The importance of appointing the right Manager
2nd September 2021
2nd September 2021
The Landlord and Tenant Act 1987, provides that residential long leaseholders may apply to the First-Tier Tribunal (“FTT”) for the appointment of a Manager in place of the Freeholder or other Manager. The application needs to show default on the part of the Freeholder or other Manager. Where the FTT appoints a Manager, it will write a bespoke Management Order setting out the powers and duties of the Manager. That order may be varied on the subsequent application of the Manager, a Leaseholder or the Freeholder.
While the FTT can give directions to the Manager, its powers do not allow it to impose sanctions on the Manager for non-compliance, beyond the power to make a new appointment on application. The Upper Tribunal (“UT”) enjoys the same “stronger” powers as the High Court, including being able to require the Manager to appear before them to produce documents, an account or answer questions and it can make other Directions in relation to the conduct of the parties.
Today we focus on two recent cases where the Tribunal has appointed managers, the conduct of those Managers following appointment and a reminder that the appointed Manager’s duty is to carry out what is in the Management Order appointing them and not to divert from that.
Suchorski and others v Norton  UKUT 166 (LC)
In 2017 Mr Norton had been appointed as a Manager by the FTT on application by the then leaseholders. He had been appointed for a three year period in respect of the block of 18 flats in Torquay.
In 2019 the FTT asked the leaseholders to sanction an extension to Mr Norton’s appointment. In response a group of leaseholders opposed that renewal because they claimed that Mr Norton has failed to manager the property effectively. No maintenance or cleaning takes place and the property has deteriorated as a consequence. Mr Norton also fails to respond to any form of communication. The Leaseholders opposition was successful and, as part of the order discharging Mr Norton’s appointment, the Tribunal ordered him to provide the new Manager with up-to-date service charge accounts and any unexpended service charge monies.
He failed to do either and generally failed to engage with the FTT. The FTT considered this to be a serious failing and transferred the case to the UT, to allow the UT to consider issuing an order requiring his attendance and, if required, to deal with any failure as a contempt of court.
The UT directed Mr Norton to attend a hearing in March 2021 and to produce certain documents ahead of that hearing. He did not comply with that order and court enforcement officers had to be sent out to locate him. He attended one interim hearing but no further hearings. The UT considered that there had been serious misconduct and directed that the Manager was to personally repay all the service charge monies which he had received during his period of management. The UT was prepared to give credit for sums legitimately spent on the building, but only if adequate proof of expenditure was provided, which had not yet been done.
The full facts and decision can be found here.
This case is an example of just plain old (unexplained) bad behaviour. The second case, also from this year, deals with the not uncommon example of taking steps beyond the powers granted to the Manager.
Maharaj & Lo Porto (Applicants) v Richard Davidoff (Respondent) (2021) LON/00AL/LSC/2020/0111
In January 2019, the Respondent (a professional managing agent and owner of a professional managing agent firm), was appointed by the FTT as a Manager, with the Management Order to expire on 31 January 2021. The purpose of the Management Order was for the Manager to execute internal and external works that had been identified and costed by a surveyor. The Manager had produced a draft budget for the first year of £26,000, with major works of £10,000.
The appointment was made on the Leaseholders’ application as the Freeholder had not carried out the works. The Freeholder, by the FTT’s order, was to pay 50% of the costs of the internal works and 60% of external works (n part due to its ownership of two flats and commercial premises in the building).
On or shortly after appointment the Manager appointed his own firm as Managing Agent for the block. In June 2019 the Leaseholders received the first service charge demands, totaling more than £106,000, with £93,000 for a reserve fund for future works. The works to be provided for within those costs were substantially more than the original surveyor’s costing and thus beyond the scope of the powers granted to the Manager.
The Leaseholders paid some, but not all, of the amounts demanded. The Freeholder did not pay anything, but objected vigorously at the increase in amounts. No works were undertaken before the expiry of the Management Order in January 2021.
The FTT found that the original surveyor had not provided a specification of works. After the Manager’s appointment, the surveyor withdrew from further involvement. The Manager, with the FTT’s permission, appointed a new surveyor. However, the scope of works was far broader than that in the original surveyor’s report or contemplated in the Management Order (based upon that original surveyor’s report). The Manager had proceeded to section 20 consultations on this extended scope of works without making any application to the FTT for further directions (an extension to its powers).
It should have been clear at this stage that the Management Order was certain to fail. The Manager was proposing a Schedule of Works completely outside the scope of what was proposed when the Management Order was made. The Leaseholders were unable to afford the sums demanded and the Freeholder was refusing to pay. The FTT considered that Manager should have brought the matter back to the FTT for further Directions, but failed to do so. The Leaseholders had paid some £28,000, under protest, toward the service charge demands. This was far in excess of what the FTT determined that they were liable for.
The FTT found:
The Management Order has failed.
The Manager must accept the primary responsibility for this failure.
The Manager failed to have sufficient regard to the terms of the Management Order.
The Leaseholders’ primary case was that the Manager had sought to inflate the fees that he can claim through the Management Order.
No justification could be found for the agreement which the Manager and his appointed Agent.
The FTT calculated that the applicants were entitled to a sizable refund £11,844.32 and £12,196.92 respectively and directed that the Manager refund those sums to the Applicants. They further directed that, if the repayments were not made, the Applicants would be able to recover them as a debt in the County Court.
The FTT commented in this case that: This case highlights the need for there to be clarity between the tribunal and the parties as to the outcomes which can realistically be achieved through the appointment of a manager. Where it becomes apparent that these outcomes are unobtainable, it is open to the manager to apply to the Tribunal for directions or for the management order to be varied or discharged.
The full details of the case and decision can be found here.
The above two cases show how important it is to ensure that the Manager knows both what is expected of them as a minimum and the limitations of their powers once appointed, strictly adhering to what the Management Order provides and seeking from the FTT amendments when what is provided is insufficient. For further information, do read the our Legal Update Appointment of a Manager from November 2020.
This 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.
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