If a property has been badly managed, leasehold tenants may make an application under section 24 of the Landlord and Tenant Act 1987 to appoint a new manager. Tenants should note that this is a different procedure from the right to manage (RTM) established by the Commonhold and Leasehold Reform Act 2002.
The latter process does not require tenants to show fault on the part of the landlord, so it is often quicker and cheaper. There are a few circumstances, however, in which it can be better to use the older legislation, particularly where the RTM provisions have already been relied upon and there continue to be management issues, or if the tenants intend to buy the freehold later on.
Role of the manager
To address concerns about the poor management of buildings by landlords, section 24 of the Landlord and Tenant Act 1987 gives the First-Tier Tribunal (FTT) the power to appoint a manager for the property instead of the landlord or the landlord’s agent. The role of the manager is to act as an employee of the FTT; the manager is not appointed to act in favour of the tenants. The manager may be granted powers that are not provided for in the lease, such as the ability to collect fees that aren’t enshrined in existing agreements.
Typically the order will stipulate that the manager is to be remunerated by the landlord or the tenant, or in some cases the remuneration may be shared. It will also set out the status of the manager, whether permanent or temporary and bestow the relevant rights and obligations upon the manager to carry out the proper services.
Leaseholders should note that the procedure under section 24 is not applicable to buildings with particular types of ownership or where the landlord lives on the premises. For example, an application cannot be made if the landlord is a local authority, a housing association or a charitable housing trust.
An application to have a manager appointed must cover the whole of a building in which there are two or more flats. A single leaseholder or a group of leaseholders acting together can make the application.
The tribunal will consider a number of criteria before making an order to determine whether it is just and decent to do so. Often a landlord is in breach of an obligation to the leaseholder or tenants are experiencing unreasonable service levels or variable administrative charges.
Who can be the manager?
There is no requirement for the FTT to appoint a professional manager under the 1987 Act, but at the same time, it is generally the case that the tribunal will be disinclined to appoint a tenant. It is preferable for tenants to propose a professional management company, though it is also worth bearing in mind that the tribunal frequently rejects the managers that have been proposed, on the grounds that they lack experience.
Although the right-to-manage procedure established by the Commonhold and Leasehold Reform Act 2002 is now the preferred route for tenants looking to improve the management of their building, the procedure under section 24 of Landlord and Tenant Act 1987 is still valid. It is important that tenants seek professional advice in order to understand the pros and cons of each before pursuing a change of management.