When tenants fall out

The most common reason for disputes surrounds repair works, with tenants disagreeing what is and is not in need of repair. These disputes are difficult, as the parties are neighbours, and often present some interesting legal challenges - for example, the rights of minority shareholders (in the management company) against the majority.

Minority tenants/directors can become frustrated when they are consistently overruled by the majority and they might flex their muscles by, for example, withholding service charge - an action which can seriously prejudice the management of their block, especially where the total number of tenants is small.

Litigation is not usually the answer because it is costly and time-consuming and there is no guarantee of a positive outcome. Indeed, minority tenants may be able to starve the freeholder of litigation funds by refusing to pay service charge.

How can these disputes be resolved, or avoided? Solicitors working with tenants acquiring the freehold must explain how disputes can arise between tenants after enfranchisement. All tenants must be given advice about alternative dispute resolution methods such as mediation. The long leases granted on enfranchisement could specify that disputes are settled using one of these methods.

Tenants who hold minority views need to have their expectations managed appropriately. On the other hand the importance of maintaining good working relationships between tenants should be stressed. Where disputes arise between tenants who mutually trust and respect each other, there is a greater chance that agreement can be found.

However block managers should also have safeguards in place. One solution is for the freehold company to be incorporated with articles of association permitting a majority of directors to call for funding from tenant members. In parallel the individual flat leases could contain covenants obliging the tenants to make payments into a reserve or sinking fund if so required by the landlord, and to comply with the articles of association. Solicitors should ensure they advise tenants of this solution at the start of the enfranchisement process.

Overall, the increase in residential tenants’ rights is a positive development. Now the time has come to give thought into making the new regimes more fit for purpose.