Landlord and tenant – Management company – Redress scheme – Respondent managing residential block of flats – Respondent being member of approved redress scheme for letting agency work but not property management work – Tenant complaining to appellant local authority that respondent in breach of legal obligations in respect of residential leasehold management – Appellant issuing notices under article 8 of Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014 and imposing financial penalty – First-tier Tribunal allowing respondent’s appeal – Appellant appealing – Whether respondent in breach of legal obligations under 2014 Order – Appeal allowed
The appellant local authority received a complaint from a tenant at a residential block of flats, which the respondent company had managed for two years, stating that the respondent was not a member of an approved redress scheme as required by article 5 of the Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014. The appellant discovered that the respondent was a member of such a scheme (the Property Ombudsman Scheme) for its letting agency work but not for its property management work so that the respondent was in breach of its legal obligations. Consequently, the appellant issued a final notice concerning the failure to belong to an approved redress scheme for property management (residential block management), with a penalty of £3,000 (the maximum penalty being £5,000). In fact, according to the evidence, the respondent never belonged to such a scheme as defined by the appellant. Its membership of the Property Ombudsman Scheme covered it for residential sales and lettings, commercial sales and lettings and some property management, but not for residential leasehold management.
The respondent appealed to the First-tier Tribunal (FTT) which concluded that it was not clear that the 2014 Order imposed an obligation to join different elements of an approved redress scheme in order to provide redress for different types of property management work. Section 84 of the Enterprise and Regulatory Reform Act 2013 contained a single definition of “property management work”. The appellant had not provided any explanation of why the obligation of the respondent under the Order went beyond obtaining the membership that they held in respect of property management work. The appellant had not provided evidence about the different property management activities that the respondent was carrying out on the relevant date, nor had it explained the difference in the categories of membership offered by the Property Ombudsman of businesses undertaking property management work. There was insufficient evidence on which to find that the respondent’s membership of the Property Ombudsman Scheme in connection with property management work was insufficient to meet its obligations under the 2014 Order. The appellant appealed.
Held: The appeal was allowed.
(1) The FTT erred in failing to take account of relevant matters. There was ample evidence from which to determine the property management activities of the respondent and the type of scheme operated by the Property Ombudsman into which that management activity fell. There was also evidence that, since the respondent had not registered with the Property Ombudsman for residential leasehold management, any dispute concerning the management of the block would not fall within the ombudsman’s jurisdiction.
(2) The FTT found that there was no express term of the 2014 Order that required different categories of membership of a redress scheme to be taken out in order to cover all of the sub-divisions of property management work that a redress scheme provider might operate in practice. However, section 84(6) of the 2013 Act defined “property management work” and that was clearly what the respondent was doing in relation to at least the residential block in the present case. Article 5(1) of the 2014 Order provided that a person who engaged in property management work had to be a member of a redress scheme for dealing with complaints in connection with that work. That meant that a person so engaged (including the respondent in this case) had to be a member of a redress scheme for all such work in which they were engaged. That obligation could not be met by belonging to a different scheme, or a different part of a scheme, which could cover the requirement but did not do so. Otherwise the whole purpose of the requirement for redress schemes was undermined in relation to those who might have cause to complain, or wished to do so, but found that the relevant property manager did not happen to belong to the right scheme.
(3) The decision of the FTT was made in error of law and would be set aside insofar as it concerned the residential leasehold management issue. There was no advantage in referring the matter back to the FTT, where it would be considered by a judge sitting alone. The Upper Tribunal was satisfied that the relevant facts had been established: the activities of the respondent, the provisions of the redress scheme and the respondent’s failure to belong to a relevant scheme or relevant part of a scheme. Accordingly, the tribunal would substitute its own decision to the effect that the respondent was and remained (for the relevant period) in breach of the requirements of the 2014 Order.
(4) The respondent had pointed out that, by the time of the issue of the notice, it was no longer managing the block in question and that it was not in a position to pay the imposed penalty which represented a considerable proportion of the company’s net worth. The tribunal was not persuaded by the financial argument but it might be thought unfair at this stage to increase the penalty above that originally imposed by the appellant and set aside by the FTT. The tribunal would also take into account the fact that the erroneous view of the law (supported by the FTT) might have been an honestly held belief by those running the respondent. The appellant’s original assessment of £3,000 (representing a 40% discount from the maximum) was appropriate and that was the amount that would be ordered.
Ryan Thompson (instructed by the director for legal and governance, Newham London Borough Council) appeared for the appellant; the respondent appeared by its representative.
Eileen O’Grady, barrister
Click here to read a transcript of Newham London Borough Council v Samson Estates Ltd
