Building Safety Act amendments re Tribunal appointed managers

Timothy Polli KC, Carl Fain, and Katie Gray discuss what the rules are in the LTA 1987 amendments, as well as the issues that arise between FTT appointed managers and Regulator- appointment special measures managers.

Introduction

Property litigators will be familiar with the power given to the First-tier Tribunal (FTT) to appoint a manager under section 24 of the Landlord and Tenant Act 1987 (LTA 1987). A manager is usually appointed “for cause”, in that the person applying for such an order must establish a gateway ground. Such grounds include the demanding of unreasonable service charges or a breach of a management obligation contained in a lease.

Section 72 of the Building Safety Act 2022 (BSA 2022) introduced the concept of the “accountable person” in relation to higher-risk buildings. Section 72 should be referred to for the detail of the definition, but broadly an accountable person is a person who has a legal estate in possession of any part of the common parts or a person who does not hold a legal estate in the building but is under a relevant repairing obligation in relation to the common parts.

The BSA 2022 made substantial changes to section 24 of the LTA 1987, however these changes have received relatively little attention.

Building safety regime and tribunal appointed managers

What seems clear from the amendments is that the two statutory regimes – the appointment of a manager and the responsibilities of the accountable person – are intended to be separate.

In this regard, the first point to note is that the LTA 1987 has been amended to make it clear that the FTT may not appoint a manager on the grounds that an accountable person is in breach of a relevant building safety obligation.

Secondly, a management order made by the FTT cannot provide for a tribunal appointed manager to carry out a function in relation to a higher-risk building if that function is one that should be carried out by an accountable person

Existing management orders

There has been a question about what happens in cases where a tribunal appointed manager was, before the coming into force of the BSA 2022, already in place and the term of the management order has not come to an end. A tribunal appointed manager clearly does not hold any legal estate in a higher-risk building, but might be said to have relevant repairing obligations in relation to the common parts. As a matter of practicality, it appears odd that the manager would not be able exercise safety-critical functions but the freeholder (for example) whose management functions had been taken away for previous poor management would be able to exercise those functions.

For now (subject to any appeal) the question has been answered by the Upper Tribunal in Unsdorfer v Octagon Overseas Ltd [2024] UKUT 59 (LC).

The Upper Tribunal held that a tribunal appointed manager could not be an accountable person under the BSA 2022. The manager’s functions could not be said to be relevant repairing obligations as they arise from the management order, not the lease nor the LTA 1987 itself. However, where there is an existing management order that does provide for the manager to carry out functions that are now the functions of an accountable person, the order remains in force until it is varied or discharged. So, the manager will be required to carry out functions under the existing order that include building safety responsibilities. This is likely to cause real, albeit temporary, problems for existing tribunal appointees and accountable persons alike, because their functions will overlap. Indeed, the accountable person may actually find themselves prevented from carrying out building safety functions (breach of which often carries with it criminal liability) because of the existence of the management order. Unless the relevant parties can helpfully collaborate with each other (and often management orders are made in circumstances where the relationship between the landlord and the lessees has irretrievably broken down) then either the manager or another interested party will need to apply to the FTT for further directions. For practical reasons, the manager may want to apply, because as he/she is not an accountable person, the Building Safety. Fund is likely to refuse to pay out

Special Measures Managers

There are potential remedies outside of the LTA 1987 for tenants faced with an accountable person who is not carrying out its functions. With effect from 16 January 2024, tenants may complain to the Building Safety Regulator who may apply to the FTT for an order appointing a Special Measures Manager (SMM) under section 102 and schedule 7 to the BSA 2022. The SMM will be appointed to carry out the functions of the accountable person.

The SMM is themselves entitled to apply to the tribunal under section 24 of the LTA 1987 to appoint or replace a manager, and the tribunal may also amend the existing management order to ensure that the manager’s functions do not overlap with the functions of the SMM. The potential for disputes and disagreements about these roles can readily be seen.

The process for appointing a SMM is cumbersome and largely outside of the tenants’ control – they are able to complain and make representations but that is the extent of their ability to influence the decision.

Further, there is a lengthy procedure for notices to be served and decisions to be made by the Regulator before it applies to the FTT to make a special measures order and the FTT may only do so if it is satisfied that there has been a serious failure, or a failure on two or more occasions, by an accountable person to comply with its duties. Nevertheless, in theory, the Regulator could apply to appoint an existing tribunal appointee to be the SMM, thereby removing the overlap in functions described above.

 

This article was first published on Practical Law here.