UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2013] UKUT 165 (LC)

LT Case Number: LRX/85/2011

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

LANDLORD AND TENANT – appointment of manager – whether LVT had power to appoint a receiver – s.24 landlord and Tenant Act 1987 – management order granted largely management functions and words “and Receiver” deleted

 

 

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

LEASEHOLD VALUATION TRIBUNAL FOR THE

LONDON RENT ASSESSMENT PANEL

 

 

BETWEEN P C RESIDENTS (FINCHLEY ROAD) LIMITED Appellant

and

SEKINAT ABIOLA AND OTHERS Respondents

 

 

 

Re: Palace Court

250 Finchley Road

London NW3 6DN

 

 

 

Determination on the basis of written representations

 

 

 

 

© CROWN COPYRIGHT 2013

 

DECISION

Introduction

1.           This is an appeal against a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (“the LVT”) dated 3 February 2011.  That decision determines a number of applications but the only one which is relevant for present purposes is an application under s.24 of the Landlord and Tenant Act 1987 (“the 1987 Act”) for the appointment of a manager of premises known as Palace Court, 250 Finchley Road, London, NW3 6DN (“the Premises”).  The LVT granted that application and by an order dated 3 February 2011 appointed Mr Maunder Taylor as “Manager and Receiver for 3 years from 3 February 2011.”

2.           The appellant (“the Landlord”) is the freehold owner of the Premises, a company in which all the residents of the flats of the Premises have a share.  The applicants for the management order and respondents to this appeal are the long lessees of six flats in the Premises (“the Tenants”).

3.           Permission to appeal was granted by the then President, George Bartlett QC, on the single ground that the LVT decision discloses no reason for the appointment of a receiver and that there may have been no material before it on which the LVT could have reached the conclusion that a receiver should be appointed.  It was ordered that the appeal be dealt with by way of review.  The parties have agreed to the appeal being dealt with by written representations.

Law

4.           Provision for the appointment of a manager is made in Part 2 of the 1987 Act.  Section 21(1) provides, so far as relevant:

“The tenant of a flat contained in any premises to which this Part applies may …. apply to a leasehold valuation tribunal for an order under section 24 appointing a manager to act in relation to those premises.”

By virtue of s.21(6) no application to the court to exercise any jurisdiction to appoint a receiver or manager may be made in circumstances where an application could be made for an order under s.24.

5.           Before any application can be made the tenant must give the landlord a notice under s.22 that he intends to apply for an order under s.24 specifying the grounds of such an application and where appropriate any steps required to remedy the matters forming the grounds of application.

6.           The power to make the order itself is set out in s.24(1):

“A leasehold valuation tribunal 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 tribunal thinks fit.”

The order may only be made if the LVT is satisfied as to the matters set out in sub-section (2) including that it is just and convenient to make the order in all the circumstances of the case.  By virtue of sub-section (11) references to management include references to “repair, maintenance, improvement or insurance”.

7.           The only other reference to a receiver is in s.24(8) which states that:

“The Land Charges Act 1972 and the Land Registration Act 2002 shall apply in relation to an order made under this section as they apply to an order appointing a receiver or sequestrator of land.”

There are consequential provisions for the variation or discharge of an order including cancellation of any entry registered under the Land Charges Act 1972 or the Land Registration Act 2002 in consequence of the order, see s.24(9).

The LVT decision

8.           When dealing with the application to appoint a manager the LVT set out the six lessees who joined in the application and then refers to their concerns that the appointment of a manager would deepen rather than mend the rift between the lessees of the Premises, there being 21 lessees altogether.  The decision then goes on to refer to the grounds of the application:

“57. There are a number of grounds upon which an LVT may base its decision to appoint a manager which are set out in s.24 of the Act.  Mrs Abiola’s indicated that the grounds upon which she is relying are as follows:

(b)    There is no trustee account for the receipt of service charges in accordance with s.42 of the 1987 Act.

(c)    There is a breakdown in trust between a significant number of lessees and PC Residents which has meant that service charges are paid into an escrow account.

(d)    There is no managing agent or other competent person carrying out the management of the common parts and common services.

(e)    There has been a particular failure to deal competently and reasonably with an application for a licence to carry out alterations to Flat 25.

(f)     There is a failure to maintain the property in accordance with the fifth Schedule to the lease.  In particular the applicants point to the lack of external painting, the failure of the entryphone system for approximately two years, periodic leaks to the common pipe work and water penetration to Flat 16A.

58. The notice served prior to the application to the Tribunal indicated the steps which needed to be taken by the Freeholder in order to avoid application to the tribunal.

59. These steps included:

The opening of a trustee bank account for the receipt of service charge monies;

The appointment of a suitably qualified and experienced managing agent;

The finalisation of a reasonable agreement in connection with the application by Mrs Abiola for a licence to carry out alterations to Flat 25;

The convening of an EGM to consider a motion of no confidence in the present board of directors.

60. There is some evidence before the Tribunal that some steps have been taken to resolve some of these matters.  In particular NG Properties Limited have been appointed as managing agents by PC Residents and they have opened a designated client account for the premise which meets s.42 requirements.

61. However the Applicants gave evidence to the Tribunal that the authority of the managing agents is limited.  In particular NG management has been instructed that any surplus funds over and above £5000 will be transferred into the PC Residents bank account.

62. The Tribunal accepts the evidence of the applicants that NG properties are not independent managers and determines that the grounds of s.24 of the Landlord and Tenant Act are made out.”

9.           The LVT then went on to consider the question of whether it was just and convenient to make the order:

“63. The Applicants claim that it is just and convenient because of the problems that have been caused to them by the failure to manage the property properly.

64. The statutory power which is available to a lessee to apply to the LVT for the appointment of a manager is one which should only be resorted to when there are no other avenues open to a lessee to ensure that the leasehold property is properly managed.  In other words, it is to be used sparingly, and not simply for instance because one lessee disagrees with the decisions of the manager.  Moreover the issue of just and convenient is one to which it is important that a Tribunal direct its mind properly.

65. This Tribunal would not have decided for instance that it was just and convenient to appoint a manager solely on the basis that Mrs Abiola was unable to obtain her licence to carry out alternations.  However it is clear to the tribunal that there are more extensive problems with the management of the premises.  These problems are illustrated by the email that Mr Ahmed sent on Dr Ali’s behalf in connection to all the lessees with the s.24 application.  The email included observations such as Maunder Taylor will be able to spend our money as he likes.  Maunder Taylor will be able to secure loans against your freehold share and spend on what he likes, like his legal fees and on external refurbishment.  Maunder Taylor will be able to harass the leaseholders by using expensive solicitors paid from the service charge monies.  The leaseholders can only stop him through expensive litigation.

66. This intemperate language suggests to the Tribunal that there has been a complete breakdown of trust between the parties that is detrimental to the interests of the property.

67.  In reaching its decision on the question of just and convenient the Tribunal took into account the steps that PC Residents have taken to improve the management of the block since the application was issued.  It also took into account the difficulties that PC Residents faced in ensuring the proper management of the premises whilst serious disagreements continue about its management and the fact that some lessees continue to support the current management.  It set to one side the allegations of financial impropriety as it considered that PC Residents had not had proper opportunities to answer these (albeit that the lack of opportunity was to an extent a problem caused by PC Residents’ failure to appear at the hearing).

68. Nonetheless it decided that it was just and convenient to make the order requested.  It took into account the complete breakdown of trust between the applicants and the respondent, the assurance from Mr Maunder Taylor that he would act impartially between the lessees, and the expertise and knowledge he has built up about Palace Court during the course of this dispute.

69.  The Tribunal also took into account the need to ensure that there is no further deterioration in the fabric of Palace Court, the failure of the Respondent to put any meaningful argument before it and the emotional and frequently irrational terms in which communications are made between Dr Ali and the lessees.  Its concern has been the best interests of the property.  Drawing on all the evidence before it, the Tribunal therefore determined that if is just and convenient to make the order.”

10.        The LVT went on to conclude that Mr Maunder Taylor was a suitable manager and to consider the terms of his appointment.  As to this, the LVT were provided with a draft order by the Tenants and made a number of amendments including that the appointment should be for a period of three years.  It is to be noted that there is no express reference in the LVT decision to any applications for the manager to exercise the functions of a receiver or for Mr Maunder-Taylor to be appointed as receiver.

11.        The appointment of the manager is set out in paragraph 1 of the Management Order:

“Bruce Roderick Maunder Taylor of Maunder Taylor Chartered Surveyors, 1320 High Road, London N20 (“the Manager”) is hereby appointed as Manager and Receiver for three years from 3 February 2011 of Palace Court, 250 Finchley Road, London NW3 6DN… pursuant to Section 24 of the Landlord and Tenant Act 1987 and given for the duration of his appointment all such powers and rights that may be necessary and convenient and in accordance with the leases of the flats on the Estate (“the Leases”) to carry out the management functions of the Respondent in relation to this estate in compliance with the RICS code, and in particular ….”

The rest of paragraph 1 lists specific functions of a management nature including the right to demand and receive service charges, the right to open and operate bank accounts in relation to the management of the Premises and to receive existing service charge money from other accounts, the power and duty to carry out the Landlord’s obligations contained in the Leases in particular providing services, carrying out repairs and arranging insurance.  The powers also include the appointment of agents and other professionals as required to assist the Manager in the performance of his functions, the power to deal with applications for consents or licences requiring the consent of the Landlord and the power to borrow money in the event of a shortfall in service charge contributions which may be secured on the Landlord’s interest in the Premises.

12.        The Management Order goes on to impose obligations on the Landlord to make records available and information available and other consequential provisions. Then it specifies the  Manager’s obligations and his fee.

Decision

13.        The Landlord submits that there was no application before the LVT for the appointment of a receiver, only a manager and no reference in the LVT decision itself to the appointment of a receiver.  It is submitted that there was no evidence which justified the appointment of a receiver and the word “Receiver” in the draft order was simply overlooked by the LVT.  As a matter of fact, it is submitted that the Management Order does not include any powers that would be exercised by a receiver only provisions for management.  The Landlord refers to the fact that Mr Maunder Taylor has attempted to register a restriction against the registered title of the Premises at the Land Registry as a receiver which is unnecessary and inappropriate.

14.        The submissions on behalf of the Tenants are broadly to similar effect.  Mrs Abiola, the first respondent, does not resist this ground of appeal and would be content for the word “Receiver” to be removed from the Management Order.  The other respondents do not consider that Mr Maunder Taylor has in fact been appointed as a receiver, only a manager.  They draw attention to the fact that s.24 of the 1987 Act refers only to the appointment of a manager who may carry out the functions of a manager and receiver as the LVT thinks fit.  It is submitted that the word “Receiver” in the Management Order is in effect meaningless and does not give Mr Maunder Taylor any powers beyond the management powers detailed in the Management Order.  They draw attention to the fact that the Landlord failed to attend or participate in the hearing before the LVT and that there was ample evidence to justify the appointment of the manager with the powers set out in the Management Order.

15.        In my judgment the terms of s.24(1) of the 1987 Act are quite clear.  The power of the LVT is to appoint a manager not a receiver, though the manager may be appointed to carry out the functions of a manager and/or receiver.  The references to ‘receiver’ in s.21(6) and s.24(8) are to the appointment of a receiver under other powers. The Landlord’s Statement of Case does not complain about any of the express powers given to the Manager in Management Order, only the inclusion of the words “and Receiver” at the beginning of paragraph 1.  Indeed, as the Landlord did not participate in the hearing before the LVT, it is not open to it to criticise the detail of the Management Order which ought properly to have been the subject of evidence and submissions before the LVT.  However, that does not prevent the Landlord from complaining to this tribunal that the LVT has exceeded its powers.

16.        With one exception, the Management Order does not give the Manager any powers which might ordinarily be regarded as exercisable by a receiver as opposed to by a manager.  There is no power of sale or any right to dispose of or deal with the freehold interest in the Premises. There is a power to charge the freehold with any sums borrowed in event of service charge arrears, see paragraph 1.14.  This could be regarded as the function of a receiver because it involves disposition of an interest in the freehold but it is only exerciseable for a management purpose, namely to ensure funds are available for service charge expenditure. There was no evidence before the LVT that a manager of the Premises needed to exercise any other powers of a receiver and insofar as the power to charge in paragraph 8.1 of the Management Order could be so described, no complaint is made about the inclusion of that provision. The Tenants concerns as set out by the LVT were squarely concerned with management of the Premises.

17.        In my judgment the LVT had no power to appoint a receiver as such only to appoint a manager who may exercise such functions as the LVT thinks fit which include the functions of a manager and/or receiver.  That does not mean that a manager could not also be described as a receiver in an appropriate case. However, here paragraph 1 of the Management Order is clear that Mr Maunder Taylor is appointed with “all such powers and rights as may be necessary and convenient in accordance with the leases…. to carry out the management functions of the [Landlord]” as particularised in the succeeding paragraphs of the order (my emphasis).  Thus the purpose of Mr Maunder Taylor’s appointment was to exercise the functions of a manager and to the extent that paragraph 8.1 confers the function of a receiver it is entirely ancillary to the management functions. The words at the beginning of paragraph 1 “and Receiver” do not add anything to the Manager’s powers and are potentially misleading.  By virtue of s.175(4) of the Commonhold and Leasehold Reform Act 2002, on appeal the Lands Chamber may exercise any power which was available to the LVT.  I consider it would be pointless to remit the case to the LVT simply for those words to be deleted where that can be achieved by order of this tribunal. Paragraph 1 of the Management Order will therefore read as follows:

“Bruce Roderick Maunder Taylor of Maunder Taylor Chartered Surveyors, 1320 High Road, London N20 (“the Manager”) is hereby appointed as Manager for three years from 3 February 2011 of Palace Court, 250 Finchley Road, London NW3 6DN…”

18.        The Landlord also asks that all actions taken by Mr Maunder Taylor as receiver should be rescinded or set aside.  In the light of the fact there are no express complaints about any of the specific powers granted to the Manager in the Management Order it would be quite wrong for this tribunal to comment on any steps taken by Mr Maunder Taylor pursuant to those powers.  In any event, the only evidence of any action which he has taken to which the Landlord objects is an attempt to register a restriction against the registered title of the Premises.  No evidence has been put before this Tribunal as to that matter nor has Mr Maunder Taylor been given any opportunity to respond as to whether that action was within his powers in the Management Order.  If such a restriction has been wrongly registered (and the grounds of appeal only refer to an attempt to do so) then it will be open to the Landlord to take appropriate steps to have the entry cancelled.

19.        Finally, I note that, somewhat curiously, although paragraph 1.1 of the Management Order specifically excludes the right to receive rent, paragraph 1.8 gives the Manager power to bring proceedings against the Tenants in respect of arrears of rent.  In my judgment it would be inappropriate for the Manager to be able to exercise this power when paragraph 1.1 makes it clear that he does not have the right to receive rent.  Therefore the word “rent” on the fourth line of paragraph 1.8 of the management order will also be deleted.  Although none of the parties have made submissions on this issue I consider the amendments take the form of a typing correction which would have been made by the LVT without objection if the inconsistency had been drawn to its attention.  Paragraph 1.8 of the Management Order will therefore read as follows:

“The power in his own name or on behalf of the Respondents to bring and defend any action or other legal proceedings in connection with the Leases or the Estate including but not limited to proceedings against any of the Tenants in respect of arrears of service charges or other monies due under the leases (other than rent), and to make any arrangement or compromise on behalf of the Respondent.”

20.       A letter concerning costs accompanies this decision, which will become final when the question of costs is determined.

 

Dated 8 April 2013

Her Honour Judge Alice Robinson