The organisation that managed Grenfell Tower and manages thousands of other properties across the Royal Borough of Kensington and Chelsea is temporarily handing back responsibility for them to the council, saying it can no longer guarantee to meet the standards expected by residents.

In a letter sent to residents just before Christmas, Fay Edwards, chair of Kensington & Chelsea Tenant Management Organisation (KCTMO), said: “The TMO board has reluctantly decided that it can no longer guarantee to fulfil its obligations with respect to the delivery of services contained in its contract with the council … to a standard that residents should expect.”

It adds that management responsibility will temporarily be handed back to the council while it carries out a consultation exercise about the future management of its housing stock.

A spokesman for the borough said the council would be taking over repairs, looking after the council’s estates and running day-to-day services.

The news has been greeted with anger from residents. Joe Delaney of the Lancaster West Estate Residents Association and a member of the council’s Grenfell recovery scrutiny committee, accused the council and KCTMO of a “cynical, unethical and completely underhand move”.

Delaney said residents had no confidence in the council’s ability to manage housing and wanted KCTMO to continue to exist so that its role in the fire could be scrutinised at the public inquiry.

Council and KCTMO officials insist that even though it is handing back day-to-day management of estates across the borough it will still be scrutinised at the public inquiry for its role in the fire which claimed 71 lives.

Delaney said: “It was agreed to give residents made homeless by the fire a payment for Christmas lunch but many of us haven’t yet received those payments. If they can’t manage to organise Christmas lunch payments how can they manage estates across the borough?

“There is institutional indifference to the residents from this council,” he added. “I will be calling for this transfer of management not to go ahead at the council’s next scrutiny committee on 18 January.”

A letter being sent by the council to the 10,000 KCTMO residents in the borough states: “We are already making progress on an urgent and thorough review of all the KCTMO’s operations including health and safety, finance, repairs and estate management services. We have been prioritising this since the new leadership of the council took over, and we believe it is essential following the tragedy of the Grenfell fire. We will continue to share the results of this as we find them and make improvements and changes wherever needed.”

Concerns have been raised about shortcomings in KCTMO’s management of properties in the borough. These failures may have contributed to the devastating impact of the fire.

KCTMO will continue to exist as an independent corporate entity. The board will scrutinise the delivery of services to residents.

A spokesman for the organisation said: “The TMO has informed residents that its board has reluctantly decided that, in current circumstances, it can no longer guarantee the delivery of services to a standard that residents should expect. Therefore, in the best interests of residents, services which the TMO currently provides are to be temporarily handed back to the council while the consultation about the future management of its housing stock is completed. It remains a priority that the answers, which we all want about the Grenfell tragedy, are obtained.”

A spokesman for the borough said: “We are aware of the update from the TMO to residents and we will be writing to all residents to make sure they have clarity on next steps. We are clear, though, that this is only an interim measure.”

Seraphima Kennedy, a former neighbourhood officer for KCTMO, said: “They do not care about the impact of their decisions on the lives of those who live in the homes they are legally required to look after.”