Building Safety Act 2022: Replacing managers in higher-risk buildings

Before the Building Safety Regulations 2022 (‘’BSA 2022’’) came into force, leaseholders could make an application under section 24 of the Landlord and Tenant Act 1987 (‘’LTA 1987’’) to appoint a new manager. Provided that certain grounds are made out, this allows the First-Tier Tribunal (‘’FTT’’) to appoint a manager in place of the landlord or management company. Alternatively, the leaseholders can set up a Right to Manage (‘’RTM’’) company under the Commonhold and Leasehold Reform Act 2022 (‘’CLA 2022’’) which does not require leaseholders to show fault on the part of the landlord.

Routes to replace a manager

1. Under LTA 1987

If the leaseholders felt that the property has been badly managed, such as failure to repair, to provide full service charge account statements, or to carry out fire safety remediation, they can make an application to the FTT to appoint a new manager. The tribunal-appointed manager is required to perform the ordinary managing duties (such as service charge collection, repairs to the common parts of the building etc.) under the LTA 1987, however, they cannot also cover the duties as an accountable person (‘’AP’’) under Part 4 of the BSA 2022.

2. Under CLA 2022

Appointing an RTM company is a preferred route for leaseholders to replace the existing manager as it is generally quicker and cheaper than the route under the LTA 1987. It allows the leaseholders to take over the management of the building, even without the prior agreement of the landlord. However, it would require the support of at least 50% of leaseholders to set up an RTM company as well as satisfying other thresholds, such as at least two-thirds of the flats should be occupied by qualifying tenants, who were granted an original lease term of more than 21 years.

3. For higher-risk buildings under BSA 2022

Definitions of AP

The AP is the duty holder that owns or has a legal obligation to repair any common parts of the building, that means, it could be the freeholder, landlord, management company (includes resident and RTM management company), or commonhold association. The AP is essentially the ‘’manager’’ under the LTA 1987 but has further duties under part 4 of the BSA 2022 to prevent building safety risks or to reduce the seriousness of an incident in higher-risk buildings with cladding defects.

It is also a requirement for each higher-risk building to have a principal accountable person (‘’PAP’’). If there is more than one AP, the PAP will be the one who owns or has the legal obligation to repair the structure and exterior of the building. If there is just one AP for a building, then they will be the PAP.

Breach of duties

Under the BSA 2022, it is still unclear as to the replacement process of an AP if they fall short of their duties. However, if there is a breach of their duties, the Building Safety Regulator will work with the AP or PAP to resolve any potential non-compliance. If the matter cannot be resolved, the Building Safety Regulator can take a range of enforcement actions, including issuing compliance notices or even prosecution. In extreme cases, a special measures manager can be appointed by the Building Safety Regulator to take over the building. However, much of the detail of Part 4 of BSA 2022 needs to be filled out by secondary legislation which will then provide clarity regarding the scope of the duties of the AP.

Challenges – management duties for higher-risk buildings

1. Duties under LTA 1987 and BSA 2022

It represents a great challenge for the leaseholders to convince the FTT to appoint a manager who could cover both general managing and building safety functions with the current division of duties under the LTA 1987 and the BSA 2022. It is evident that one of the goals of the BSA 2022 is to shift the burden onto owners and developers by limiting their ability to cover remediation costs from certain leaseholders through service charges, whilst the general managing function of a manager under the LTA 1987 is to collect service charge, managing the funds and to keep the residents informed of costs. Although some other management duties, such as the repair of fire protection systems or the structure of the building, are overlapped under both Acts, it may be difficult to distinguish between the two managing functions when it comes to service charges.

2. Appointment of two managers

If an order was made under section 24 of the LTA 1987, there will be two separate individuals carrying out different management functions. That means, there will be a manager appointed by the FTT to discharge obligations under the LTA 1987 and another one being appointed to carry out the building safety functions under the BSA 2022. The presence of two separate individuals may further aggravate the struggles with existing management.

What to expect next?

As all sections under the BSA 2022 will not be fully enforceable until October 2024 (despite some parts being enforceable since 28 June 2022), we could be expecting more changes or amendments to the Act over the next year. The Government has already issued new guidance on section 156 of the BSA 2022, in which the AP will have additional responsibilities and will be required to do so from 1^st October 2023. As an interim measure, it is advisable for higher-risk buildings to have separate individuals to perform their different managing functions until further clarifications are provided on the BSA 2022. It would be far more convincing for the FTT to replace a manager under the LTA 1987 whilst knowing that there is already a separate manager that could maintain its building safety duties.

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