Rosslyn Mansions Tenants’ Association v Winstonworth Ltd [2015] UKUT 0011(LC)

Section 29 of the Landlord and Tenant Act 1985 addresses recognised tenants’ associations.

Does the Upper Tribunal have the jurisdiction to hear an appeal from the FTT’s refusal to give a certificate of recognition under section 29?

In Minster Chalets Limited v Irwin Park Residents Association (LRX/28/2000), the then President of the Lands Tribunal, George Bartlett QC, held that a challenge to a Rent Assessment Committee’s (“RAC”) refusal to grant a certificate should be made by judicial review.

Since 01 July 2013 however, it has been the FTT, rather than the RAC, which has given certificates in relation to dwellings in England.

That change is not merely semantic. It satisfied HHJ Huskinson that he had the power to hear the appeal.

How?

• An application for a certificate is made under section 29 of the Landlord and Tenant Act 1985;
• Since 01 July 2013, the power to grant a certificate has been vested in the FTT;
• Proceedings are started in the FTT by an application.
• The FTT rules are engaged once the application is made;
• An application is determined by a decision;
• An application for a certificate is therefore determined by a decision;
• Section 11 of the Tribunals Courts and Enforcement Act 2007 provides that a party is entitled – with permission – to appeal to the Upper Tribunal on any point of law arising from an FTT decision.
• There are some exceptions to that entitlement, but they are not relevant here;
• If, on hearing an appeal under section 11, the Upper Tribunal finds that the FTT has erred in law, it has the powers set out in section 12 of the 2007 Act.

Winstonworth Ltd was the freeholder owner of Rosslyn Mansions, 21 Goldhurst Terrace, London.

The Mansions contained thirteen flats. Eight were let on long leases under which the lessees covenanted to pay a variable service charge.

Four lessees belonged to the Association.

Four did not – and did not want to join. One of them was a director of the freeholder.

The Association supported their application for recognition with the following:

• The management system at the building was archaic;
• The landlord refused to communicate or to enter into any dialogue with lessees;
• The landlord had failed to consult;
• Procedures for awarding major contracts to Mr Hunt or members of his family were opaque;
• There was concern about financial and practical mismanagement.

The landlord, represented by Mr Hunt, took issue with application and the allegations raised in it. He calculated that only 57% of the qualifying tenants in the building supported the Association.

To date, no regulations have been enacted under section 29.

There are however two documents which give some guidance as to the circumstances in which an Association may be recognised.

1. “Residential Long Leaseholders – a guide to your rights and responsibilities”

Issued by the Department of Communities and Local Government, this document contains the following on page 15:

“As a general guide, an association should represent at least 60% of the flats in the block in respect of which variable service charges are payable.”

2. HM Courts and Tribunals Service

HM Courts & Tribunals Service’s document T545, “Guidance on Recognition of Tenant’s Association”, is dated July 2014. It repeats the magic 60% figure on page 2:

“There is no statutory specification of the matters to which the tribunal is to give regard in giving or cancelling a certificate of recognition and each application will be considered on its merits.

“In practice the tribunal will want to be satisfied that the constitution and rules of the association are fair and democratic and that it is independent of the landlord and, in the case of a company landlord, its employees.  The tribunal will be concerned to see that the actual paid up membership of the association represents a substantial proportion (as a general rule not less than 60%) of the potential membership.”

The FTT’s decision

In a short, six paragraph decision, the FTT declined to grant a certificate of recognition to the Association.

It noted:

• That the occupiers of six of the thirteen flats were members of the association;
• That of those six, four were subject to variable service charges;
• That 57% of the lessees liable to pay a variable service charge supported recognition;
• That the landlord opposed recognition of the association;
• That four of the long lessees did not want to join the association.

On the guidance, it recorded that:

• The DCLG’s criteria are normally applied by Tribunals;
• Recognition is normally given to associations which represent “at least 60% of the variable service charge payers”, and
• In this case, the Association fell short of that requirement.

It reviewed the Association’s constitution, which:

• Allowed for leaseholders to be full members, but
• Only allowed tenants to be honorary members. The FTT observed that it is customary for all tenants and leaseholders to be members of such associations, with voting rights in relation to the Landlord & Tenant Act 1985 matters being restricted to those liable for a variable service charge.

Finally, it concluded that the management and communication issues raised by the lessees would not be resolved by the granting of a certificate.

Permission to Appeal

The Upper Tribunal granted permission to appeal on two issues, both “matters of general significance”:

• The weight to be given to the overall percentage of the service charge paid by an Association’s members when considering whether to grant a certificate of recognition, and
• The status of the guidance in T545 that “as a general rule” not less than 60% of the potential membership of an association should have become members before a certificate of recognition is appropriate.

The appeal took the form of a review.

The Upper Tribunal’s decision

HHJ Huskinson had no quibble with the proposition that the FTT has a wide discretion under section 29 as to the granting of a certificate of recognition of a tenants’ association.

He was not however prepared to accept that the starting position was that the FTT should always grant an application for recognition unless there were good reasons not to.

“It is”, he said, “for the F-tT to decide whether a certificate should be granted having regard to all the relevant facts of the case”.

Support for the application

It was as plain as a pikestaff – although he did not put it that way – to HHJ Huskinson that the proportion of qualifying tenants supporting the application was a relevant consideration to the exercise of the FTT’s discretion.

Support was however only one relevant consideration.

“I do not accept”, said he, “that it is an appropriate approach for an F-tT to consider an application for a certificate under section 29 on the presumption that, absent special circumstances, the certificate should be refused if the proposed RTA represents less than 60% of potential membership.

“There is no requirement in section 29 for a minimum percentage of the total qualifying tenants to support the proposed RTA.

“The more substantial the percentage support the stronger may be the merits of the application for the certificate, but the application must be looked at in the light of all the relevant circumstances”.

Service charge contributions

The Association argued that the overall percentage of the service charge paid by the lessees should be a factor which the FTT should weigh in the balance, especially in a building where, for example, a few flats may between them contribute the lions’ share to the service charge expenditure for the building.

The relevance of this was underlined by an Association’s raison d’etre as observer, reviewer and occasional participant in decisions relating to the service charge and management of a building.

For example, a building might contain:

• Three large flats which contributed 20% each to the total service charge expenditure, and
• Five small flats, each contributing 8%.

If an application for recognition were made by the three large flats and one of the smaller ones, the FTT should take into account both factors:

• Half of the lessees supported the application, and
• Between its members, the Association contributed 68% of the service charge.

HHJ Huskinson quashed the FTT’s decision, allowed the appeal and remitted the case to the FTT to be determined afresh because:

• The FTT had failed to take into account the service charge contributions of the Association’s supporters;
• It had effectively used 60% as the threshold below which its discretion could only be exercised in exceptional circumstances, and
• It did not assess the relevance of what appeared to be a poor relationship between the supporting lessees and the landlord.

A recognised tenants’ association is one of the few organisations by which lessees can obtain more extensive rights without being burdened by weighty obligations.

You can find more information about residents’ associations by contacting the Federation of Private Residents’ Associations here.

The potential benefits

In his decision, HHJ Huskinson tantalisingly writes:

“Miss Cattermole drew attention to the various ways, all potentially beneficial to tenants, in which an RTA can become involved on behalf of tenants and can exercise powers, see paragraph 24a – k of her skeleton argument and also paragraph 25 in relation to section 84 of the Housing Act 1996”.

I say “tantalisingly” because HHJ Huskinson does not elucidate. It is like watching Alice disappear down the rabbit hole behind the White Rabbit without finding out what happens to her afterwards.

I therefore asked Rebecca for help. She has generously agreed to my including paragraphs 24a – k and 25 of her skeleton in this post. 

Here are the rights conferred on and enjoyed by a recognised tenant’s association under the 1985 Act and the Service Charges (Consultation Requirements) (England) Regulations SI 2003/ 1987 (“Regs”) as summarised by Rebecca:

1. The secretary of the RTA, if the tenant consents, may request the landlord to supply a written summary of the costs incurred in connection with the matters the tenant is required to pay a service charge. The summary of relevant costs may then be supplied to the secretary: 1985 Act, s.21(2).
2. The secretary of the RTA, with the consent of the tenant, within 6 months of obtaining the summary, require the landlord to afford him reasonable facilities for inspecting the accounts, receipts and other documents supporting the summary and for taking copies or extracts from them: 1985 Act, s.22(2).
3. The landlord shall make such facilities available to the secretary for a period of 2 months beginning not later than after the request is made: 1985 Act, s.22(4).
4. The landlord shall give notice in writing of his intention to carry out qualifying works to the RTA and, inter alia, invite the RTA to propose the name of a person from whom the landlord should try to obtain an estimate for the carrying out the proposed works: Regs, Sch. 4, Pt II, para. 1.
5. The landlord shall have regard to any observations by the RTA in relation to the proposed works: Regs, Sch. 4, Pt II, para. 3.
6. Where a nomination is made by the RTA (whether or not a nomination is made by any tenant), the landlord shall try to obtain an estimate from the nominated person: Regs, Sch. 4, Pt II, para. 4(1).
7. If the landlord enters into a contract, he must notify the RTA of his reasons for awarding the contract and provide a summary of observations received unless the contract was awarded to a nominated person or submitted the lowest estimate: Regs, Sch. 4, Pt II, para. 6.
8. The landlord must supply a statement of estimates to, and make available all estimates for inspection by, the secretary of the RTA: Regs, Sch.4, Pt II, para.4.
9. The RTA has similar rights to be consulted in relation to qualifying long term agreements: Regs, Sch. 1.
10. The RTA has a right to be consulted on matters relating to the appointment or employment of a managing agent for any relevant premises: 1985 Act, s.30B.
11. The right to request a written summary of the insurance cover and inspect the policy: 1985 Act, s.30A.

In addition, s.84 of the Housing Act 1996 gives the RTA a right to appoint a surveyor to advise on any matters relating to, or which may give rise to, service charges payable to a landlord by one or more members of the RTA.  The statutory appointment of a surveyor, which becomes effective on notice in writing to the landlord, carries statutory rights of access to documents and premises as detailed in Schedule 4 of the 1996 Act, which sets out the rights exercisable by a surveyor appointed by the RTA.

An oversight and a point to ponder

Rebecca argued two points that HHJ Huskinson did not address in his decision.

First, that the LVT had been mistaken on the observations it had made about the Association’s constitution.

• Section 29 envisages that a tenants’ association may comprise qualifying tenants “whether with or without other tenants”. It does not envisage any one being able to demand membership of the association, and
• In any event, the constitution had not excluded “other” tenants.

It seems to me that these are to all intents and purposes oversights on the part of the FTT, and are not obviously of general application

The second point is broader – and more controversial.

The argument was that, in considering whether a majority of qualifying tenants supported an application for a certificate under section 29, account should only be taken of qualifying tenants who are independent of the landlord.

She developed the argument to the effect that a qualifying tenant who was connected with the landlord should not be eligible for membership of an association seeking recognised status.

The argument remains unanswered. Thoughts anybody?

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Click here to read the judgment in full on the Upper Tribunal’s website.