Queensbridge Investments Limited v Lodge & Ors [2015] UKUT 635 (LC)

There was quite a simple question at issue in this Upper Tribunal (Land Chamber) appeal – could the FTT appoint a manager to the whole of a building which contained a leased commercial unit as well as three leased residential units? But it is also worth noting because of the conduct of the freeholder, apparently absent until the whiff of a threat to the commercial rental income of £35,000 pa.

Queensbridge were/are the freeholder of 135 Ladbroke Grove, London. The property had a commercial unit on the ground floor and three residential flats above – all leased. The property had had a severe lack of maintenance and repair over years. A 2010 structural engineer’s report “details certain structural problems which in part they describe as possibly dangerous and in part as quite alarming”. A health and safety expert report from 2013 “lists a number of significant high priority fire, health and safety issues which put the residents, their visitors and the visiting emergency services at risk of death or serious injury.”

The residential lessees applied to the FTT(PC) for appointment of a manager by the Tribunal under s.24 Landlord and Tenant Act 1987. Astonishingly, despite having admitted having received notices, Queensbridge began by taking:

various points including the point that the omission of the word Jersey from the address on the envelope meant that, despite the fact that the correct post code had been given, the document had not been properly addressed.  Reliance was also placed upon the fact that the St Helier address was not in the United Kingdom.  The F-tT found that the notice was properly served.  What is of some significance, bearing in mind further observations made by the F-tT, is that the appellant saw fit to take (unsuccessfully) these technical points regarding service of documents and to seek to avoid involvement in these proceedings regarding the state of the property on the basis of such points.

Anyway, the FTT found “There have been serious ongoing problems with the Property and we have no confidence on the basis of the evidence provided that the Respondent is willing and able to deal with them in a proper manner”. An order appointing a manager under s.24 was made, encompassing the commercial premises, with the manager to receive the commercial rent on behalf of the freeholder, to be paid on to them less the freeholder’s share of repairing costs, as:

“…. there could be difficulties in recovering these costs from a reluctant non-UK company.  We also consider, based on the evidence, that Ms Mooney (the appointed manager) has reasonable grounds for being concerned that the Respondent may try to be obstructive in other respects and that therefore it would be reasonable to allow her the power of enforcement action in relation to any sums due from the Respondent, to rank and claim in any insolvency of the Respondent, to require the provision by the Respondent of keys etc and (to the extent available) relevant information to enable her to do her job effectively and the power to give consents in place of the Respondent.  Similarly,  to maximise the chances that the commercial tenant complies with its covenants and pays any sum which it is fair and reasonable to require it to pay it is in our view appropriate to give Ms Mooney reasonable enforcement powers against the commercial tenant direct.”

Queensbridge appealed to the UT, arguing that the terms of the appointment of the manager “went substantially further than was permissible and the making of which amounted to an error of law”.

The Upper Tribunal was less than impressed.

The F-tT imposed terms in the management order which were within the range of reasonable terms which it was permissible for the F-tT to impose. There is a reasonable relationship of proportionality between these terms and the aim properly sought to be realised by the management order. There is no error of law in the F-tT’s decision. There is no basis upon which I properly can or should allow this appeal by varying in some way this management order.

This even extended to the remarkable provision by the FTT for entering a restriction upon the registration at the Land Registry of a disposition of the (freehold) registered estate.

It is a substantial interference with the appellant’s and any mortgagee’s right to dispose of its property. […] However the present is an exceptional case in which serious criticisms have been made by the F-tT of the appellant.  The appellant cannot be relied upon to comply with the terms of the lease but it seems that the appellant can, upon the F-tT’s findings, be relied upon to be obstructive to the manager and to the respondents.  The management order has only been made for a period of 2 years.  If Ms Mooney was, in the appellant’s contention, acting unreasonably in refusing to consent to a registration of a disposition then the appellant could make an application under section 24(9) of the Act.  In the exceptional circumstances of the present case I conclude that the F-tT was entitled to impose this restriction so as to remove the prospect that the appellant might sell its interest without paying to the manager monies which it owed and might leave the manager with such rights if any if she was able to enforce against the new proprietor (whoever that might be and, if a company, wherever it might be registered).

And then, as the coup de grâce, the Upper Tribunal went on to find that even if there had been some reason with the FTT’s order as in part unjustified or an error in law, the UT would have declined to do so in the light of subsequent events.

First, the freeholder had failed to pay any money to the manager, despite being required to.

Second, it turned out that the freeholder had brought wholly retaliatory FTT proceedings against the residential lessees for breach of lease for subletting. The FTT in that case had found that a) the freeholder had long since waived any such breach, b) had demonstrated no intention of actually forfeiting, even if such were possible & c) the proceedings were an abuse of process.

And in the light of these:

First the appellant cannot be relied upon to comply with the terms of the management order (in breach of its terms the appellant has failed, pending an appeal, to make any payment to the manager). Secondly the appellant has shown that it has a further quality which can be added to the list of criticisms already mentioned in paragraph 41 above, namely the appellant is prepared to resort, by way of an abuse of the process of the Tribunal, to litigation for the purpose of retaliating against the respondents for their making of an application for the appointment of a manager. This further evidence serves to confirm how right the F-tT was in its conclusion that a widely worded management order was demanded in the present case in order to ensure that the property was properly managed.

A s.20C order on the freeholder’s costs recovery of the appeal under the lease terms was to be determined on further submissions. I think one could probably put money on the outcome.