Quiz - how well do you understand your lease?
Understand the key things you should know about your lease. If you are a purchaser, this can help make sure your solicitor has covered all of these points and explained them clearly to you.
The term “manager” is not defined in the legislation. Generally speaking the landlord is the person with the ultimate management responsibility for the building under the terms of the lease, although he may have delegated day-to-day management to a managing agent.
More than just a Managing Agent
A manager appointed by the First-tier Tribunal (Property Chamber) (FTT) is more than a managing agent. A managing agent works under contract to the landlord, whereas a manager can be appointed by the FTT to take over the landlord’s right to manage the building. They are given directions by the FTT – for carrying out major maintenance work, for example – and they will be expected to follow professional codes of best practice to manage the building in the interests of all the residents and the landlord. The appointed manager should be entitled to receive all the income from the property for use in managing the block in accordance with the terms of the order of appointment. The manager carries out his functions as a tribunal appointed official and not as the manager of the landlord or the landlord’s obligations under the lease. His powers derive exclusively from the management order.
The appointment is made under section 24 of the Landlord and Tenant Act 1987. The application can be made by a single leaseholder in a building, or a group of leaseholders acting together.
The property must comprise the whole, or part of, a building provided that in either case it contains two or more flats.
The right to apply for the appointment of a manager is not available if the landlord is
- the Crown; or
- a local authority or other public sector body; or
- A registered social landlord or other housing association or where the premises are provided for the purposes of a charitable housing trust; or
- where less than 50% of the flats in the building are on long leases and the landlord is resident on the premises and it is a converted, not purpose-built property, and he has been resident in the flat as his only or principal residence for at least twelve month
Grounds for making an application:
- that the landlord is in breach of an obligation owed to the tenant, under the terms of the lease, in the management of the building; or
- that the landlord has demanded, or is likely to demand, unreasonable service charges; or
- that the landlord has failed to comply with any relevant provision of an approved code of management practice (eg. the Royal Institution of Chartered Surveyors’ Residential Management Code); or
- that unreasonable variable administration charges have been made, or are proposed or are likely to be made; or
- that such other circumstances exist for it to be just and convenient for an order to be made; and
- that it is just and convenient for the order to be made in all the circumstances.
What leaseholders need to prove?
To persuade the FTT to appoint a manager, the leaseholder(s) will need to prove one or more of the grounds mentioned earlier and that it is ‘just and convenient’ for a manager to be appointed. The burden is on the leaseholder to produce evidence to support the application. The evidence must directly relate to the grounds for the appointment as above, these are the only grounds on which the appointment may be made, whatever other complaints the leaseholders may have.
Read the FTT determinations on successful applications.
It is a good idea for anyone considering applying for the appointment of a manager to read through some of the decisions made by FTTs on “manager” applications and their orders appointing a manager. This will give some idea of the types of circumstances and malpractice which the FTTs consider serious and extreme enough to warrant the appointment of a manager. For a nominal fee your local FTT can supply you with past decisions, which are public documents. You can also view or download them from the Tribunal decisions section of this website. Potential applicants should also attend at least one “manager” hearing at an FTT.
Giving notice to the landlord
Before submitting an application to the FTT, the leaseholder must give a “preliminary notice” to the landlord of their intention to apply for the appointment of a manager. The notice sets out their grounds, and gives the landlord the opportunity of remedying those problems which he is capable of remedying. This formal notice is issued under section 22 of the Landlord and Tenant Act 1987 and must contain particular items of information or it will be invalid. There are a few circumstances where the leaseholder can apply to the FTT for an order to dispense with the requirement to serve this preliminary notice on the landlord, for example where the landlord cannot be found. Guidance can be found in the LEASE document, First-tier Tribunal (Property Chamber).
It is recommended that the notice is sent by either recorded delivery post or with a certificate of posting from the Post Office, so that the leaseholders have proof of posting which might need to be produced in evidence.
Choosing a manager to nominate.
As part of their application the leaseholders are asked to nominate their choice of manager for the property; in practice the individual appointed is likely to be a professional managing agent or the leaseholders may choose to run the building themselves.
The nominated manager will be expected to provide a brief statement of their credentials, confirmation that they understand the role they are being asked to take on and that they are prepared to do the job. The FTT will also require confirmation that they are familiar with the relevant code of management practice and will abide by it. If a professional is being nominated, they will need to supply details of their professional indemnity insurance. LEASE’s booklet on “Appointing a Managing Agent” gives guidance on how to find a managing agent.
Can Leaseholders choose to manage the building themselves?
Some leaseholders have banded together and formed their own limited company in order to manage their block, and they have nominated their own company to be appointed manager. This has been successful in a number of applications, and allows the lessees the option of either managing the block themselves or employing their own choice of managing agent to act on their behalf at some stage. In this case the leaseholders would have to demonstrate to the FTT that they are able and committed to managing the building properly.
What if the Appointed Manager also performs badly?
After a manager has been appointed by an FTT, any interested party can apply to have the order varied or discharged. If it is discharged, the landlord will regain the management of the building. Clearly an FTT that has removed the management from a landlord would want some clear evidence that things have changed since the order was made, for example, the freehold may have been sold to a more professional organisation.
The grounds for this kind of application are similar to those for appointing a manager in the first place: the FTT must be convinced that the appointed manager is failing to carry out their duties to a professional standard.