RICS Code of Practice (effective from 1 June 2016) (iii) failures of directors in their fiduciary duties to act in the best interests of [COMPANY], and (iv) failure of directors to exercise reasonable care and skill. 8. [COMPANY] holds the freehold title of [NAME]. By letter dated 19 August 2024 the company applied to be joined to these proceedings due to its “material interest” as freeholder, albeit not intending to take an active part. On 22 October 2024, the Procedural Judge directed that [COMPANY] be added as a [NAME] Respondent on condition that it complied with directions. Those directions required the company to provide a statement of case with any

3 supporting documents once the Applicants had sent it a copy of the hearing bundle. In furtherance of the directions, the [NAME] Respondent filed a supplemental bundle containing its statement of case and the Applicants’ response to it. The hearing 9. With the consent of the parties, the [NAME] was heard remotely by Cloud Video Platform on 19 February 2025.

10. Mr [NAME] and Mr [NAME] attended the hearing and were unrepresented. They each gave evidence and took the opportunity to put questions to witnesses called by [COUNSEL], Counsel, for [COMPANY]. Those witnesses were (1) [COUNSEL], a director of [COMPANY], and (2) [RESPONDENT], [NAME] Manager, at [NAME]. The [NAME] Respondent was represented by [COUNSEL], Counsel, whose participation focused on the implications arising from the Building Safety Act 2022 (‘the BSA’).

11. The proposed manager, [NAME], also attended and answered questions from the Tribunal as well as the Respondents’ Counsel.

12. The documents before the hearing comprised an indexed (but unpaginated) bundle formed of 24 tabs prepared for the Applicants, and a supplemental indexed bundle prepared by the [NAME] Respondent. Ahead of the hearing, the Tribunal also received a skeleton argument with attachments from Counsel for [COMPANY], a skeleton argument from Counsel for the [NAME] Respondent and the Applicants’ response skeleton argument. The issues 13. At the start of the hearing, the issues for determination were identified as those set out in the Tribunal Directions of 25 July 2024, with the addition of a preliminary point of law on the BSA raised by the [NAME] Respondent and adopted by the First Respondent. The main issues are:  Did the preliminary notice comply with the statutory requirements within section 22 of the Act? If the preliminary notice is wanting, should the Tribunal still make an order in exercise of its powers under section 24(7) of the 1987 Act?  Whether the Tribunal can appoint a manager of [NAME] on the grounds applied for;  Have the Applicants satisfied the Tribunal of any ground/s for [NAME] an order as specified in section 24(2) of the 1987 Act?  Is it just and convenient to make a management order?  Would the proposed manager be a suitable appointee and, if so, on what terms and for how long should the appointment be made?

4  Should any order extend to commercial as well as residential premises?  Should the Tribunal make an order under section 20C of the Landlord and Tenant Act 1985 (‘the 1985 Act’), to limit the landlord’s costs that may be recoverable through the service charge and/or an order for the reimbursement of any Tribunal fees and costs paid by the Applicants? Preliminary matters 14. At the start of the hearing the Tribunal flagged up that it had not received a signed agreement from Mr [NAME] to act as manager. It is worthy of mention at the outset that whilst Mr [NAME] verbally confirmed his willingness to act, it later emerged later that his willingness was in fact conditional upon [NAME] remaining as managing agents. This was not apparent from the Applicants’ bundle.

15. Mr [NAME] stated there was not a problem with [NAME], and he did not wish to replace them. He somehow wished to work above [NAME] and give directions to them. Mr [NAME] had written to [NAME] with this suggestion, but he did not wish to say whether or how they had replied. It became apparent that Mr [NAME] was not willing to act as manager in the circumstances arising in the [NAME]. Notwithstanding this rather fundamental issue, we proceed to address other issues arising. Section 22 notice 16. Before applying for the appointment of a manager under section 24 of the 1987 Act, a preliminary notice must be served under section 22 upon: (i) the landlord, and (ii) any other person by whom obligations relating to the management of the premises, or any part of them, are owed to the tenant under their tenancy. Amongst other things, the notice must specify the grounds on which the Tribunal would be asked to make an order and give a reasonable period to take steps for matters within the notice capable of being remedied.

17. In this case, the section 22 notice was dated 26 June 2023. Counsel for the Respondents confirmed that no issues are raised regarding the validity of the notice. The Tribunal is satisfied that the section 22 notice satisfied the procedural requirements.

18. The issues identified in the section 22 notice were used as a framework to hear evidence on the grounds of [NAME].

19. Over the course of the proceedings before the Tribunal, the Applicants had added more items to their case not identified in the section 22 notice. They included complaints over works to the boilers and breaches of the Companies Act 2006 by directors of [COMPANY]. An important purpose of a section 22 notice is to give opportunity for matters to be addressed that are capable of remedy. It is not permissible for the Applicants to introduce new matters of their own volition. As a matter of procedural fairness, the Tribunal made clear that it would confine its considerations to the grounds advanced in the section 22 notice.

5 Grounds under the Act 20. The Tribunal may only make an order to appoint a manager in the circumstances set out section 24(2) of the Act. The [NAME] relies on grounds under section 24(2)(a) and section 24(2)(b). In summary, these sections provide that the Tribunal must be satisfied:  that any ‘relevant person’ (in this case [COMPANY]) 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 (section 24(2)(a)(i)); And,  it is also just and convenient to make the order in all the circumstances of the case (section 24(2)(a)(iii)); Or,  that other circumstances exist which make it just and convenient for the order to be made (section 24(2)(b)). Whether the order can be made on the grounds applied for 21. The Applicants accept that [NAME] is a higher risk building within the meaning of the BSA and that it is registered with the Building Safety Regulator.

22. It is also common ground that [COMPANY] is currently the ‘accountable person’ with various statutory duties relating to building safety risks under sections 83 and 84 BSA. Those duties include taking steps promptly to prevent building safety risk and carrying out works for which the accountable person is responsible.

23. The Applicants allege a breach of obligation under section 24(2)(a)(i) by [COMPANY] from management failures and delays in its approach to works on the Automatic Opening Vents (‘AOV’) that form part of the smoke control system (‘SCS’). They also cite failures to comply with other fire safety requirements. Critically, section 24 was amended by section 110 BSA so that section 24(2)(a) does not apply in respect of a breach of a building safety obligation by an accountable person for a higher risk building by virtue of section 24(2ZB).

24. Initially, the Applicants sought to argue that section 24(2)(a) remained engaged for the SCS and AOV. They insisted they were not pursuing breaches of building safety obligations but breaches of obligation within the lease. The two cannot be divorced. All agreed that the AOV is part of the SCS that draws smoke out of corridors in the event of a fire. A fault with the SCS/AOV is a building safety risk. It follows that any breach of obligation to maintain the SCS/AOV is clearly a breach of a building safety obligation.

6 25. Eventually, after considerable time spent hearing particulars of the argument Mr [NAME] agreed with the Respondents that their complaints concerned breach of building safety obligations after all. That is patently right. Despite this admittance, Mr [NAME] maintained that the issue fell under section 24(2)(b) as ‘other circumstances’ which make it just and convenient for the order to be made.

26. The Tribunal does not accept this line of argument. Issues over the AOV system were identified in the section 22 notice as a breach of obligation being pursued under section 24(2)(a). That is where the alleged breach of obligation squarely falls. From use of the word ‘other’ in section 24(2)(b) it must mean circumstances other than those falling within the preceding paragraphs at subsection (2)(a). Moreover, subsection (2ZB) cannot have been introduced by Parliament to remove breaches of building safety obligations by an accountable person from the Tribunal’s remit under section 24(2)(a) only for them to be capable of introduction under section 24(2)(b).

27. We conclude that the Tribunal cannot consider alleged building safety breaches by [COMPANY] as the accountable person as a ground to make a management order under section 24. It has no jurisdiction to do so.

Accordingly, arguments over the AOV and SCS are disregarded.

28. The Applicants persisted nevertheless to argue that there remained breaches from delays in the section 20 consultation process for the AOV, which remained open to the Tribunal to consider. This is not a sustainable argument because such matters still concern building safety obligations by [COMPANY]. Carpets and LED lighting 29. It is undisputed that the communal area carpets require replacement. Mr [NAME] described the disintegrated underlay as looking like sand. It had caused the carpet to bunch creating a tripping hazard. In response, Mr [NAME] of [NAME] explained that the managing agents are aware of the issue. They visit regularly and have acted upon any health and safety issues. Where necessary, [NAME] had placed heavy duty tape on the carpet, as shown in photographs, in order to address the risk.

30. The sample lease contains a covenant on the part of the developer in Schedule 5 to keep the common areas of the building in a good and substantial state of repair, condition and decoration, including renewal and replacement of all worn and damaged parts.

31. Mr [NAME] of [COMPANY] explained how the decision to replace the carpet was deferred due to the need to incur expenditure in undertaking emergency works which had taken priority. The Applicants’ chronology records that the decision to defer for an undetermined period was taken whilst the Applicants were directors “with the Applicant dissenting”. Mr [APPELLANT] confirmed that it remains the intention of [COMPANY] to replace the carpet once funds can be released. The budget is currently under discussion for the next service charge year.

7 32. The Tribunal is satisfied that a firm intention exists to address the carpet and that reasonable steps have been taken in the meantime. It is unfortunate the carpet has not been replaced sooner, but the evidence demonstrates that it was necessary to delay for legitimate reasons.

33. In the circumstances, the Applicants have not satisfied the Tribunal that a breach of obligation within the lease has occurred by reason of the condition of the communal area carpet.

34. When the Applicants were directors, [COMPANY] proposed to replace lights in common areas with LED lighting. They are aggrieved this has not materialised. It is undisputed by [COMPANY] that energy costs could be reduced over time by fitting LED lights. However, the lease does not require wholescale replacement of the lights for the common areas to be kept in good order. The failure to fit LED lighting is not a breach of covenant.

35. A main thread of the Applicants’ case is that notices were issued under the consultation provisions for major works in section 20 of the Landlord and Tenant Act 1954 setting out the intention to undertake works, but they did not materialise. The Tribunal heard how the carpet and lighting works did not proceed after [COMPANY] obtained a Capital Expenditure and Dilapidation Report in March 2023. The report identified a series of critical works, including smoke detection works and pipework for communal heating.

36. Whilst section 20 notices had been issued for the carpets and LED lighting, there is no legal requirement to proceed with the works. It does not demonstrate any breach of obligation within the lease. Reserve fund 37. The Applicants are highly critical of [COMPANY] board. They make generalised comments over financial mismanagement and failures to act in the best interests of [COMPANY]. In their skeleton argument, the Applicants refer to failures of the board to make necessary uplifts in the service charge from 2023. From what the Applicants said at the hearing, the grievance appears to be that the carpet and LED lighting works could have been accommodated with better budgeting.

38. From the First Respondents’ evidence, [COMPANY] has taken and acted upon professional advice. The board obtained a capital expenditure report to assist in prioritising works and raise funds for the likely expenditure. There have been significant calls upon the reserve fund, including circa £400k in replacing timber balconies that posed a fire risk and around £75k on boiler replacement. [COMPANY] has engaged professional managing agents in assessing the appropriate level of reserve fund to hold.

39. Clearly there have been tensions between the Applicants and [COMPANY] board, with the Applicants expressing exasperation with what they believe to be inadequate communication, amongst other matters.

8 However, it has not been demonstrated that there has any breach of obligation owed to the Applicants under the terms of their lease or relating to the management of [NAME]. Other circumstances 40. The section 22 notice referred only to failures of the directors in their fiduciary duties to act in the best interests of [COMPANY] in their relationship with the previous managing agent. This ground was not advanced further at the hearing. The Tribunal cannot be satisfied from the documentary material reveals any other circumstances which make it just and convenient to make the management order. Just and convenient 41. Even if the Tribunal had been satisfied of a ground under section 24(2) (which it has not), we would still need to be satisfied that it is ‘just and convenient’ for the order to be made. A multitude of issues arise.

42. The [NAME] was made by a very small proportion of leaseholders indicating that the vast majority are content with existing arrangements. Now that [NAME] are managing agents, there appears to be a good working relationship with [COMPANY]. [NAME] were only appointed in July 2023 and steps are being taken to address the works required. In our view, it is too early to replace them; a view that appears to be shared by the proposed manager.

43. As already mentioned, it transpired that Mr [NAME] willingness to act as manager is conditional upon [NAME] remaining as managing agents. Mr [NAME] had also anticipated that he would take control of [COMPANY] by removing the directors until replacements were elected. It is a cause for concern that the nominated person had not fully understood the role. His conditions of appointment cannot be met.

44. When the [NAME] was made, Mr [NAME] had not appreciated that the appointment of a manager would result in [COMPANY] being removed. Under section 105(4) of the Commonhold and Leasehold Reform Act 2002, the right to manage the premises would cease to be exercisable by [COMPANY] once a manager appointed under Part 2 of the 1987 Act begins to act.

45. During the hearing, Mr [NAME] suggested that the Tribunal might exercise its discretion to keep [COMPANY] in place and compel the directors to resign. This was plainly outside the scope of the section 24 [NAME]. It would serve no purpose for the Tribunal to address the suitability of the nominated appointee in more detail.

46. Further factors arise from [NAME] being a higher risk building with the added dimension of the BSA. At present, [COMPANY] is the accountable person under the BSA. The question for the Upper Tribunal in [NAME] v Octagon Overseas Limited [2024] UKUT 59 (LC) was whether a Tribunal appointed manager under section 24 of the 1987 Act

9 can be an ‘accountable person’ within the meaning of section 72, BSA. The conclusion reached was that no management order made by the Tribunal may require the manager to perform functions which Part 4 imposes on the accountable person. The Tribunal is not able to confer functions on the Manager which Part 4 provides are to be carried out by an accountable person [114].

47. There was consensus at the hearing that if an order to appoint a manager is made, then (applying [NAME]) the manager cannot carry out BSA obligations of an ‘accountable person’ and cannot be an ‘accountable person’. By default, the [NAME] Respondent (the freeholder) would become the ‘accountable person’ and the ‘principal accountable person’ for the purposes of the BSA. The [NAME] Respondent strongly opposes being placed in that position, having not been involved in the management of the building for over a decade. During that time, it has had no control over repairs or maintenance.

48. There was no suggestion that the reluctance of the freeholder to become involved with BSA matters raised any jurisdictional bar to the Tribunal [NAME] the order. However, the division in responsibilities for the building and how they would be funded (given that the manager would be responsible for raising service charges) would require unravelling. Inevitably, it would cause delay.

49. When Mr [NAME] submitted the draft form of management order, he envisaged taking control of [COMPANY] and removing the directors. Radical changes would be needed to the draft management order, to include the involvement of the [NAME] Respondent. This would be another time-consuming factor. It is significant because urgent building safety matters need attention. They include the SCS which is not working due to end of lifespan components. Steps are being taken to address these matters, and it would not assist progress by complicating the management arrangements at this time. It is clearly imperative that critical works be allowed to proceed unhindered by delay from these proceedings.

50.

In all the circumstances, it is not just and convenient for the order to be made to appoint a manager. Conclusion 51. The Applicant has not satisfied the Tribunal of any grounds for [NAME] an order as specified in section 24(2) of the 1987 Act.

52. It follows that no order for the appointment of a manager shall be made, and the [NAME] must be dismissed. [NAME] under section 20C and fees 53. The Applicants applied for an order under section 20C of the Landlord and Tenant Act 1985 so that the landlord may not pass on any costs

10 incurred in connection with these proceedings before the Tribunal through the service charge. The Applicants also applied for a refund of the fees paid in respect of the [NAME]/hearing.

54. The [NAME] to appoint a manager has not succeeded with no grounds within section 24(2) demonstrated. In the circumstances, it would not be just and equitable to make an order under section 20C.

55. As the Applicants have not succeeded in their [NAME] to appoint a manager, the [NAME] for reimbursement of Tribunal fees is refused.

56. Whilst the Applicants had indicated that they wished to seek recovery of their costs, they decided to await the outcome of this decision. The attention of all parties is drawn to the Upper Tribunal decision in [ADDRESS] Co [COMPANY] v Alexander [2016] UKUT 0290 (LC), which informs us that unreasonable conduct is a precondition to the power to award costs. That first stage involves the [NAME] of an objective standard and not the exercise of the Tribunal’s discretion.

Name: Judge K. Saward Date: 3 March 2025

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME] 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).