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If residents of an apartment block are unhappy with the management company and managing agents, how do they change them both?

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31st January 2024

Andrew Martin expands on Mark Loveday‘s answer, which appeared in The Times Brick and Mortar section.

Management companies and managing agents can both be involved in the management of a building, but legally, they are quite distinct.

Managing agents are exactly that – agents. They act on behalf of the party with responsibility for the management of the premises, which may be the landlord or the management company. Whether or not the landlord or management company can recover the costs of employing managing agents is a question answered by the terms of the lease and the law relating to the recoverability of service charges. Regardless, they are free to employ managing agents of their choice, subject to s.30B of the Landlord and Tenant Act 1985.

S.30B provides a right for recognised tenants’ associations (as defined by s.29 of the 1985 Act) (“RTAs”) to be consulted about managing agents. This does not happen automatically; the RTA must first serve a notice on the landlord requesting him to consult the RTA on the appointment and employment of managing agents. This can be done at any time. Thereafter, the landlord must, if he is already employing managing agents or, if not, when he is about to employ them, provide certain information within prescribed time limits to the RTA. In response, the RTA may make observations about the managing agents. The landlord must have regard to these observations but is not required to remove a managing agent if requested by the RTA.

A management company, by contrast, is incorporated specifically for the purpose of managing the premises. It will be a party to each of the leases, making them ‘tripartite’. Therefore to remove the management company would require varying each of the leases with the agreement of the landlord, leaseholder, and the management company itself.

Often, leaseholders will also be members of the management company so that they can exercise control over the management of the premises. If that is the case, while leaseholders will not be able to remove the management company as such, the remedies afforded by company law will be available to them. They would, of course, be doing so, strictly speaking, in their capacities as members of the company rather than as leaseholders

If this does not provide a solution, a leaseholder may have recourse to rights and remedies afforded by statute to certain long leaseholders.

There is a statutory right to manage under Part II of the Commonhold and Leasehold Reform Act 2002. Provided the qualifying criteria are met, any qualifying leaseholder is entitled to be a member of the right to manage company (the “RTM Company”). Once the right to manage has been acquired, the “management functions” of the landlord or other management party are transferred to the RTM Company. S.96(5) of the 2002 Act defines “management functions” as “functions with respect to services, repairs, maintenance, improvements, insurance and management”. This is likely to cover all of the functions, rights, powers, and obligations of a management company under a lease, and therefore the RTM Company will effectively replace the management company for as long as the right to manage continues.

Another statutory right afforded to certain long leaseholders is the right to collective enfranchisement under Part I of the Leasehold Reform, Housing and Urban Development Act 1993. This legislation allows leaseholders of flats in a building, provided their leases qualify and there are a sufficient number of them, to purchase the freehold collectively through a nominee purchaser, which is often a company set up specifically for this purpose. Depending on the terms of the leases, this may allow the leaseholders to exert a greater degree of control over the management of the building as landlord through the nominee purchaser. Collective enfranchisement does not, however, change the terms of the leases. If the management company has responsibility for the management of the premises and is embedded in a tripartite lease, collective enfranchisement will not change this.

Finally, Part II of the Landlord and Tenant Act 1987 provides a right for the leaseholder of a flat in a building (or part thereof) which contains two or more flats to apply to the First-tier Tribunal for an order appointing a manager. This is different to exercising the right to manage. First of all, it is the tribunal who appoints the manager and decides his powers or duties (which may include ones that are not present in the leases). Secondly, it is a fault-based system; that is, it has to be shown one of the various failures of management listed in s.24(2) of the 1987 Act is present, and the tribunal considers it just and convenient to make the order in all the circumstances of the case. Thirdly, most orders will be made for a fixed term (although an open-ended appointment is possible). These characteristics mean that the appointment of a manager tends to be most suitable for limited periods of time, and not as a long-term solution.

In conclusion, while it is difficult to effect the removal of managing agents or a management company, there are a number of ways a long leaseholder can influence or take control of the management of the premises, particularly in collaboration with fellow leaseholders.

Andrew Martin

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