Council wins Upper Tribunal battle with property company over membership of redress scheme

A London borough has won an appeal to the Upper Tribunal over whether a property management company was in breach of legal requirements for membership of redress schemes.

The background to the case of London Borough of Newham v Samson Estates Limited (Other general regulatory appeals) [2019] UKUT 110 (AAC), the judgment for which was published this month, was that on 15 February 2017 Newham received a complaint from a tenant at a residential block of flats which the company, Samson Estates, had managed for two years, stating that it was not a member of an approved redress scheme.

The council discovered that the company was a member of such a scheme (the Property Ombudsman Scheme) for its letting agency work but not for its property management work.

Newham took the view that the company was in breach of its legal obligations in this and other respects. On 22 February 2017 it issued three notices of intent indicating likely financial penalties totalling £17,000. On 9 June 2017 it issued three Final Notices with financial penalties then totalling £11,000.

The appeal to the Upper Tribunal concerned only one of those matters – failure on 22 February 2017 “to belong to an approved redress scheme for property management (residential block management)”, with a penalty of £3000 (the maximum penalty being £5000).

Judge Levenson said: “In fact, according to the evidence, the company never belonged to such a scheme as defined by the authority. Its membership of the Property Ombudsman Scheme covered it for residential sales and lettings, commercial sales and lettings and some property management, but not for residential leasehold management. (I was told at the hearing before me that a further fee would have been payable to the scheme in respect of further cover.”

The First-tier Tribunal allowed Samson Estates’ appeal in respect of the residential leasehold management redress issue. It found that there was "insufficient evidence ... to find that on 22nd February 2017 Samson’s membership of the Property Ombudsman Scheme in connection with property management work was insufficient to meet their obligations under the Order”.

Allowing Newham’s appeal in the Upper Tribunal, Judge Levenson said:

“Section 84(6) of the 2013 Act [the Enterprise and Regulatory Reform Act 2013], set out above, defines “property management work” and that is clearly what the Company was doing in relation to at least the residential block referred to above. Article 5(1) of the 2014 Order provides (my emphasis);

5(1) A person who engages in property management work must be a member of a redress scheme for dealing with complaints in connection with that work.

“In my opinion this means that a person so engaged (including the Company in the present case) must be a member of a redress scheme for all such work in which they are engaged. Otherwise the whole purpose of the requirement for redress schemes is undermined in relation to those who might have cause to complain, or wish to do so, but find that the relevant property manager does not happen to belong to the right scheme. This cannot possibly be an obligation that can be met by belonging to a different scheme, or a different part of a scheme which could cover the requirement but does not do so.”

The judge set aside the decision of the First-tier Tribunal (GRC) made in March and April 2018 insofar as it related to residential leasehold management.

Substituting his own decision, Judge Levenson said Samson Estates was and remained (for the relevant period) in breach of the requirements of The Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014 (“the 2014 Order”).

The local authority’s original assessment of a financial penalty of £3000 was appropriate, the judge added.