In this Legal Update, we review the case of Ata -v- Sinclair [2024] UKUT 423 (LC), which relates to the validity of a notice served by a group of leaseholders on their landlord under Section 22 of the Landlord and Tenant Act 1987 (“the Act”), stating their intention to apply to the FTT for the appointment of a manager.

Recap of the process to apply to appoint a manger

Our previous legal update here sets out the procedure to be followed by leaseholders wishing to apply to the FTT for the appointment of a manager, where the leaseholders are dissatisfied with the landlord’s management of their block or development. By way of recap, leaseholders can apply to the FTT to appoint a manager, under Part II of the Act, to “carry out functions in connection with the management of the premises” if the landlord (or management company) has committed any of the faults stipulated under Section 24 of the Act. 

Only one leaseholder needs to apply but they can also apply collectively.  The applicant leaseholder must rely on at least one of the fault-based grounds under Section 24 of the Act and satisfy the FTT that it is “just and convenient” for the order to be made.

There are three stages involved in the process, as follows :-

1. Service of the Preliminary Notice under Section 22 of the Act, which must :

   • state the intention to apply to the FTT for the appointment of a manager;

   • specify the grounds on which the FTT will be asked to make the order; and

   • give a reasonable period of time for remedy (where any breach or matter is capable of remedy).

2. The application to the FTT under Section 24 of the Act, which must include:

   • details of the proposed manager to be appointed;

   • evidence to satisfy the FTT that the grounds relied upon have been made out and that it is just and convenient to appoint the manager.

3. The making of the management order by the FTT, which:

   • sets out the manager’s functions, rights and powers (which may be in addition or in place of those under the lease);

   • may be open-ended or time-limited.  If the period ends without extension or a new appointment being made, the management will revert as per the lease.

Background to the case

In the case of Ata -v- Sinclair, 64 of the leaseholders in the block served on the landlord a preliminary notice pursuant to Section 22 of the Act.  The Second Schedule to the notice set out the grounds on which the leaseholders intended to rely, which were various breaches of the landlord’s obligations under the leases and Management Agreement as well as statutory breaches.

The Third Schedule to the notice set out the leaseholder’s evidence on which they intended to rely in support of the grounds.  The evidence for ground 1 was as follows. 

"Leaseholders receive no responses to requests for information. The building is falling into disrepair. The Landlord and his manager are obstructive. Summaries of expenditure are not made available. The accounting system is in disarray. Leaseholders do not know how their money is held. The treatment of student tenants is poor. Cash has been taken from tenants with no apparent receipting or accounting. Violence has been threatened by the Landlord. Infestation continues without resolution. Misinformation passed to tenants by the Landlord's manager. The situation is untenable."

The Fourth Schedule set out a number of steps for the landlord to take in order to remedy the breaches and gave the landlord 14 days in which to take this action.

The notice was served on 23 December 2022, so some of the notice period fell during the Christmas holiday period.

The FTT’s decision

One of the leaseholders subsequently made the application under Section 24 (other leaseholders were joined to the application later but did not make the application, seemingly so as to save the application fees).

The FTT found the requirements of section 24(2)(a)(i) of the Act were met, i.e. that the landlord was in breach of his obligations owed by him to the leaseholders under the leases (specifically those relating to repair and maintenance), and that it was "just and convenient" to make a management order. The leaseholders' nominated manager, Harvey Mills of Cloud Student Homes, was appointed for a period of 3 years.

Appeal against the FTT’s decision to the Upper Tribunal ("UT")

The landlord appealed the FTT’s decision on three grounds, which were as follows.

1. Ground 1 - The leaseholders failed to particularise the breaches of covenant in the preliminary notice

   The UT decided that, although the notice did not set out in detail the matters that the leaseholders intended to rely upon in support of their ground of failure to maintain and repair, the information that was provided was sufficient.  The UT said that the notice “did what it was supposed to do”; it stated that the landlord was in breach of covenant and those breaches were disrepair and infestation.  The notice alerted the landlord to the fact that he was in breach of the lease and the reason for the breaches were disrepair and rat infestation and these were issues which he was already well aware of. 

   Therefore, the UT found that the notice was not invalidated by a failure to set out in enough detail the matters relied upon by the leaseholders, and so this ground failed.

2. Ground 2 - The preliminary notice did not allow sufficient time for the appellant to remedy the breach, only giving 14 days commencing on 23 December 2022

   The UT found that a reasonable time had been allowed and that reasonable time is fact-specific.  It does not take 14 days to contact a pest control company and so the time allowed to deal with the infestation was reasonable.  Further, the UT highlighted the fact that the appellant did not take any steps to resolve the issues either during the notice period, the longer period in between the expiry of the notice period and the submission of the application to the FTT or “for some months thereafter”.  Therefore, the appellant had no argument in support of his assertion that he was not given sufficient time to remedy the breaches.

   The UT therefore found that the appellant had sufficient time to take action to resolve the issues following service of the notice upon him and this ground therefore failed.

3. Ground 3 - It was not appropriate to appoint Harvey Mills as the manager due to a potential conflict of interest

   The appellant argued that Mr Mills should not have been appointed manager because he was the director of the letting agent engaged by the leaseholders.  As an “agent” of the leaseholders, the appellant argued that this role would conflict with his role as appointed manager with powers of management for the block.  The UT noted that the FTT was aware of this and clearly did not consider there was a conflict of interest.  The UT therefore found no substance in this ground of appeal and so it failed.

The appeal therefore failed and the UT asked the parties’ representatives to agree the terms of the Management Order.

Conclusion

The case is important to show that a notice under Section 22 does not need to be overly detailed to be considered valid. As long as it complies with the statutory requirements and, in the words of the UT, it says “all it needed to say”.

It goes without saying that landlords and management companies wishing to avoid such notices and applications must ensure that they carry out their management functions effectively and in accordance with the leases.  If, however, such a notice is served, then prompt action must be taken to comply within the notice period provided. Competent legal advice should be taken in any case on your options.

Disclaimer

This Legal Update describes the position in law as at the date of this article and care should be taken to note any subsequent amendments to the position as set out above.  The Legal Update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.