Repairs: Landlords at risk in mixed-use buildings

In the recent case of Queensbridge Investments Ltd v Lodge [2015], a landlord owned a building which had been let to residential tenants and a commercial tenant. The tenants claimed that the disrepair to the property was causing safety issues. Due to the landlord’s failure to carry out repairs, the residential tenants applied to the First-Tier Tribunal for a management order under Section 24 of the Landlord and Tenant Act 1987.  In other words, the tenants wanted the Court to take management of the building out of the landlord’s hands.

The Tribunal criticised the landlord and found that it had failed to comply with its responsibilities. A manager was appointed and given powers which went further than the provisions under the leases, granting management functions for the whole property, including the commercial premises. The manager was given powers to carry out repairs, collect rent from the commercial tenant and recover a contribution from the landlord by way of a form of service charge. The order also included a restriction on the landlord for 2 years from disposing of its interest without authorisation from the manager.

The landlord appealed, claiming that although it accepted it should have carried out repairs, the order went too far and interfered with its property rights. The Upper Tribunal considered that, due to the serious criticisms of the landlord, this case was exceptional and the order had been proportionate.

Therefore, where a landlord fails to comply with its repairing responsibilities in a mixed-use block, the Tribunal can remove all management functions from the landlord and give a manager the power, under a management order, to retain the rent from the commercial element in the building to deal with management issues such as repairs.

Practical points:

• Landlords should be aware, when entering into leases in mixed use premises, that Section 24(1) allows the appointment of a manager to carry out such functions in relation to the premises as a tribunal may think fit – it will not be limited to the functions of the particular landlord under the lease in question. Similarly, commercial occupiers of mixed-use premises may be able to ask residential tenants to use some of these rights when faced with a difficult landlord.
• It is also important for landlords to consider their response to claims of disrepair to avoid the appointments of managers.
• It is important for landlords to keep on top of repairs – not just to avoid the appointment of a manager. In the recent case of Moorjani v Durban Estates Ltd [2015] the landlord’s liability for damages for non-repair extended to the inconvenience and distress caused to the tenant, even though the tenant may have chosen to live elsewhere as a result.