Leaseholders dissatisfied with the management of their block or development will often turn to their rights under the Commonhold and Leasehold Reform Act 2002 to exercise the right to manage, or where appropriate to a collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993 to buy their freehold.

Both of these remedies are, however, subject to strict qualification criteria which stands in the way of any potential claim, including for example where there are substantial non-residential areas. Leaseholders unable to satisfy the qualification criteria are not left without recourse though, and may instead consider applying to the FTT to appoint a manager under Part II of the Landlord and Tenant Act 1987 (‘the Act’).

Unlike with the right to manage or a collective enfranchisement, the application can be made by one leaseholder, as opposed to a 50% majority. The applicant must show that one of the fault-based grounds in the Act are made out, and satisfy the FTT that it is ‘just and convenient’ for the order to be made. As the appointment is at the discretion of the FTT, it is for the FTT to decide whether to make the order even if the grounds are made out.

Qualification

Premises qualify if they consist of the whole or part of a building which contains two or more flats. An application may be made by a tenant or collectively by a number of them. Certain premises and landlords are exempt, including Local Authorities and social landlords, and in certain circumstances charities and resident landlords.

The manager’s appointment is not limited to residential premises and may extend to commercial units in the case of mixed-use premises, as well all other property over which the tenants enjoy rights, including amenity land.

Grounds

The FTT can only make an order appointing a manager where one or more of the grounds set out in Section 24(2) of the Act are made out, and the FTT finds it ‘just and convenient’ to make an order.

Those grounds are :-

(a) breach of an obligation under the lease relating to management of the premises;

(ab) unreasonable service charges;

(aba) unreasonable variable administration charges;

(ac) failure to comply with a code of management practice; or

(b) other circumstances exist which make it just and convenient for the order to be made.

Process

Step 1 - The Preliminary Notice

The process is commenced by the service of a preliminary notice under Section 22 of the Act on the landlord and any other party who has management functions under the lease. In certain circumstances, including for example where an application needs to be made urgently, an application can be made to the FTT without the preliminary notice having been served and the FTT can make an order dispensing with the preliminary notice.

Amongst other things, the preliminary notice must state the intention to apply to the FTT for the appointment of a manager, specify the grounds on which the FTT will be asked to make the order, and give a reasonable period of time for remedy (where any breach or matter is capable of remedy).

Step 2- Application to the FTT

Once the period in the preliminary notice has expired, an application can be made to the FTT on the prescribed form. The application must include details of the proposed manager to be appointed. The FTT will expect to see evidence to satisfy itself that the grounds relied upon have been made out, and that it is just and convenient to appoint the manager. Whether the appointment will be just and convenient will depend on all the circumstances, but generally an isolated breach as opposed to persistent or serious breaches, will carry less weight with the FTT.

The level of evidence and what will be considered relevant will vary from case to case.

The proposed manager can expect to be questioned by the FTT on their experience and suitability for the appointment. If appointed, the manager will be an officer of the FTT and they will be held personally liable for any failings to the same standard of account as the landlord or management company in the lease.

The appointment

The order made by the FTT will carefully spell out the terms of the manager’s appointment. It is therefore the order, as opposed to the lease, which forms the basis for the manager’s functions, rights and powers. The terms of the order must be considered and drafted carefully, to avoid further applications to the FTT to widen or clarify the scope of the appointment later. In addition to the rights and powers of the manager, the order will also deal with remuneration to be paid to the manager and include a requirement for the manager to have professional indemnity insurance.

The appointment may be open-ended or time limited. If the appointment is time limited, the order may make provision for the appointment to be extended. If the period ends without extension or a new appointment being made, the management will revert as per the lease.

Disclaimer

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