Q: We are an estate of 24 properties. The landlord has his own management company and they in turn use a managing agent to handle the day-to-day maintenance of the estate. The service charges are paid to the management company via the managing agent.
The estate has an on-site bio-digester sewage treatment plant that outputs treated water into the nearby river. The landlord’s management company has a permit from the Environment Agency to operate the treatment plant according to certain standards laid down in the permit. If the treatment plant were to pollute the river, who would be liable for any potential fine that the EA might impose – the landlord, the landlord’s management company, the managing agents or the leaseholders?
FPRA Committee Member Shaun O’Sullivan replies:
Although I am not a lawyer, and although I don’t have sight of the agreement between the management company and managing agent nor, indeed, details of the licence granted to the former, I do not believe this will impact on my advice. My reading of the lease is that the foul digester treatment plant forms part of what the lease describes as ‘Service Media’. Other than those parts of Service Media which have been demised to what the lease describes as ‘Units’ and which comprise only such items as serving the Unit exclusively, the rest of the estate and its infrastructure has, as is usually the case in residential leases, been retained by the freeholder. Thus, although the management company has an obligation to repair and maintain such items as comprising Service Media, ownership of the treatment plant remains with the freeholder whom, I believe, would be ultimately responsible for any pollution from the plant and any fine which might be imposed.
However, the management company is obliged to keep the estate insured against a range of risks and to do so in the joint names of the landlord (freeholder) and management company. Additionally, the management company is required to buy any further insurance the management company and landlord might deem to be necessary in meeting their obligations and with the cost of such cover being met from the service charge(s). My guess would be that the management company would, on behalf of the company and the Landlord, have ensured that the (somewhat unusual) risks resulting from any instance of pollution would have been covered.’
[Submitted August 2016]