How the acquisition of the right to manage affects a management order under Landlord and Tenant Act 1987 and whether that management order can be varied.
Benthan and another v Lindsay Court (St Annes) RTM Company Ltd and another  concerned a development, comprising 16 blocks and 96 flats. The building had fallen into a state of disrepair and significant works were required. An application was made by the freeholder (the second appellant) to appoint a manager under the LTA 1987. The First-tier Tribunal made an order appointing the first appellant as manager in March 2014. Subsequently, the FTT decided that the first respondent right to manage (RTM) company was entitled to acquire the right to manage block 1 of the development with effect from 22 January 2021. Under the Commonhold and Leasehold Reform Act 2002, when an RTM company acquired the right to manage, those who previously had the right to manage, including a manager appointed under LTA 1987, lost it.
The appellants in this case, being the appointed manager and the long leaseholders of block 1, sought to vary the management order, to the effect that the appointed manager’s powers to manage block 1 continued despite the RTM company’s acquisition of the right to manage. Effectively, the appellants sought an order that the appointed manager would resume management of block 1 immediately after the RTM company’s acquisition of the right to manage. The FTT concluded that it did not have the necessary jurisdiction to vary the management order and the appellants appealed to the Upper Tribunal.
The Upper Tribunal dismissed the appeal, concluding that the management order could not be varied as required by the appellants. The RTM company would continue to manage the property from 22 January 2021, and the appellants would be entitled in the future to make an application to assume management rights from the RTM company if they could make a case to support this application.
In their appeal, the appellants argued that there was no limit upon variation and that there was no need for the conditions under the LTA 1987 to be considered before variation could be ordered, because these considerations had been discussed at the time of the management order being made. However, the Tribunal did not agree with the appellants’ assumption that it was possible by varying a management order, to bring a third party within its scope. The Tribunal found that an order removing management powers from a third party, where that third party was not bound by the original manager appointment, was not a variation but rather was an entirely new order. The RTM company explained the circumstances under CLRA 2002 when the RTM’s powers could be brought to an end under LTA 1987 and its submissions in this respect were accepted by the Tribunal. Accordingly, on 22 January 2021 the RTM would acquire the right to manage the premises, including block 1.
The Tribunal further confirmed that if the appellants were able to satisfy the conditions under LTA 1987 then they would be able to bring an application for the appointment of a manager to take over management from the RTM, but this could not be achieved by variation of the existing management order.
Advice and action
The Tribunal’s decision in this case provides that where a management order is made and the right to manage is subsequently acquired by a third party, an order depriving that third party of its management powers could not be made by variation of the original management order. In this instance, an application would need to be brought under LTA 1987 for the manager to take over management from the third party and an entirely separate order granted.
The Upper Tribunal dismissed the appeal, concluding that the order could not be varied. The appellants would be entitled to make a future application to assume management rights if they could make a case.