What is a manager?
The term manager is not defined in the Landlord and Tenant Act 1987 ('LTA'). However, the law does say what a manager might do, which is to carry out functions in connection with the management of the premises, and possibly the functions of a receiver.
Right to ask the First-tier Tribunal (Property Chamber) to appoint a manager
Section 24 of the LTA gives leaseholders in certain circumstances the right to ask a court (the Property Chamber of the First-tier Tribunal) to appoint a manager to replace the landlord or the landlord's managing agent.
Why you might ask the court to appoint a manager
When a landlord is abusive or derelict in their duties, leaseholders have a number of ways of replacing them. Those include: carrying out repairs and maintenance themselves (known as self help) forming a right to manage company and buying the freehold (collectively enfranchising) and seeking an order to purchase. But those are only possible in certain circumstances.
An alternative is to ask the First-tier Tribunal ('FTT') to appoint a manager.
However, the circumstances for this must also be correct. Leaseholders have to demonstrate misconduct or incompetence by the landlord or their agent. That might be done by an appointed surveyor or through a management audit.
If you're a leaseholder thinking of this option, then it is important to know that the manager that the FTT appoints is not answerable to the leaseholders, but rather is an officer of the court and answerable to that only.
Not a managing agent
A managing agent works under a contract for services for the landlord. That makes them responsible to the landlord for the operation and maintenance of the building or site.
By contrast, a tribunal appointed manager is directed by the FTT. Their powers derive exclusively as a result of the management order and therefore they work as an officer of the tribunal.
The FTT might give a particular instruction, for example, to oversee major maintenance work such as the replacement of a roof, but otherwise the manager will follow professional codes of best practice that balance the interests of both the leaseholders and the freeholder.
In return, the court will allow the manager to be entitled to receive the service charge income from the property, including a reasonable fee for their services.
What criteria must be met in order to apply for a court appointed manager?
The following are the technical criteria that must be met.
- The property can be the whole of a building or part of one. It must comprise two or more flats.
- The premises cannot be provided for the purposes of a charitable housing trust.
- The landlord must not be the Crown; a local authority or other public sector body; or a registered social landlord or other housing association such as a fully mutual housing association.
The leaseholders also have no right to ask a tribunal to appoint a manager if the property is a converted, not purpose-built property, and less than 50% of the flats in the building are on long leases and the landlord has lived in one of the flats as their only or principal residence for at least twelve months.
Grounds for making an application
Any of the following are grounds on which leaseholders may request to the FTT that a manager should be appointed. These are given in section 24 of the LTA.
In addition to any of these grounds alone, the tribunal will consider whether it 'just and convenient' for the order to be made in all the circumstances.
In other words, just because the ground is met, there is still room for the court to decide not to appoint a manager.
- The landlord is in breach of any obligation owed by them to the tenant under their tenancy (as set out in the lease document) and relating to the management of the premises in question or any part of them.
- In the case of an obligation dependent on serving a notice, the landlord would be in breach of any such obligation but for the fact that it has not been reasonably practicable for the tenant to give them the appropriate notice.
- Unreasonable service charges have been made, or are proposed or likely to be made.
- Unreasonable variable administration charges, or prohibited administration charges, have been made (perhaps through use of a sweeping up clause), or are proposed or likely to be made.
- A relevant person (the landlord or their managing agent) has failed to comply with any relevant provision of a code of practice approved by the Secretary of State under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993 (codes of management practice) (such as the Royal Institution of Chartered Surveyors’ Residential Management Code).
- Other circumstances exist which make it just and convenient for the order to be made.
The leaseholders may have other complaints as well, but such grievances cannot support their application because they are not relevant. The only grounds that can be used are those listed above.
What evidence do leaseholders need give?
The burden is on the leaseholders making an application to prove that one or more of the grounds have been met. As such, they will need to produce evidence to support their application, must directly relate to the grounds for the appointment.
The role of the FTT is not to judge whether the ground has been met, but rather whether is is 'just and convenient' for a manager to be appointed even given the ground is met.
Because of the subjectivity of what is just and convenient, before making your application, it is recommended to research the circumstances in which the FTT has previously made orders appointing a manager. These decisions on manager applications will give you an idea of the types of malpractice deemed serious enough to take management away from the landlord.
You can ask your local tribunal to provide you with past decisions. These are public documents, available to everyone, but are charged at a nominal fee to cover costs.
Additionally, you can (and should) attend a hearing at an FTT (preferably one with similar background to your own).
Giving preliminary notice to the landlord
Under section 22 of the LTA, the leaseholder must give a preliminary notice to the landlord setting out their intention to apply for the appointment of a manager.
If a leaseholder does not do this, or does not supply particular items of information within it, then the notice will be invalid and the application is likely to be set aside. There are limited circumstances where a leaseholder can ask the tribunal for an order to dispense with the requirement to serve preliminary notice, for example where the landlord is absent and cannot be found.
The formal notice sets out the grounds that the leaseholder will use. The purpose is to provide the landlord with an opportunity to remedy the issues within a reasonable period of time.
Leaseholders need to make sure that the landlord receives the notice. As such, it should be hand-delivered in the presence of a witness, or sent by recorded delivery post or with a certificate of posting from the Post Office. That way, the leaseholders will have proof of posting and should have proof of receipt.
Nominating a proposed manager
In the application, the participating leaseholders nominate a manager for the property. This might be one of themselves, or it might be a professional managing agent.
The tribunal will need to be satisfied that the suggested manager is capable of the task. To vet them, the nominated manager will be asked to provide a statement of their credentials to demonstrate that they have sufficient professional expertise, understanding of the role, and familiarity with a relevant code of management practice. A professional manager will be asked for a copy of their professional indemnity insurance.
Can leaseholders ask to manage the building themselves?
There have been cases where the FTT has allowed the leaseholders to manage their property themselves through their own limited company where the tenants are the shareholders. The company's directors either carry out the management tasks themselves for the other residents, or the directors appoint a professional managing agent.
However, you should bear in mind that the formed company still needs to demonstrate to the tribunal that they are capable of managing the property properly and in a professional manner.
Another alternative is where one individual leaseholder takes on the role of manager. This is less common as that person needs to show commitment to the position throughout the full period of the appointment as well as having knowledge and experience of property management.
If the manager appointed by the tribunal performs poorly
If the new manager doesn't perform their duties satisfactorily, then any interested party, including the landlord, can apply to the FTT to have the order varied or discharged.
The grounds for such an application are the same as for the request for appointment in the first place. It must be evident that the appointed manager is failing to carry out their obligations to the expected professional standard, and it must be in the interests of all stakeholders to discharge the manager.
The landlord could request that someone they nominate takes over - perhaps even themselves. For this, the FTT would require clear evidence that the same mistakes would not happen again. Justification such as the freehold being sold to a new owner, a more professional organisation, would be sufficient.
Waiting it out
Another thing to bear in mind is that a manager appointment is for a set period of time. After that time, the leaseholders can apply to have another appointed manager placed in charge, or the management would be taken back by the landlord. So if an appointed manager acts badly, it may be worth waiting for their replacement.