Property Management: Whether the First-tier Tribunal was correct to appoint a manager following an application by leaseholders (Invergarry Court Ltd v Connolly and others – 2022)

The Upper Tribunal considered an appeal by the freeholder landlord of a block whereby the First-tier Tribunal had made an order to appoint a property manager pursuant to an application by leaseholders, and where on-account service charges were found not to be payable.

The background

In Invergarry Court Ltd v Connolly and others [2022], the appellant management company was the freeholder of the subject residential block building in North London. Much of the management was undertaken by the leaseholder of the penthouse flat (“B”). Leaseholders of 8 flats in the original building held one share each in the company. Later, a 9^th flat was created in the building’s basement.

B had a dispute with two leaseholders concerning works undertaken to their flats which B stated had not been authorised. This caused problems with the proposed sale of those flats, as B advised prospective purchasers that works had not received landlord’s consent.

A further dispute between B and the first respondent centred on the respondent’s claim that B had not provided annual service charge reconciliations. The First-tier Tribunal found that, although sums demanded were reasonable, they were not payable as apportionments were inaccurate and proper procedures had not been followed.

The respondents applied to the FTT for the appointment of a manager, which duly appointed K&M Property Management Ltd. When appointing a manager pursuant to such an application, the FTT must be satisfied that one of the conditions contained at s.24(2) of the Landlord and Tenant Act 1987 is made out. The appellant appealed, stating that the FTT had not made findings of fact in respect of the service charge allegations, that the FTT had not considered B’s account of facts, that a claim of unreasonable service charges had not been proven, and that no management duty had been breached such that appointment of a manager was just.

The decision

The Upper Tribunal allowed the appellant’s appeal, remitting the application to a new FTT panel.

The court considered whether the FTT was right to appoint a manager. The FTT had found that the appellant had breached a management obligation to tenants – a covenant that consent to assignment would not be unreasonably withheld – and that it had been just and convenient to make the order to appoint a manager. The appellant landlord argued that no formal written requests for consent to assignment had been received, and so a breach by the landlord could not have occurred. The UT agreed. The FTT did not state in its decision that it was satisfied as to the justice and convenience of appointing the manager when making the order, as a result of which the order could not be upheld.

With regards to service charge, B presented evidence claiming that reconciliations had been carried out and showed an underpayment by the respondent C (which was then paid). The respondents were unable to evidence details of sums unaccounted for.

Advice and action for landlords

This decision indicates the importance of applicants substantiating claims with evidence, as well as the need for the FTT to fully consider the justice and convenience of appointing a manager when asked to make such an order.

In this case, with no formal written applications for consent to assign having been made, the landlord could not be in breach of its obligations and it was therefore neither just nor convenient for the FTT to make the order appointing the manager. With little evidence presented by the leaseholders in respect of their claims regarding transparency of service charge reconciliations, this aspect of the FTT’s order could also not be considered just or convenient.