Landlord and tenant – Appointment of manager – Landlord and Tenant Act 1987 – Jurisdiction of leasehold valuation tribunal – Management orders made under section 24 of 1987 Act in respect of block of flats – Respondent tenants applying for fresh order – LVT determining as preliminary issue that earlier management orders permitting manager to recover service charges from appellant landlord – Whether having jurisdiction to decide that issue in relation to respondent’s applications – Whether reaching correct conclusion – Appeal dismissed
The appellant was the freeholder of a block of 12 flats, seven of which were let on long leases and five of which the appellant retained for letting on short-term tenancies. The respondents were the long-lessees of six of the flats. In June 2009, they succeeded in an application to the leasehold valuation tribunal (LVT) for the appointment of a manager pursuant to section 24 of the Landlord and Tenant Act 1987. The appointment was for an interim period of 12 months but, in June 2011, a further appointment was made to June 2012.
In February 2012, the manager brought a claim against the appellant in the county court for recovery of “arrears of service charge” and costs in relation to the appellant’s five flats. The appellant denied that it had any obligation to pay such service charges and, in January 2013, the manager’s claim was stayed pending further directions and/or clarification by the LVT concerning the manager’s powers under the management orders.
The LVT considered, at the same hearing: (i) an application by the manager for directions as to his powers under the June 2011 management order; and (ii) applications by the respondents for the appointment of a manager and, pursuant to section 27A of the Landlord and Tenant Act 1985, for a determination as to the reasonableness of service charges levied by the appellant.
The LVT dismissed the manager’s application, holding that where there was no live question before it which depended on the interpretation of its earlier orders, it had no jurisdiction to interpret them; the task of interpretation instead fell to the county court as the court in which the issue arose. However, it considered that it did have jurisdiction to interpret the earlier orders as a preliminary issue on the respondents’ applications, notwithstanding that the orders had lapsed by that date and the appointment had expired. It found that the respondent’s leases, properly construed, imposed an obligation on the appellant to contribute to the service charge as if it were the lessee of each of its five in-hand flats and that the management orders permitted the manager to enforce that obligation. The appellant appealed.
In October 2013 the LVT went on to determine the substantive issued on the respondents’ applications. By that time, the appellant had paid the sums demanded and the LVT decided that it was not just and reasonable to appoint a manager.
Held: The appeal was dismissed.
(1) The proper construction of the earlier management orders was an issue relevant to the respondents’ application for a manager. The LVT therefore had jurisdiction to determine that issue by way of a preliminary issue on that application, in advance of its substantive decision in October 2013. A main ground of the respondents’ application to appoint a manager was that the appellant had failed to pay its share of the service charges at any stage, including during the currency of the management orders. While such non-payment might not be a breach of “any obligation owed by [the appellant] to the tenant under his tenancy” for the purposes of section 24(2)(a)(i) of the 1987 Act, because it was not an obligation owed to the respondent lessees, the LVT (and now the first-tier tribunal) also had power, under section 24(2)(b), to appoint a manager where it was satisfied that “other circumstances” existed which made it just and convenient for the order to be made. Breach of an obligation owed to a previous court-appointed manager could in principle be grounds for making a further management order as such “other circumstances”. Therefore, whether the appellant was required to pay service charges to the manager was an issue that arose in the respondents’ application to appoint a manager. The LVT’’s finding on that point had paved the way for the appellant’s success in the October 2013 decision, since the appellant’s payment of the outstanding sums, made in light of the LVT’s findings on the preliminary issue, had contributed to the LVT’s decision that it was not just and convenient to appoint a manager.
Whether the appellant had an obligation to pay service charges to the manager was a question of construction of the wording of the management order itself, which formed the entire basis of the manager’s functions and powers. It was therefore a question of law. The LVT had two tasks in relation to the respondents’ application for the appointment of a manager. The first was to resolve any issues of fact or law that had arisen, while the second was to decide as a matter of judgment, in the light of the resolution of those issues, whether it was just and convenient to make the order. Whether the appellant was under any duty to pay service charges to the manager and, if so, whether the service charges had been paid, fell within the first task. If an LVT or FTT considered that it would assist it and/or the parties to determine one or more issues of fact or law by way of preliminary issue, before deciding others and the second “just and convenient” issue, then that was a matter for the LVT or FTT.
The construction issue was also relevant to the respondents’ section 27A application to determine the reasonableness of the service charges. That application specifically asked the LVT to take a decision on the costs associated with the manager’s attempts to recover service charges from the appellant. In order to do so, the LVT would have to decide whether they were payable and reasonable pursuant to sections 19 and 27A of the 1985 Act. It could not do so without first deciding the construction issue.
(2) The LVT had correctly construed the orders as requiring the appellant to pay service charges to the manager pursuant to the terms of the leases. That requirement was particularly evident from the terms of the June 2011 order, obliging the manager to “manage the property in accordance with the respective obligations of the landlord under the leases”. The relevant obligations of the landlord under the leases included the obligation to pay service charges in respect of its retained flats. The terms of the 2009 order, although less clear, had the same effect. The intention of the LVT in making the orders was to ensure that the property was properly managed and that the management order was effective to achieve that result. If the manager could not recover service charges from the appellant, management of the property would be impossible. It was to be expected that the LVT would make a management order in terms that enabled its purpose to be achieved rather than entirely thwarted. The management orders should be read in such a way as to achieve their purpose where they were sensibly capable of such a construction.
Philips Sissons (instructed by Scott Cohen Solicitors, of Henley-on-Thames) appeared for the appellant; John Jeffrey appeared in person for the respondents.
Sally Dobson, barrister
