Background
Gowling WLG has recently advised a tenant seeking to address their landlord's poor management of the building. The key issues included poor handling of service charge budgets, incomplete accounts, unapproved expenditure, failure to repair and failure to carry out cladding and other fire safety remediation works.
Before the coming into force of the Building Safety Act 2022 (BSA 2022), tenants could apply to the tribunal to appoint a new manager under Section 24 of the Landlord and Tenant Act 1987 (provided certain grounds are made out).
From the 6 April 2023, this is no longer possible in buildings that classify as "higher-risk buildings" under the BSA 2022. Managers appointed by the court now can no longer carry out building safety functions (which are listed in Part 4 of the BSA 2022).
The challenge
The BSA 2022 establishes that the responsibility for building safety risks when a building is occupied lies with a new dutyholder: the "accountable person". The accountable person is:
- The person who is under a relevant repairing obligation for any part of the common parts of the building under a lease or by virtue of an enactment. This will normally be the landlord or a superior landlord.
- Where there is no person with a relevant repairing obligation, the person who has the legal estate in possession of any part of the common parts of the building. Management bodies therefore can be the accountable person.
The duties of the accountable person are set out in Part 4 of the BSA 2022, and include assessment and management of building safety risks, reporting requirements, keeping of information, provision of information, engagement with residents, etc.
The current split between ordinary managing functions and building safety functions represents a challenge for tenants seeking to convince a court to replace lousy management for several reasons:
1) It is difficult to differentiate between the two functions
The tenant seeking to introduce a court-appointed manager would therefore need to show to the court that a new manager is required for the performance of ordinary managing duties under the Landlord and Tenant Act 1985. However, it may be hard to disentangle these from building safety measures.
For instance
| Management functions | Building Safety Duty? | General Management Duty? |
|---|---|---|
| Management of service charge | Yes – some costs relating to building safety can be charged to tenants, while some cannot and government funding needs to be obtained. | Yes – the manager has a duty to put together a service charge budget, manage the funds, and keep residents informed of costs. |
| Water leaks | Yes – water leaks can constitute a safety hazard. | Yes – the manager of a building would be responsible to organise the repair of the leaks. |
| Repair of fire protection systems | Yes – fire alarms and fire protection systems in a building would amount to a building safety defect remediation. | Yes – the manager would be responsible to organise the repair of the system. |
2) There could be two managers
The effect of the division of functions is that where a tenant applies to replace a manager via Section 24 of the Landlord and Tenant Act 1987, the court-appointed manager cannot also cover the functions of the accountable person under Part 4 BSA 2022.
In practice, this means that where an order under Section 24 of the Landlord and Tenant Act 1987 is made, the building will have two different individuals carrying out management functions: one appointed by the court to discharge obligations under the Landlord and Tenant Act 1985 and one carrying out building safety functions under Part 4 of the BSA 2022.
3) It may be hard to convince a tribunal to appoint a new manager
Where a building classes as a "higher-risk building", the presence of an accountable person might make it harder to convince a tribunal to appoint a manager to carry out Landlord and Tenant Act 1985 duties – the presence of two separate people may further exacerbate existing management struggles.
This is especially so where following the Grenfell Tower disaster a number of buildings qualifying as "higher-risk" are ongoing urgent cladding remediation works. The tribunal might be weary of disrupting the progress of such works with a change in management and the splitting of management functions.
Our solution
We advised our tenant client to reach agreement with the landlord to replace the managing agent. By the terms of the appointment, the newly appointed managing firm carried out both general management duties and building safety duties. The different functions were simply discharged by different individuals within the same firm.
Looking to the future
With the BSA 2022 having come into force only recently, the ramifications of the new provisions are still unfamiliar to both tenants and landlords, who should however keep in mind the shift in legislation in this area.
Over the next year, we are likely to witness the enactment of secondary legislation clarifying the role of the "accountable person", the scope of their duties, and the process to follow in order to replace them where they are falling short of their duties.
Read the original article on GowlingWLG.com
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