In what circumstances may a court appoint a manager to manage a privately owned block of flats?
For many years it has been realised that the position of tenants in privately owned flats is far from satisfactory. A number of reports (eg the Nugee report and the James report) have pointed out the deficiencies and suggested various solutions. The main problems were connected with the enforcement of repairing obligations against landlords and the exaggerated amount of service charges and other payments demanded from tenants. As there are about half a million privately owned flats let to tenants (mostly in London and the Home Counties), the importance of this problem is obvious.
Some measure of protection for tenants against such abuses perpetrated by unscrupulous landlords (or their agents) was given by section 37, Supreme Court Act 1981, which gave the High Court power to appoint a receiver in all cases where it appeared just and convenient to do so. It was obvious, however, that such a procedure in the High Court was costly and was not suitable for minor, albeit distressing, breaches of obligations suffered by tenants of flats.
In order to simplify the procedures for obtaining remedies against unscrupulous landlords, Part II of the Landlord and Tenant Act 1987 was passed. This Act grants to tenants the right to apply to the High Court or to the county court for the appointment of a manager.
The Act arranges, on the one hand, for quicker, simpler and cheaper applications for the appointment of a manager by the court. On the other hand, however, it protects the landlord against vexatious or unjustified applications by the tenant, thus striking a balance between conflicting interests of landlord and tenant.
The general rule is that “the tenant of a flat contained in any premises” may apply to the court for an order (under section 24) appointing a manager to act in relation to those premises.
This right applies to the tenants of flats in premises which consist of the whole or part of a building if the building (or the part of the building) contains two or more flats.
Some tenants are excluded from this right:
(a) Where the interest of the landlord in the premises is held by an “exempt landlord”. Section 58(1) of the Act enumerates eight categories of exempt landlords. Generally speaking, these categories cover tenancies in the public sector and are similar (even if not quite identical) to the categories listed in the Rent Act 1977, sections 14-15.
(b) Where the landlord is a “resident landlord”. The phrase “resident landlord” is defined in section 58(2) of the 1987 Act in a similar way to section 12, Rent Act 1977, with the additional condition that the landlord must have resided in the premises for at least 12 months.
(c) Where the premises are included within the functional land of any charity.
(d) Where the tenancy is a business tenancy.
The application may be made by a single tenant or by a number of tenants jointly.
Section 22 of the Act requires any tenant who intends to apply for the appointment of a manager to send the landlord a “preliminary notice”. This gives the landlord a chance to remedy the defect which prompted the tenant to consider making the application. If the landlord’s address is unknown, it is sufficient to send the notice by recorded delivery to his last-known address (section 49 of the Act).
The notice has to comply with certain requirements. For example:
it must contain the tenant’s name and address and also the address to which any correspondence should be sent;
it must state the tenant’s intention to apply to the court for the appointment of a manager;
it must specify the ground (or grounds) on which the court will be asked to make such an order and the matters which support the application;
it must require the landlord (within a specified reasonable time) to take specified steps to remedy the matters in question (if they are capable of being remedied);
If it is not reasonably practicable to serve a notice, the court may dispense with this necessity or may permit a different notice to be served.
If the interest in the premises is subject to a mortgage, a copy of the notice should be sent to the mortgagee.
Section 23 of the Act contains some further consequential provisions, which are self-explanatory. Under this section no application may be made for an order appointing a manager unless:
the period given to the landlord in the tenant’s notice has elapsed without the landlord having complied with it; or
the matters complained of in the notice are irremediable; or
the requirements of serving a notice were dispensed with or modified by an order of the court.
Section 24 of the Act contains 11 subsections and, in a very detailed way, describes the powers of the court in this regard.
Subsection (1) corresponds (to some extent) to section 37 of the Supreme Court Act 1981. It states that the court may
on an application for an order under this section, by order (whether interlocutory or final) appoint a manager to carry out in relation to any premises to which this Part applies —
(a) such functions in connection with the management of the premises, or
(b) such functions of a receiver, or both, as the court thinks fit.
Subsection (2) is also important, as it states that the order may be issued only if the court is satisfied as to the following circumstances:
(a) that the landlord is in breach of any of his management obligations(*); and that the breach is likely to continue; and that it is just and convenient to make the order in all the circumstances;
or (b) that other circumstances exist which make it just and convenient for the order to be made.
Subsection (4) contains the general power of the court to describe and limit the powers of the manager. It states that:
An order under this section may make provision with respect to —
(a) such matters relating to the exercise by the manager of his functions under the order; and
(b) such incidental or ancillary matters, as the court thinks fit.
In addition to this provision, if the manager makes any subsequent application, the court may give him directions with respect to his duties.
Subsections (5), (6) and (7) contain consequential provisions about the rights and duties of the manager. The more important of these provisions are:
(i) the manager may take over rights and duties arising under contracts to which he is not a party;
(ii) he is entitled to prosecute past or future claims (whether contractual or tortious);
(iii) he is entitled to remuneration;
(iv) he may be authorised to act during a specified period or without limit of time;
(v) his powers may be suspended or limited by further order of the court.
The Land Charges Act 1972 and the Land Registration Act 1925 apply in relation to an order made under this section as they apply in relation to an order appointing a receiver or sequestrator of land (subsection (8)).
It is stated in section 24 (11) of the Act that the “management” of any premises includes repair, maintenance or insurance of those premises”.
Section 52 of the Act deals with jurisdiction. All problems arising from Part II of the Act are within the county court jurisdiction and this jurisdiction also extends to any proceedings joined with the “Part II proceedings”.
If anybody starts proceedings for obtaining a management order in the High Court, he will be entitled only to costs assessed as for county court cases. The allocation of these cases to the county courts makes it much easier and cheaper for a tenant to apply for a management order. The Act also tries to be fair to the landlord by arranging for a “preliminary notice” by the tenant, thus enabling the landlord to avoid a management order by remedying any justified grievances of the tenant which he may hitherto have overlooked.
(*) If the breach is not one which would normally arise until after the tenant had given some form of notice to the landlord, the court may nevertheless appoint a manager if it is satisfied that it was not reasonably practicable for the tenant to have given that notice.
