Estate Management
| Author | Christopher Jessel |
| Pages | 181-192 |
Chapter 15
Estate Management
15.1 INVOLVING A MANAGER
Positive covenants are used to provide services on residential and commercial estates. Most estate schemes are set up by a developer which starts by owning the whole complex and then sells off each unit. It will often be responsible at the beginning for operating the estate and providing services and the sale transfers of each unit will reflect that but there are a number of options for the future. It may establish a separate manager, usually a company, from the beginning to provide the services and to have the right to collect the service charge. It may retain responsibility and manage the estate itself. It may carry the initial responsibility until a majority (or sometimes all) of the units have been sold and then transfer that to the manager which may be controlled by the developer or by the unit holders. It may transfer the common parts and the rights and obligations to a property company. Whatever the outcome, running the common services will be the responsibility of a manager.
There will be reciprocal covenants. The manager will covenant to carry out the services and the unit owner to pay a service charge. The manager is most often a company but services can be provided by trustees, by an individual or by a local authority. The unit holders will wish to ensure that the manager is reliable and solvent and continues to operate effectively. If that ceases to be the case they will need to be able to secure that any successor takes over the liability.
Correspondingly, both the manager and the unit holders collectively will wish to ensure that each unit holder performs any covenants for the general benefit and pays the service charge when it is due. A unit holder may be one or more individuals or a company or any other entity capable of holding land. The owner of the freehold in a unit may not occupy it directly but may hold the unit as an investment and lease it to a residential or commercial occupier or operate through a subsidiary company.
182 Positive Covenants and Freehold Land
The developer may retain ownership of the land comprising the common parts. In that case the manager simply has duties to provide the services and the burden of the covenants to manage will be personal to it and will not burden the land. Otherwise, the developer may transfer the common parts to the manager, in which case the benefit and burden of covenants can be attached to them.
It may be desired to give the manager power to make regulations for the good administration of the estate. On a commercial estate that might be for matters such as hours of opening, arrangements for parking and for loading and unloading, the design and placing of signs and other similar matters. On a residential estate it might be for the use of communal facilities, for the employment of any caretaker or security staff, for refuse disposal and other amenities. Obligations to comply with regulations may be restrictive, if they simply prohibit unneighbourly activity, but will be positive if they require action such as keeping a building in repair or using a common decorative scheme. In principle this is no different from any other positive obligation.
Where a positive covenant is supported by a restriction on the register, one of the common complaints when a unit is sold is that managers can be slow to respond and can charge substantial fees for giving consent.
The conveyancer acting for the buyer of a unit will usually have a number of standard queries. These will include a request for copies of recent accounts and any estimate of the likely costs for the future. If the covenants include a duty to comply with regulations made by the manager then a copy of them will need to be available.
15.2 TRUSTEES
Sometimes the manager will not be incorporated but will comprise a body of trustees. A trust has the advantage that it can be set up and operate without involving the expense and formalities associated with a company. The trust deed will need to cover the appointment and replacement of trustees, their procedures and their powers.
Trusts were involved with positive obligations before the creation of modern limited liability companies. An example is in Austerberry v Oldham
Corporation.
Trustees are normally seen as a single continuing body of persons but because they do not have a corporate personality, any claim at common law must be made against the individual trustees without regard to their collective nature. Under the Trustee Act 1925, s 34 land (other than land held on charitable trusts) such as the common parts can not be vested in more than four trustees, who may themselves be individuals or companies. Under s 36(6), on a change of trustees of any private trust, the number is normally limited to four. Any positive covenant given by an original trustee will only bind that individual so that, if one retires and a new trustee is appointed instead, that new trustee will not be personally liable on the covenant unless he or she gives a commitment.
If the trust owns the common parts then, when the developer puts the land into the trust or when there is a change of trustees, there will need to be a Land Registry transfer of the title to those parts. Under the LPA 1925, s 63 a conveyance, which includes a transfer, passes all the rights of the former owner. If it is not already registered, first registration will be required on any appointment under the LRA 2002, s 4(1)(aa)(i).
Sometimes the beneficial interest in communal property, particularly roadways, may belong to the unit owners as tenants in common. Prior to 1925, a roadway used by several properties was often owned in undivided shares and their owners each had a legal estate in their respective shares. This caused problems if there were many of them and the LPA 1925 converted undivided shares into beneficial interests under a trust for sale; subsequently...
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