In the recent decision of the Upper Tribunal in Solomon Unsdorfer v Octagon Overseas Ltd and others [2023] UKUT 137 (LC) it was determined that commercial tenants in a mixed use building would not be liable for all possible litigation costs incurred by the Tribunal appointed manager.
This case turns on the drafting of the original Tribunal Order appointing the manager, described by the Upper Tribunal as a "poorly drafted document, repetitious, grammatically incoherent and peppered with second thoughts and qualifications". However, there are some helpful general points made in the decision in relation to the interpretation of Orders made to appoint managers.
Under the Tribunal Order in this case, the appointed manager was only obliged to deal with the commercial tenants where it managed the shared electricity and other utilities which served both the commercial and residential parts. The appointed manager was therefore only entitled to recover service charges from the commercial tenants in relation to these shared services.
The manager brought proceedings to determine what rights it had to recover its litigation costs incurred in managing the estate from the commercial tenants.
The Upper Tribunal determined that any contribution by the commercial tenants towards the cost of litigation incurred by the appointed manager would be limited to litigation costs incurred in relation to the shared services. The commercial tenants would have no wider obligation to contribute towards litigation costs incurred because this was not contained in their leases and was not expressly included in the Tribunal Order.
This is a fairly fact specific case but the points of general use made by the Upper Tribunal in this decision are:
- The Tribunal has the power to make an Order appointing a manager which goes beyond the terms of the leases.
- It would be surprising for a Tribunal to make an Order imposing additional obligations on any tenants that did not have the opportunity to make representations. Therefore, if it was open to interpretation whether those additional obligations had been imposed, the interpretation favouring the tenants who were not parties to the proceedings should be preferred.
Where residents of mixed use buildings are applying to the Tribunal to appoint a manager they should carefully consider what powers the manager may need in relation to costs recovery from the commercial tenants in order to avoid a situation where the residential tenants alone are found to be liable.
"the effect of this decision will be that the manager’s costs of most of the proceedings he has been involved in in the FTT will fall on the residential tenants" - Martin Rodger KC
