Q&A - Right to Manage 

The issue is that there is absolutely no structure, transparency or adherence to rules in the way the building/ company is managed, and we have one problematic owner/ director, or rather they are a couple who are deeply unreasonable, argumentative, rude, bloody minded, and vindictive, and they take every opportunity to demand repairs to their home or the building from the service charges, in which they stand to benefit financially at the company's expense.  There have been examples of dishonesty about insurance claims which were hidden from the other directors, of insisting on using their builders for communal repairs and dismissing other's estimates ( which are always lower than the ones they find) ; of conflicts of interest where the company ends up paying them to do repairs to their own house; of refusing to pay another director when they carried out a communal repair; of threatening legal action without proper grounds and falsifying letters ; of refusing to stand down as secretary when they were voted out; of using their own builders to carry out a repair which was not up to standard, and expecting the company to pay a second time for the repairs when the problem came back; and of even using bully tactics and intimidating behaviour in person to get their own way.  Even our end of year accounts do not provide a clear breakdown of costs as we do not have an independent accountant doing the accounts.  When there is an expense from which they will benefit, money is no object, but if another resident needs a repair, they will argue about even very small amounts.

Unfortunately, because the other two directors in the house do not take a very active role or interest in managing the company, and because of the lack of clarity over leasehold rules and regulations, it means that it is very hard to take collective action to keep this behaviour in check, leaving me as the only person who tries to deal with these issues, therefore becoming a target of their antagonism and unreasonable behaviour. This has created a great deal of distress, anxiety and headaches in the past and i cannot see a way through this mire. I would like us to appoint a managing agent who deals with small blocks, so that there can be an independent third party that keeps any interaction at an arms length as I am exhausted with having to deal with their behaviour, which takes up a lot of my personal time and energy. However, the others, who tend to go along with things for a quiet life,  are not convinced that appointing an agent is a good idea, as they fear that they will create more expense and problems for the company.  

I am at my wits end and have considered selling up, but I love my home and believe there must surely be another way of ensuring that rules and leasehold law is enforced, short of taking this to the LVT.  Consulting a lawyer with expertise in this field to help me would be great, but I simply cannot afford it and I'm not sure if i could claim back any costs from the company. If that is possible, then i would go down that route. I have thought about mediation/ arbitration, but again, that costs money which the others have to agree to.   I am sure there must be many other residents out there with similar problems, but it seems that there is very little support for residents in small RTM blocks, not even from the local council.  I think the law needs to be changed so that if a block obtains the RTM, a clear set of guidelines and rules are sent to all the residents by default and organisations for support if things go wrong, rather than just being left on their own to work out such a complex area of law, which they are not qualified to for. Any advice and assistance gratefully received.

Response

Many thanks for your enquiry; I’m sorry to hear of your difficulties.

From your query, it’s not clear how your building is managed.  I note you refer to having purchased the freehold and also the right to manage company.  The first thing you need to get clarification on the mechanism by which your building is managed.  This will help determine what subsequent avenues are open to you as a director, either of an RTM company or management company.

As a leaseholder, you do have several ways of challenging and dealing with the current situation.  There was a recent Court of Appeal case (Morshead Mansions Ltd v Leon di Marco [2014] EWCA Civ 96) that set out neatly the various statutes that apply to this area and the remedies a leaseholder has when there hasn’t been compliance with those statutory provisions.

Dealing first with your complaints regarding the service charges.  In short, it seems that you’re saying the decisions that are being taken to incur costs are unreasonable.  Service charges are only payable to the extent they’re reasonably incurred and reasonable in amount.  This is set out in section 19 of the Landlord and Tenant Act 1985.  Where they’re incurred in the provision of a service, service charges are only payable if the service is of a reasonable standard.  It seems that you’re contending that both the decisions themselves are unreasonable and also that the standard of services you’re receiving are unreasonable too.

You can make an application to the First Tier Tribunal Property Chamber under sections 27A and 19 of the Landlord and Tenant Act 1985.  You can ask the Tribunal to make a determination on the reasonableness and payability of the service charges. You will need to set out your case and why you consider the charges to be unreasonable.  The Tribunal are an expert panel, and will make a determination based on the evidence presented to them, drawing on their expertise.

It seems that works have been carried out to the building.  You haven’t commented on any consultation so I presume that there was no formal statutory consultation for these works.  Where a landlord proposes to carry out “qualifying works” (which are defined as works on a building or any other premises), and the cost of those works exceeds £250 for any leaseholder, then the landlord must either undertake the formal consultation process or obtain dispensation from consultation.  If they don’t, then the contributions of the leaseholders to those works is limited to just £250 per leaseholder.

The consultation process itself allows leaseholders to engage in the proposed works by making observations, proposing contractors etc.  The rules can get a bit convoluted, but in essence, a landlord is required to “have regard” to any observations, and also to approach nominated contractors and invite them to tender.  If the landlord doesn’t go for the nominated (or cheapest) contractor, then they need to serve a notice specifying the reasons for awarding the contract to the person they have.

The Service Charges (Consultation Requirements) Regulation 2003 set out the procedure that should be followed when consultation is being undertaken.

If consultation hasn’t been undertaken, then this could form part of your challenge at the Tribunal; as you’d challenge the payability of those works because section 20 consultation hasn’t been properly conducted.

These remedies deal with what’s happened, but one of your concerns is what’s going to happen moving forwards, and in particular that you’d like to appoint a managing agent to manage your block.

I go back to the initial comments I made about getting clarification on how your building is managed.  Once you understand this, it may be that you have some capacity to be more involved in the decisions that are being made.

An option for you to consider is the appointment of a manager.  The Tribunal produce a booklet on this which you may find helpful.

This is where the Tribunal makes an Order appointing a manager, generally a named individual (eg Mr Smith of Smiths Managing Agents).

This is a fault based procedure.  It’s normally a last resort, but can be a useful remedy in situations such as yours where you’re a lone voice.

You would need to prepare and serve a section 22 notice, setting out (amongst other things) your objections and what the “fault” is.

When considering whether to appoint a manager the Tribunal will decide whether it’s satisfied that:

1. The landlord or current manager is in breach of his obligations to a leaseholder under the lease relating to the management of the premises or part of the premises; or

2. Unreasonable service charges have been made or are proposed or likely to be made; or

3. The landlord or manager is in breach of any relevant provision of a code of practice approved by the Secretary of State under Section 87 of the 1993 Act ; or

4. The landlord or manager has failed to comply with section 42 of the Landlord and Tenant Act 1987 with regard to holding service charge monies on trust; and

5. Other circumstances exist in which it is just and convenient for the order to be made.

As a leaseholder you need only prove one of the above grounds. However, if you intend to prove grounds on 1, 2, 3, or 4 you must also satisfy ground 5 to the Tribunal - that it is just and convenient in the circumstances to make an order to appoint a new manager.

As such, you have potential challenges to the service charges that have been sought from you, and also options for you to consider about how your building can be managed going forward.  As you say, this is a complex area of law, and there are lots of good guides on these kind of applications (published by the Tribunal itself, NoTB, ARMA, Lease etc to name just a few) but I hope that my reply has been of assistance to you.

Cassandra Zanelli, partner specialising in property management at Taylor&Emmet LLP