Scope of Tribunal’s Housing Management Order exceeded powers

Part II of the Landlord and Tenant Act 1987 provides for the appointment of managers by tribunals.

Subject to exceptions in subsection (3), section 21(2) provides that Part II of the Act applies to premises consisting of the whole or part of a building if the building or part contains two or more flats.

Section 21(7) says in Part II of the Act “tenant” does not include a tenant under a tenancy subject to Part II of the Landlord and Tenant Act 1954 so, tenants who occupy premises for the purposes of a business cannot make an application for an order for the appointment of a manager.

By section 21(1) the tenant of a flat in any premises to which Part II of the 1987 Act applies may apply to the tribunal for an order under section 24 appointing a manager in relation to those premises.

In the Upper Tribunal (Lands Chamber) case of Sennadine Properties Ltd v Heelis [2015] the building was configured so that the flats on the upper floors had their own communal entrance and did not share common parts with the commercial let premises on the ground floor.

The lessee of flat 2 made an application under section 24 of the 1987 Act. The application could have been limited to the upper floors on which the flats were situated, but the applicant chose to include the whole of the building. The Local Valuation Tribunal (“LVT”) could have made a more restricted order, under section 24(3), but it appointed a manager of the whole of the building.

A liquidator of a company or a trustee in bankruptcy in the course of a winding up or bankruptcy has power to disclaim leases under the Insolvency Act 1986. The Crown also has power to disclaim after the dissolution of a limited company where a lease has vested in the Crown as bona vacantia. The LVT had no power to confer the right to disclaim a lease on the manager because disclaimer was not a procedure otherwise available.

In fact it was unclear what the LVT had in mind by “disclaimer”. It may have intended the manager to end the lease of the commercial ground floor premises because the lessee had stopped paying rent. The LVT clearly wanted an income to be generated from the commercial premises so the manager could fund repairs. If it intended the manager to forfeit the existing lease to re-let it did not express itself properly.

The LVT could not confer on the manager a power to “disclaim” a commercial lease vested in a third party. So by directing the manager to “disclaim” the lease of the commercial unit on the ground floor, to market the commercial unit, to let it on commercial terms and to demand and receive rent and service charges under any new lease, the LVT had exceeded its jurisdiction.

More generally it was disproportionate in the circumstances for the LVT to have made an order directly intervening in the relationship between the freeholder landlord and a third party (the existing ground floor tenant). The circumstances in which it might be appropriate to make such an order were likely to be exceptional.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.