JB Leitch’s Associate Director of Legal Katie Edwards, looks at a recent case Upper Tribunal case, which asked that where an RTM Company is obliged to undertake major works, could variations could be made to leases to allow the RTM Company to recover its expenditure.
The background
In Eastern Pyramid Group Corporation SA (1) and others v Spire House RTM Company Ltd [2025], the subject property comprises a residential block in a prime area in central London containing 23 units. The building features a Victorian church tower and spire, formerly part of the Christ Church building which had previously occupied the site.
Eastern Pyramid Group Corporation SA held the freehold of the flats, and held long leasehold interests in the tower and spire, and the adjoining garden. Spire House RTM Co Ltd acquired rights to manage of the block in 2022.
Urgent works were required to be undertaken to the tower and spire in order to prevent dangers caused by falling masonry. Emergency repairs were estimated to cost £450,000, and full remedial works were anticipated to reach £2.3 million.
The RTM Company did not hold sufficient funds in order to carry out the works, with substantial service charge arrears owed and a reserve fund of only £110,000. Service charges in advance were capped under the leases, and the RTM Company would therefore be required to fund the works itself before recovering costs from leaseholders at the end of the accounting year.
The RTM Company applied to the First-tier Tribunal, seeking a variation of the leases to allow it to demand the full costs of the works from leaseholders in advance. Although contended by the freeholder and two leaseholders, who argued that the RTM Company should be required to fund the repairs itself, the FTT agreed to a variation of the leases on the basis that the leases did not make “satisfactory provision” for the recovery of service charges in a situation such as this. The freeholder and two leaseholders brought an appeal in the Upper Tribunal.
The decision
The Upper Tribunal dismissed the appeal, finding that the leases made unsatisfactory provision for the demand of on-account service charges and allowing the variation to be made in favour of the RTM Company.
The appellants argued that a variation to a lease should be made only where a failure to make “satisfactory provision” results in the lease being seriously defective, such as raising health and safety concerns. The appellants submitted that the leases were not “unsatisfactory”; they allowed for the recovery of costs by the RTM Company, but the method of that recovery was simply inconvenient for the RTM Company.
The Upper Tribunal followed the approach set down by 56 Westbourne Terrace RTM Company Ltd v Polturak & others [2025], in which the UT ordered lease variations that enabled the RTM Company to recover enforcement costs. The leases in 56 Westbourne Terrace allowed only for the landlord to recover costs of forfeiture as a remedy, which was not available to the RTM Company. Finding that this resulted in the leases failing to make “satisfactory provision”, the UT made an order for variation.
In the present case, the UT concluded that the leases made unsatisfactory provision. They failed to allow for the demand of sufficient sums on account to allow the RTM Company to proceed with urgent works, and the order for variation was made.
Advice and action for landlords
As landlords, managers and RTM Companies continue to deal with major works programmes, this decision will reassure parties that, where sums are required to be paid in order to allow works to proceed, the tribunals are prepared to order the variation of leases to release funds on account.
The decision allows the RTM Company to exercise its duties and to undertake urgent works in a timely manner, considering the RTM Company’s finances and income, and making variations to leases where required, in order to support the safe and effective management of residential buildings. Parties are advised to review leases and seek legal advice where required in order to ensure that “satisfactory provision” is made for the demand of on-account sums when needed.
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