Jonathan Upton takes a look at a landmark decision that has serious consequences for flat owners going for right to manage in multi-block development.
Now RTM applies to ONE self-contained block only
It is common for a residential estate to comprise more than one self-contained building within its grounds. However, there have been conflicting views in law as to whether the Commonhold and Leasehold Reform Act
2002 permits one RTM company to exercise the right to manage in respect of more than one self-contained building; i.e. could it obtain management for all the buildings on an estate.
In a recent case known as Ninety Broomfield Road RTM Co Ltd v Triplerose Ltd [2013] UKUT 606 (LC), the Upper Tribunal heard four such cases together. It came to the conclusion that:
- A single RTM company can exercise the right to manage more than one self-contained building;
- Each set of premises must satisfy all of the conditions in s.72 of the 2002 Act, ie in addition to being self-contained, they must contain two or more flats held by qualifying tenants and the total number of flats held by such tenants must be not less than two thirds of the total number of flats contained in the premises; and
- A single notice will suffice in respect of a number of properties.
This decision was followed by the Deputy President of the Upper Tribunal in Fencott Ltd v Lyttelton Court RTM Company Ltd [2014] UKUT 0027 (LC).
However, the Court of Appeal ([2015] EWCA Civ 282), has recently reversed that decision, determining that the acquisition and exercise of rights to manage applies not to a number of blocks of self-contained buildings in an estate, but to a single self-contained building or part of a building. The Court of Appeal also held that the RTM Companies (Model Articles) (England) Regulations 2009 and the model articles of association of the RTM company made it clear that a single building was intended. If a company was an RTM company in relation to premises A, only qualifying tenants and relevant landlords of premises A were entitled to be members of that RTM company. If that were not the case, then the voting mechanism of members under the articles would be ‘undermined’. Other provisions of the 2002 Act supported that conclusion. As a result, it was not possible for an RTM company to acquire the right to manage more than one self-contained building or part of a building.
This is a landmark case on the right to manage. It means that a majority of tenants in premises A cannot dictate the appointment of directors of the RTM company and outvote the qualifying tenants of premises B in relation to decisions that affect premises B. Where a number of self-contained buildings have been managed together and share appurtenant property there is nothing to prevent two or more RTM companies, which are established in relation to separate blocks on the same estate, from entering into an agreement to delegate management to one of the RTM companies, or indeed a third party manager, to act on behalf of both or all. However, the court failed to give any guidance as to how any conflict between parties that both have the right to manage property on the same estate should be resolved.
Under Part 2 of the Commonhold and Leasehold Reform Act 2002, the Right to Manage (RTM) gives qualifying leaseholders of flats (generally those with leases granted for terms in excess of 21 years) the right to take over the management of their block of flats through the vehicle of a dedicated, tenant owned company known as an RTM company. When a group of flat owners exercise their right to manage, the RTM company takes over not simply management, but all the obligations and duties arising under the leases of the flats in the block, except the right to forfeit the leases. So for most practical purposes, the RTM company will in effect act as the landlord.
Jonathan Upton is a barrister at Tanfield Chambers specialising in property disputes and is co-author of the 3rd Edition of Service Charges and Management (Sweet and Maxwell). He is a member of the Chancery Bar Association and the Property Bar Association.
