We analyse the Court of Appeal's judgment in Alma Property Management Ltd v Richard George Crompton and Jonathan Edward Cookson [2023] which dealt with the relationship of a receiver and the extent of their repairing obligations in lieu of the tenant.
This appeal from the High Court concerns a high rise building in Salford, used partly as a hotel and partly as residential flats on long leases, where the lessee of a lease of the common parts had responsibility for repairs to the building (the Common Parts Lease).
Crompton and Cookson (the Receivers), insolvency professionals, were appointed as receivers of the freehold of the building pursuant to a charge entered into between Alma Property Management Ltd (Alma) and the chargee, West Bromwich Commercial Limited. Furthermore, they were the current lessees of the Common Parts Lease, after acquiring the same in the course of their receivership. The charge over the freehold was redeemed, the receivership came to an end, and it was intended that the Common Parts Lease be assigned by the Receivers. However, this did not happen, and the Receivers were left holding the Common Parts Lease.
The Claimant/Appellant is Alma, the current freeholder of the building. In March 2020 Alma demanded that the Receivers carry out works pursuant to their obligations under the Common Parts Lease, and in August 2020 brought an action for specific performance of the repairing obligations. North Tower Residential Management Ltd (a company owned by the flat lessees) (NTRML) was willing to take an assignment of the Common Parts Lease and in November 2020 Alma gave consent but subject to the receivers each entering into an authorised guarantee agreement. Crompton and Cookson counterclaimed for a declaration that Alma had unreasonably refused consent to an assignment of the Common Parts Lease.
In October 2022 the High Court dismissed the claim for specific performance and gave judgment for the Defendants on the counterclaim.
The High Court held that the receivers had acquired the Common Parts Lease in the course of their duties as receivers and were acting within their powers (particularly paragraph 17 of Schedule 1 to the Insolvency Act 1986 to 'take a lease or tenancy of any property required or convenient for the business of the company'). They were therefore deemed to be acting as agents for Alma, and they were entitled to be indemnified by Alma. As such, it was inappropriate to order specific performance.
With regards to the counterclaim, the High Court held that while the authorised guarantee agreement may ordinarily have been a reasonable condition, it was not when taking into account the indemnity (since the receivers would be indemnified as lessees, but would lose their entitlement to be indemnified if they assigned the Common Parts Lease).
Alma appealed but on 19 July 2023 the Court of Appeal upheld the original judgment and the appeal was dismissed in its entirety.
In these times of economic uncertainty, with more receiverships likely to be on the horizon, this case is a sage reminder of the obligations with which receivers can be required to comply and the fact that leaseholders may remain liable to receivers who continue to hold property interests.
