Right to Manage doesn’t extent to shared estate services (FirstPort Property Services Ltd v Settlers Court RTM Company and others; ARMA intervening)
Associate Camilla Waszek (pictured) of specialist property solicitors JB Leitch, discusses the highly anticipated and highly significant decision on the extent and parameters of RTM estate management, which will provide clearer distinction in responsibility between RTM companies and existing managers…
The Supreme Court has, for the first time, considered the provisions under Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002, relating to the right to manage. In doing so, it has held that the right to manage does not extend to management functions shared with a wider estate.
The Background
Settlers Court is a block of flats on the Virginia Quay Estate (the “Estate”), comprising of flats held by way of long leases. On 8 November 2014, Settlers Court RTM Company acquired the right to manage in respect of Settlers Court, allowing the leaseholders under the long leases to take over management of Settlers Court.
The Estate contains other blocks containing flats; these flats share services with Settlers Court. Prior to the RTM Company acquiring the right to manage, the management of the blocks and the estate services were provided by FirstPort, the named manager under the leases.
Following the acquisition of the right to manage, the RTM Company, relying on the Court of Appeal’s decision in Gala Unity v Ariadne Road RTM Co Ltd [2012] EWCA Civ 1372, claimed that its management functions included management of the Estate, and FirstPort was no longer entitled to levy the estate charges from them.
FirstPort disputed this, maintaining that it remained exclusively responsible for providing the Estate Services to the entire Estate because the RTM does not extend beyond the block over which it is exercised (and facilities and amenities solely relating to it).
The parties were unable to reach agreement as to how the Estate Facilities should be managed and the Estate Charges levied. On 8 December 2017, the Appellant therefore applied to the First-tier Tribunal (the “F-tT”) to determine whether it was entitled to levy Estate Charges from the lessees of the flats in Settlers Court.
The F-tT found against the Appellant, considering itself bound by Gala Unity. The Upper Tribunal (the “UT”) also dismissed the Appellant’s appeal on the basis that it was also bound by Gala Unity. The UT did however issue a leapfrog certificate for an appeal directly to the Supreme Court. This was the first time that the UT has issued such a certificate.
The Decision
The Supreme Court held that the decision in Gala Unity was wrong; the RTM company only acquires the right to manage the block and the appurtenant services which exclusively service the leaseholders of the block.
The Supreme Court determined that the purpose of the right to management it to confer exclusive management rights upon RTM companies in relation to single buildings or part of buildings, and not to confer a right to share the management of estate facilities used in common by the occupants of several buildings.
The Supreme Court considered that, if the RTM Company were to acquire the right to manage the entire estate, it would lead to outcomes which were both absurd and unworkable; it was therefore preferable to interpret the 2002 Act in a way which did not give rise to an unworkable situation.
In the circumstances, it was held that the right to manage did not extend to shared estate services. Therefore, the Supreme Court finding that “Estate services remain under the management of the previous manager, and the existing leaseholder structure makes continuing provision for that manager to recover the full cost from all relevant tenants”.
Conclusions
The implications of the outcome will be significant – and it will be worthwhile noting how this new precedent will affect future cases in coming months and years. The case provides clarification that a right to manage claim extends only to the block and appurtenances that exclusively service the block (or part thereof) in question.
Where there are shared services with other blocks, then such services remain part of the functions and services of the party requires to provide them under the leases.
Moving forwards, upon receipt of a Claim Notice on an estate with shared services, it is useful for landlords and management companies to identify those services which pass to the RTM Company and those which remain with the landlord/management company.
In addition, landlords and management companies should consider existing sites whereby an RTM Company has acquired the right to manage; if the RTM Company is managing shared services, then the landlord and management companies will need to commence provision of those shared services.
If you would like to discuss this case further, or if we can help you in a similar matter, please contact Camilla.
