Making a management order under section 24 of the Landlord and Tenant Act 1987 (the 1987 Act) is a draconian remedy which cannot be made unless the statutory conditions are satisfied. So emphasised Martin Rodger QC, Deputy Chamber President in Invergarry Court Ltd v Connolly and others [2022]UKUT 209 when he allowed the freeholders’ appeal of the decision of the First-tier Tribunal (Property Chamber) to appoint a manager.
By virtue of section 24 of the 1987 Act, the FTT has power to “appoint a manager to carry out in relation to any premises to which this Part [of the 1987 Act] applies (a) such functions in connection with the management of the premises, or (b) such functions of a receiver, or both, as the tribunal thinks fit”.
The FTT may only exercise the power of appointment in the circumstances described in section 24(2) – “(a) Where the tribunal is satisfied – (i) that any relevant person either 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…; and… (iii) that it is just and convenient to make the order in all the circumstances of the case; (ab) where the tribunal is satisfied – (i) that unreasonable service charges have been made, or are proposed or likely to be made, and (ii) that it is just and convenient to make the order in all the circumstances of the case; (aba) where the tribunal is satisfied – (i) that unreasonable variable administration charges have been made, or are proposed or likely to be made, and (ii) that it is just and convenient to make the order in all the circumstances of the case; (ac) where the tribunal is satisfied – (i) that any relevant person has failed to comply with any relevant provision of a code of practice approved by the secretary of state under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993 (codes of management practice), and (ii) that it is just and convenient to make the order in all the circumstances of the case; or (b) where the tribunal is satisfied that other circumstances exist which make it just and convenient for the order to be made”.
Invergarry Court is a small block of flats in New Barnet, north London. It initially contained eight flats but in about 2004 a void at lower ground level was converted, so increasing the number to nine. At about the same time the second flat at lower ground level was converted from a one-bedroom to a two-bedroom property. The leases for the flats were all in similar terms. They included a covenant not to make structural alterations without the previous consent in writing of the landlord, a covenant to permit the landlord to have access to the flat to view the condition and a covenant not to assign the lease without the consent in writing of the landlord (such consent not to be unreasonably withheld).
The freehold company (through its secretary who was a director and a lessee) asserted that the building works to both flats at lower ground floor were (at least in part) unauthorised and that no consent would be given to any assignment of the flats in question. In 2020, the lessees of the two lower ground level flats and one other lessee brought an application for the appointment of a manager. They contended (among other things) that the freeholder was in breach of an obligation in relation to the management of the premises as it had unreasonably refused to consent to the sale of the two flats, that the service charge had been mis-managed and that it was just and convenient to make a management order.
The FTT granted the management order sought but did not make findings of fact on most of the points in issue or identify what breaches it considered had been proven.
The finding that the freeholder was in breach of an obligation was a mistake as to the law. The standard proviso in leases that consent to assignment will not be unreasonably withheld does not impose an obligation on the landlord not to refuse its consent unreasonably. The proviso operates as a condition which, if not satisfied, allows a tenant to assign without consent. Further, practitioners should note the Deputy President’s observation that there is a question mark over whether the giving or refusing of consent to assign constitutes a “function in connection with the management of the premises” such that it can be included in a management order in any event.
Although the behaviour of discouraging potential purchasers might have formed the basis of the appointment of a manager under section 24(2)b, appointment under that subsection still required the FTT to consider whether it was just and convenient for a manager to be appointed, and it had not made those findings. Whether an appointment is under section 24(2) a or (b) the FTT must be satisfied that the appointment is just and convenient. In this case, the FTT had not set out the text of the statutory conditions; it had not identified any factors which would be relevant to the necessary assessment of where the balance of justice and convenience lay; it did not consider what the purpose of the management order would be or whether that purpose could be achieved by some other route; it did not refer to the fact that the application was made by a minority of the flats, with the owners of the majority being opposed to it, and an appointment of a manager was not the only (or even the most obvious) solution to the issue considered by the FTT.
In relation to criticisms of the service charge account, the limited findings of fact made by the FTT rendered it impossible to decide whether statutory conditions were satisfied or not. The matter was remitted back to a differently constituted FTT with strong urging to the parties to mediate.
Elizabeth Dwomoh is a barrister at Lamb Chambers
