Part I of the Leasehold Reform, Housing and Urban Development Act 1993, which governs the new enfranchisement and lease extension provisions, contains other measures which may have an appreciable effect on the legal position of flat owners.There is, in particular, a new right to have a management audit carried out to determine whether landlords are carrying out their obligations and spending the flat owners' service charge contributions in an efficient and effective manner (see c.5, ss.76-84).

Allied to this is the new power of the secretary of state for the environment to approve codes of management practice.

Whilst failure to comply with the code does not of itself attract any liability, breach of the code is admissible in evidence in any subsequent court proceedings (s.87(7)).The other notable change is made by s.85 of the Act, which makes a number of amendments to the Landlord and Tenant Act 1987.

As explained below, these changes should make it easier for a group of flat owners compulsorily to acquire through court proceedings the landlord's interest under the 1987 Act where it has consistently failed to discharge its obligations.As a number of reports have demonstrated, many flat owners are dissatisfied with the quality of services they receive from their landlords and with the level of service charges.

Flat owners have also found their existing rights under the Landlord and Tenant Acts 1985 and 1987 difficult to enforce (see The Landlord and Tenant Act 1987: Awareness, Experience and Impact, 1991, HMSO).

A study published by the Consumers Association, Leasehold Flats - Time for Reform 1992, has also revealed evidence of mismanagement of many blocks of flats.For the purposes of a management audit application, a flat owner is a qualifying tenant if he or she has a long lease (other than a business lease) under which service charges are payable (s.77(1)).

Although the definition of a long lease is broadly similar to that for collective enfranchisement, there is one modification.

The holder of a shared ownership lease is a qualifying tenant whatever his or her share in the dwelling (s.77(2)(b)).

(A flat owner who has a shared ownership lease only qualifies for collective enfranchisement where he or she owns a full 100% of the ownership of the equity.) In the case of a jointly owned flat the joint owners are treated as one qualifying tenant (s.77(3)(4)).

If a flat is let under two or more leases, the holder of the superior lease cannot be the qualifying tenant (s.77(4)(a)).

A flat owner who owns two or more flats in a building i s not treated as a qualifying tenant of any of them for the purposes of collective enfranchisement (s.

5(5)).

By contrast, someone who owns two or more flats in a particular building can join in an application for a management audit (s.77(6)).The number of flat owners who must support an application for a management audit depends primarily on the number of flats in the building.

If the building contains two flats then either or both flat owners qualify.

Where the building contains three or more flats then not less than two thirds of the flat owners must support the application.

In a case of a building which contains only one flat which is occupied by a qualifying flat owner then he or she has the right to insist on a management audit where service charges are payable under the lease (s.76).Management functions which can be audited are any obligations to provide services, to carry out repairs and maintenance, or to insure the premises (s.84).

The auditor shall, amongst other things, have regard to the provisions of any relevant code of practice that has been approved by the secretary of state for the environment.

To be eligible for appointment, a prospective auditor must be either a qualified accountant or a qualified surveyor who, in either case, is not one of the flat owners seeking the audit (s.78(3),(4),(5)).

The appointment must be supported by the appropriate number of flat owners who are qualifying tenants.

If, for example, there are three or more flats in the building occupied by flat owners then the auditor's appointment must be supported by not less than two thirds of them (s.78(3)).The auditor has the right to obtain information, inspect and copy accounts and other documents and the right to carry out an inspection of any common parts in the building (s.79).

The landlord can be required to supply the summary of service charge payments that a flat owner can demand under s.21(1) of the Landlord and Tenant Act 1985.

The auditor has the right to inspect and take copies, or extracts from any relevant accounts, receipts and other documents relating to this summary.

In addition, the auditor can inspect any other documents which he or she reasonably requires for the purpose of carrying out the audit and he or she must be allowed to take copies or extracts from such documents.The landlord cannot charge the auditor for allowing an inspection of documents, but can make reasonable copying charges.

The freeholder can, however, in principle, recover the cost of responding to a management audit by treating it as part of its management costs (s.79(5)(6)).The right to have a management audit is exercised by the auditor giving a notice to the landlord which must be signed by each flat owner who supports it (s.80(1),(2)).

The notice must give the names and addresses of the flat owners, the name and address of the auditor and a specification or description of any documents which the auditor requires the landlord either to supply or to allow him or her to inspect.

If the auditor proposes to inspect the common parts then this must also be stated and an inspection date must be proposed.As an alternative to serving the s.80 notice on the freeholder, it may be served on someone such as a managing agent, who collects the ground rent on behalf of the landlord (s.80)(5)).

The recipient of the notice must respond within one month.

The documents must be supplied to the auditor, or copying facilities must be granted, and where relevant the landlord must either agree to a common parts inspection date or propose a different date (s.81(1)).

If th e landlord objects to the disclosure request he or she must say so, and give reasons.If the landlord fails to respond to the auditor's notice within two months of service, the auditor may apply for a court order.

This application must be made before the end of a period of four months of the giving of the original notice (s.81(7)).

It is possible that the information that the auditor seeks is held by a superior landlord.

In such a case the landlord who receives the auditor's notice may require the superior landlord to respond (s.82).Similarly, where the notice requires the recipient landlord to afford facilities for inspection, copying and so on and the documents are in the custody or under the control of a superior landlord, the recipient landlord must notify the auditor of this fact as soon as possible and provide the auditor with the superior landlord's name and address.

The auditor may then give the superior landlord notice requiring him to afford the facilities in question.

Application can be made to the court where the superior landlord fails to respond (s.82(2)(3)).Under pt III of the Landlord and Tenant Act 1987 flat owners (and other lessees) may apply to a county court in order compulsorily to acquire the freehold of their building.

One of the grounds on which the court may make an acquisition order is where the applicants establish default on the part of the freeholder.

Until changes made by the 1993 Act, applicant flat owners had, in addition, to satisfy the court that appointing a manager (as opposed to directing acquisition of the freehold), would be an inadequate remedy.

This requirement has now been repealed and it is therefore easier than before to seek an acquisition order under the 1987 Act.Another change is that the 'requisite majority' of the qualifying occupiers who must support the application under the 1987 Act has been changed from 50% to a new proportion whereby not less than two thirds of the occupiers must support the application.

Another qualifying condition has been simplified.

It is now the case that an application may be made for an acquisition order under the 1987 Act provided at least two thirds of the flats in the building are held by qualifying flat owners.If the court makes an acquisition order, the applicant flat owners must pay the freeholder the market value of the freehold.

There is no requirement to pay a proportion of any marriage value, let alone compensation for any diminution to any other interests owned by the freeholder, as required in the case of collective enfranchisement under the 1993 Act.

Nor is there an obligation to pay the freeholder's costs as there is under the 1993 Act.Under s.35 of the 1987 Act, either party to a long lease can apply to the court for an order varying the terms of the lease where the existing terms are inadequate in such matters as repair, maintenance, insurance or service charge collection.

As a result of amendments made by the 1993 Act, a lease may be varied where the computation of service charge liabilities is unsatisfactory because the total amounts payable to the freeholder either exceed, or are less than the freeholder's actual expenditure (s.86).As noted earlier, the secretary of state for the environment has power to approve codes of management practice (s.87).

Such codes may make provision for the resolution of disputes, between landlords, managing agents and the flat owners, the use of competitive tendering for works, and the administration of any trusts which are set up to deal with advance service charge payments.

Breach of an approve d code of practice is admissible in evidence in court proceedings and a court or a tribunal may, in determining disputes, take account of the content of an approved code.

This means, for example, that disputes over service charges may now turn on whether a landlord has complied with a relevant code as well as other statutory requirements such as those in the Landlord and Tenant Acts 1985 and 1987.

(At present, no code of practice has been approved.)The combined effect of these changes should not be underestimated.

Some groups of flat owners may now be best advised to seek acquisition of the freehold under the 1987 Act rather than using the collective enfranchisement procedures in the 1993 Act.

Where, for example, (following perhaps a management audit), there is evidence that the freeholder is not managing a block in an efficient and effective manner, flat owners may consider applying (or threatening to apply) for an acquisition order under the simplified procedures in the 1987 Act.

As explained above, this may carry significant financial advantages in terms of the price payable and legal costs.