Can a purchaser of property for valuable consideration, on registration of the disposition, take it free of an order by the First-tier Tribunal (FTT) appointing a manager under Part II of the Landlord and Tenant Act 1987 (the 1987 Act)? This important question was considered by the Upper Tribunal (Lands Chamber) (UT) in Urwick and another v Pickard [2019] UKUT 365 (LC); [2019] PLSCS 229.
The appointment of the manager
Ditton Place School in Balcombe, West Sussex, was a Grade II listed country house. The main house and an adjoining coach house were converted into 12 self-contained flats let on long leases. The lessees shared the communal grounds on the estate with six freehold houses.
Management of the estate was initially carried out by Ditton Place Management Company Ltd (DP). Unfortunately, DP failed to manage the estate successfully. On 11 November 2015, a number of the lessees applied to the FTT for the appointment of a manager under Part II of the 1987 Act. The appellants, Richard Urwick and Caroline Yrazu-Bajo, were parties to that application. DP admitted that there were grounds for the appointment of a manager.
On 24 January 2017, the FTT appointed the respondent, Gary Pickard, as manager. The management order was expressed to bind DP and any successor in title. It required DP and the lessees to cooperate with Pickard and prohibited them from interfering or attempting to interfere with the exercise of any of his powers or duties. Further, the FTT directed that DP register the management order against the freehold title of the estate. DP failed to do so.
Evasion of the management order
On 23 March 2019, lessees of seven of the flats (the participating lessees), which included the appellants, sought to exercise their right to collective enfranchisement, by serving an initial notice under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act). The participating lessees’ nominee purchaser was Ditton Place Freehold Company Ltd (DPFC).
DP transferred to DPFC the main house and coach house together with their immediate grounds for consideration of £2. Pursuant to section 32(5) of the 1993 Act the transfer was deemed to have been made for valuable consideration.
On 28 March 2018, DPFC became the registered proprietor of the main house, coach house and their immediate grounds. The participating lessees subsequently applied to the FTT in June 2018 to vary the management order to exclude from it the land in DPFC’s newly acquired title. The FTT rejected the application. It found that the collective enfranchisement had been a ploy used by the participating lessees to evade the management order.
On 20 December 2018, Pickard applied to the FTT, seeking clarification that he was still required to manage the whole estate, including the land comprised in DPFC’s freehold title. The participating lessees argued that because the management order had not been registered against DP’s freehold title, it was void vis à vis DPFC.
The FTT found that, notwithstanding the fact that DP had failed to register the management order, it bound DP’s successors in title. The FTT made orders varying the management order. It changed the definition of the premises to which the management order applied by incorporating a reference to DPFC’s freehold title. It also varied the management order to require the participating lessees to procure that DPFC abide by its terms. A penal notice was attached to the order to compel compliance with the same. Urwick and Yrazu-Bajo appealed.
Effect of non-registration
The UT noted that the 1987 Act contained no bespoke provisions concerning the effect of a change of ownership of premises which had been made the subject matter of a management order. Instead, section 24(8) of the 1987 Act directed that the Land Registration Act 2002 (the 2002 Act) applied in respect of such orders as they applied in relation to an order appointing a receiver or sequestrator of land.
Pursuant to section 87 of the 2002 Act the only means of protecting a management order was by the entry of a restriction. Such an order was classified as “an interest affecting an estate or charge”. Section 87(2) of the 2002 Act specifically prohibited such an interest being protected by a notice. Further, section 87(3) prevented such an order being capable of being an overriding interest.
The UT noted it would have been preferable if the manager had been ordered to register the restriction. Yet, a restriction alone did not protect the priority of an interest; it merely provided a procedural barrier to the registration of a disposition.
In allowing the appeal, the UT ultimately determined that, on registration, a purchaser of property for valuable consideration takes it free of a tribunal’s order appointing a manager under Part II of the 1987 Act, whether or not the order was mentioned on the register of title.
Jurisdiction to vary
The UT also provided some guidance in relation to the jurisdiction of the FTT to vary management orders. The UT noted that the steps taken by the lessees up to the date of registration of the transfer to DPFC had breached the management order. Yet, this did not bestow the FTT with jurisdiction to make its original order effective by the indirect route of variation.
The FTT had jurisdiction to make a new order under section 24 of the 1987 Act, but that would only have prospective effect. Further, the necessary procedure under Part II of the 1987 Act had to be followed if a new order was to be made. Although the lessees had failed to comply with the management order in not co-operating with Pickard, their behaviour did not vitiate the need to comply with the “jurisdictional hurdles” imposed by the 1987 Act.
Key points
- On registration, a purchaser of property for valuable consideration takes it free of a tribunal’s order appointing a manager under Part II of the Landlord and Tenant Act 1987
- The First-tier Tribunal does not have jurisdiction to make effective a management order that has been breached by the indirect route of variation
Elizabeth Dwomoh is a barrister at Lamb Chambers
