The Landlord and Tenant Act 1987 includes provisions that enable tenants of flats to ask a tribunal to appoint a manager if a landlord is guilty of mismanagement or neglect. Queensbridge Investments Ltd v Lodge [2015] UKUT 635 (LC) concerned a building comprising commercial premises, with three residential flats above. The commercial tenant was liable to pay rent of £35,000 per annum and to repair the structural parts of its unit. The landlord covenanted to repair the remainder of the building at the cost of the residential tenants, but failed to do so, resulting in structural problems that were potentially dangerous.
The First-tier Tribunal made an order appointing a manager for the whole of the property. The order gave the manager wide powers to manage all the units and, because it was concerned that the manager would recover no more than 75% of the service charge costs due to deficiencies in the wording of the leases, the tribunal ordered the landlord to contribute 25% of the expenditure to fill that gap, even though the landlord was under no obligation to pay any such contribution under the leases themselves. Furthermore, in anticipation of difficulties recovering these costs from the landlord, which was based in the Channel Islands, the tribunal gave the manager the power to collect the rents paid by the commercial tenant to ensure that the manager was in funds.
The landlord complained that the management order went too far. It had been unnecessary and disproportionate to give the manager the right to manage the commercial unit and the power and duty to grant consents required by the leases (for example, on alienation or to alterations) since there had been no complaints about this. Furthermore, the order gave the residential tenants better rights than they actually enjoyed. The tribunal should have considered the tenants’ entitlements under the terms of their leases and what was reasonably necessary to secure them. Instead, it was trying to cure deficiencies in drafting that should have been dealt with by an application to vary the leases under section 35 of the 1987 Act.
The Upper Tribunal upheld the management order. It accepted that there must be exceptional circumstances before intervening in the relationship between a landlord and a third party – ie the tenant of the commercial premises. However, the work required was urgent and this case was exceptional. The First-tier Tribunal had been entitled to conclude that it was necessary to remove the entirety of the management of the property from a landlord, which it judged to be hostile and obstructive, and to ensure that adequate funds were available to the manager, to secure the proper management of the building.
Section 24(1) empowers the tribunal to appoint a manager to carry out functions connected with the management of premises, as opposed to the functions of the particular landlord under the tenants’ leases. The tribunal is not limited to conferring on managers inadequate powers conferred by badly drafted leases – and the provisions in section 35 do not prevent the tribunal from enabling managers to sidestep such problems while they are in office. The landlord would be entitled to apply for a variation of the management order in the event of any problems and to receive the rents paid by the commercial tenant in due course, less the contribution required from it to ensure that the property was repaired.
Allyson Colby is a property law consultant
