Gowling WLG has recently advised a tenant seeking to address their landlord's poor management of the building. The key issues included inadequate handling of service charge budgets, incomplete accounts, unapproved expenditure, failure to repair and failure to carry out cladding and other fire safety remediation.
Before the Building Safety Act 2022 (BSA 2022) came into force, 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 6 April 2023, this is no longer possible in buildings that are classified as "higher-risk buildings" under the BSA 2022. Managers appointed by the court 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". Broadly speaking, 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 (where available).
|
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 persons 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 is classed 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 following the Grenfell Tower disaster, with a number of buildings now qualifying as "higher-risk" and undergoing urgent cladding remediation works. The tribunal might be wary 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. As a result, the court ordered the appointment of an individual agent to carry out ordinary management duties under the Landlord and Tenant Act 1985. In parallel, the landlord appointed the new manager's firm, as agent, to carry out building safety functions on its behalf – whilst the landlord still retained its responsibility for building safety functions under the BSA 2022 as the Accountable Person. In short, the different functions were simply discharged on a day-to-day basis by different individuals within the same management 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 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.
If you are a tenant or landlord of a higher-risk building and are concerned about how the new Building Safety Act 2022 may affect you, please get in touch with Martin Thomas, Şenay Nihat or Alice Devenuto.