Lease Extensions and Property Management
Appointment of a Manager
Sometimes a block of flat is poorly managed either by the landlord or by someone appointed on the landlord’s behalf. If this situation occurs then Section 21 of the Landlord and Tenant Act 1987 (“the 1987 Act”) provides that leaseholders (where there are two or more flats) can appoint an independent manager instead.
An application to a specialist Tribunal needs to be made by at least two leaseholders (unless one leaseholder owns multiple flats). This procedure is “fault based” so leaseholders need to be able to show that the landlord has failed in his obligations. The aim of the proceedings is to ensure that the future maintenance and management of the building is safeguarded through the appointment of an independent manager (the manager would also take responsibility for any commercial property) for a specified term of years (usually five). The management is then governed by a formal document called a Management Order rather than the leases.
In order to appoint a manager, the Tribunal must be satisfied that:
- The existing manager (this could be the landlord or a management company) is in breach of any obligation owed under the lease to the leaseholders, and that it is “just and convenient” to appoint another manager; or
- The existing manager is in breach of the RICS Code; or
- Unreasonable service charges have been levied, or are proposed or likely to be levied, or
- Other circumstances exist
Before making any application the leaseholders must give the landlord an opportunity to redress any existing defects and a preliminary application notice must be served on the landlord, and any other person who has management obligations in respect of the premises, i.e. a management company.
The preliminary application notice must include the following:
- The name of the leaseholders serving the Notice, along with their correspondence address and flat address;
- A statement that they intend to make an application to appoint a manager, but that they will not do so if the issues complained of are resolved;
- The grounds on which the order is sought; and
- For those matters that can be remedied, it must specify a reasonable time frame for the landlord to do this – around 2 months is generally acceptable.
If the Landlord does not take any remedial action and the time frame expires, then it is open to the leaseholders to make a formal application for the appointment of a manager.
The formal application is made in the format prescribed by the Tribunal and will require the leaseholders to confirm that they have served the preliminary notice and provide a copy of this with the formal application. The leaseholders must specify who they would wish to have appointed instead of the existing manager or landlord if they have a manager in mind.
Once the application is received by the Tribunal they then set out directions or steps the parties need to take, which are likely to include the provision of evidence and possibly expert reports.
The Tribunal may then list the matter for an oral hearing, in order to review the suitability of the new manager that is being proposed (if any). If successful, the manager will be appointed from a specified date, and for a specified time period. The leaseholders will be required to register the Management Order against the landlord’s title; this is done by a restriction meaning that the landlord cannot sell the property without the consent of the manager, as appointed by the Order.
Appointing a manager may be a more cost effective alternative to collective enfranchisement which does not require a majority of leaseholders to participate nor does it fall to the leaseholders to then manage the building. It might also be an option where the building does not fulfill the Right to Manage requirements.