LVT Praises “Impressive” Managing Agent As Vexatious Flat-Owner Loses Case

A recent decision from the London Leasehold Valuation Tribunal highlights the problems caused when an individual leaseholder persistently brings service charge litigation with little or no prospect of success.

The case concerned an application brought by Mr. and Mrs. Aitken for the Appointment of a Manager.  They own two out of the 84 flats in the block, called Park South in South West London.  The building is a 21-storey ex-local authority property with a number of communal facilities including a swimming pool, gymnasium and squash court.  The freehold is owned by the flat owners collectively, having been purchased in 1990.  Moreland Estates was recently appointed as the managing agents and had been in that role for approximately four months by the time of the litigation.

Appointment of a Manager is a procedure which can be used by leaseholders to remove the existing managing agent and for them to be replaced by one appointed by the LVT.  The LVT must be persuaded that the existing managing agents are at fault in their management of the property before they will exercise their powers under Part II of the Landlord and Tenant Act 1987. In this way, the procedure is very different to an application for Right to Manage, which is a no-fault procedure albeit requiring the support of 50% of the flat owners in the building

Mr. and Mrs. Aitken had been responsible for a considerable amount of previous litigation concerning the building.  Altogether, there had been at least three previous legal cases - one in the LVT and two in the County Court.  The Aitken’s had lost all of those cases, and be ordered to pay a total of £7,420.99 in costs.

The recent case was ostensibly no different.  The Aitken’s complained that the property was not being managed property, and sought to argue about a number of issues which had already been decided in previous legal proceedings. The Tribunal remarked that the Aitken’s bundle of documents stretched to some 1,000 pages - “allowing for some rather eccentric pagination” - including three witness statements totalling 181 pages.  Further, to support their application, the Aitken’s brought their proposed new managing agent, Mr. Newell, to the hearing. However, after patiently listening to the evidence for a day and a half Mr. Newell withdrew and informed the Tribunal that he no longer wanted to be considered for the appointment.  He explained that “...his firm could not improve on the current level of management performance and that...it had become clear during the hearing that the current managers had the support of the vast majority of leaseholders and occupiers of the premises”.

Commenting on Mr. Newell’s decision, the Tribunal said: “We are impressed at the level of commitment Ms Butler (Residents Association) and her colleagues devote to the running of the building and we are impressed also at the performance of Moreland and their favourable assessment of their predecessors. We are not surprised that Mr Newell decided to withdraw after the hearing of the evidence.”

The Tribunal had previously heard evidence from Laurence Freilich, a director of Moreland Estate Management and a qualified surveyor.  In a rare expression of commendation for a managing agent, the Tribunal remarked:

“Moreland acquired the previous agents and then assisted in the tendering process leading to their later appointment. We were impressed with the evidence of Mr Freilich whose company has an impressive record in the field of leasehold management. His account of the steps taken by his company in the first year of their appointment is also impressive. We also note his favourable assessment of the quality of the previous management which his firm took over.”

The Tribunal, which was chaired by Professor James Driscoll (one of the most eminent and experienced LVT Chairmen), decisively dismissed the Aitken’s “vexatious” application and ordered them to pay £500 towards the costs of the resident-owned Landlord company.  £500 is the maximum award possible under paragraph 10 of Schedule 12 of the Commonhold and Leasehold Reform Act 2002.

This case is a salutary reminder that even after acquiring the freehold to the building, vexatious litigation from a minority within the building can be a bane for their neighbouring flat owners.  

Laurence Freilich, of Moreland Estate Management Limited, explained: “We are delighted with the outcome of this case that by the Tribunal’s admission should never have resulted in a hearing. There are a number of potential pitfalls when taking over the management of buildings with previous issues as was the case here. Our experience in all aspects of leasehold management stands us in good stead when ensuring the needs of existing and future tenants are serviced to a high standard.”

With the LVT limited in the amount of punitive costs that can be awarded, there is little discouragement for vexatious leaseholders - something which has recently been commented upon by the London Assembly in their critical report on Service Charges. So, any victory by the majority of the flat owners can only be pyrrhic at best, as they will still need to pay for the remainder of their legal fees.  Meanwhile, such cases only serve to further clog up the legal system and delay more deserving cases from reaching a hearing sooner.  Unfortunately, as more flat owners claim their Right to Enfranchise or Right to Manage their building, the risk of similar cases such as this one remains.

To read the decision in full click here