Mr B Madi and Ms H Lawton v Nearfine Limited (1) Mr T Ettehadieh (2) (London : Section 24)

Factual and Procedural Background

This opinion concerns an application under Section 24 of the Landlord and Tenant Act 1987 for the appointment of a manager in relation to a residential property comprising six flats and a caretaker's flat. The Applicants, occupying one flat, sought the appointment of an independent manager proposed to be Mr Oakey. The head lease was owned by the first Respondent, a company represented by its director, with the second Respondent representing several other lessees. The property management had been a subject of dispute since 2010, involving allegations of harassment, unreasonable service charges, and secret commission arrangements related to maintenance works.

The matter was initially set for hearing in February 2016 but was adjourned due to lack of evidence from the second Respondent. It was subsequently heard on 21st and 22nd June 2016 by a Tribunal panel. Extensive documentary evidence, including previous Tribunal decisions, witness statements, and correspondence, was submitted. The proceedings involved detailed examination of management practices, service charges, and interpersonal conflicts between the parties.

Legal Issues Presented

1. Whether the Tribunal should appoint a manager under Section 24 of the Landlord and Tenant Act 1987 given admitted breaches of management obligations and allegations of unreasonable service charges.
2. Whether it is just and convenient in all the circumstances to make such an appointment.
3. The relevance and impact of alleged secret commission arrangements on the service charges and management integrity.
4. The effect of the breakdown in relationships between the parties on the management of the property.

Arguments of the Parties

Applicants' Arguments

• There have been management failures and harassment since 2010, including intimidation and unreasonable service charges.
• Secret commission arrangements existed between the landlord's director and a maintenance operative, which were undisclosed and inappropriate.
• Management was inadequate due to lack of inspections, poor communication, and absence of hands-on oversight by the landlord's representatives.
• The current management arrangement was unmanageable and divisive, justifying the appointment of an independent manager.
• Appointment of the proposed manager would provide a curative solution and heal divisions among leaseholders.

Respondents' Arguments

• The first Respondent accepted some grounds relating to unreasonable service charges but opposed the appointment as not just and convenient.
• The second Respondent, representing majority lessees, supported the existing management and opposed the application, citing satisfaction with current arrangements.
• Historical issues raised were largely resolved or irrelevant to current management needs.
• The alleged commission was isolated, ceased in 2011, and did not result in overcharging leaseholders.
• An independent manager would impose additional financial burdens and face difficulties managing without majority support, risking unmanageability.
• Management was carried out satisfactorily with a caretaker and in-house solicitor despite the landlord's director residing abroad.

Proposed Manager's Position

• The proposed manager was considered fit and willing to manage the property for a reasonable term.
• He indicated that non-payment of service charges by leaseholders could render the property unmanageable.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal acknowledged admitted management breaches and unreasonable service charges as grounds justifying potential appointment of a manager under the Act. However, it focused on whether such an appointment was just and convenient in all circumstances.

The Tribunal found that several allegations raised by the Applicants, including harassment and defamation, were either historical, unsubstantiated, or unrelated to property management. The handling of specific issues, such as the wood burning fire complaint and storage rights, was deemed reasonable management practice.

While the Tribunal recognized a breakdown in relationships between certain leaseholders and the landlord, it noted that the majority of lessees supported the existing management and that the building was generally well maintained with prompt responses to issues. The presence of a caretaker and an experienced solicitor further supported ongoing management adequacy.

The Tribunal critically examined the secret commission arrangement between the landlord's director and the maintenance operative. It found the arrangement inappropriate due to lack of disclosure, but concluded no leaseholder had paid more than due. Since the operative was no longer involved, the issue was not ongoing.

Financial implications were significant: appointing an independent manager would impose additional costs and require leaseholders' payments in advance. Given that a substantial portion of leaseholders opposed the appointment, the Tribunal reasoned that the manager would face practical difficulties in managing the property effectively.

Balancing these factors, the Tribunal concluded that appointment of a manager was not just and convenient, as it would not resolve underlying disputes and would impose financial burdens without clear benefit.

Holding and Implications

The Tribunal REFUSED to appoint a manager under Section 24 of the Landlord and Tenant Act 1987 in respect of the property.

The decision means that the current management arrangement remains in place, with the landlord's company continuing to manage the property. The Tribunal recognized admitted management shortcomings but found that the appointment of an independent manager would not be a practical or effective remedy given the opposition by a majority of leaseholders and the financial consequences involved.

No new legal precedent was established; the ruling is fact-specific and reflects the Tribunal's exercise of discretion considering the particular circumstances and relationships among the parties.