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Background

Under the Commonhold and Leasehold Reform Act 2002 there is a right for leaseholders of flats to collectively acquire the right to manage their building subject to certain criteria. The right is exercised through a right to manage (RTM) company. A point of contention and debate for some time has been whether one RTM company could claim the right to manage in respect of more than one building on an estate.

Ninety Broomfield Road is the name given to three conjoined cases which were the subject of an appeal from the Upper Tribunal to the Court of Appeal (Triplerose Ltd v Ninety Broomfield Road [2015] EWCA Civ 282). The Upper Tribunal held that one RTM company could exercise the right to manage in respect of more than one block and only one notice of claim in respect of the multiple blocks concerned was necessary.

Decision

The Court of Appeal overturned the Upper Tribunal decision and found that an RTM company could only be formed for the purpose of, and to exercise the right to manage one building. Accordingly the references in the 2002 Act to “premises” are to a single self-contained building or part of a building and not to more than one building. The court considered that the key sections of the Act, the Regulations made under it, and the prescribed form of Articles (constitution) of an RTM company and found that all were all inconsistent with an interpretation that the right should extend to more than one building. If there were any ambiguity the court had regard to a consultation paper and the debates in Parliament reported in Hansard when the proposed 2002 Act was going through the legislative process which it said demonstrated that the right to manage was intended to apply to a single block. Whilst extending the right to more than one block was considered by Parliament, it was rejected because of the supposed difficulties in framing the legislation for that purpose.

The Court of Appeal added that if the interpretation of the Upper Tribunal were correct, there would be no need for the building concerned to be part of the same estate and could be geographically remote which could not have been the intention of Parliament. The court was also influenced by arguments from counsel for the successful appellant landlord that there were practical difficulties if for example one RTM company could exercise the right over two blocks of differing sizes there was a risk that the leaseholders of the larger block could run the buildings to the detriment of the smaller block and exercise management so that their block was given preference in respect of repairs and maintenance over the smaller block.

Comment

This decision is not unexpected. Whilst the Upper Tribunal decision was understandable in the context of seeking perceived justice and common sense in the case with one RTM company being entitled to manage an entire estate, its interpretation did not fit comfortably with the wording of the Act. Sadly, Parliament when discussing the proposed Act during its legislative passage looked at the issue of multiple blocks on an estate but either did not have the time to deal with that problem or decided it was too complicated to resolve. In either case, the failure of the 2002 Act to address specifically the right to manage estates of more than one block is a gap in the statute which has caused considerable problems and uncertainty with numerous disputes relating to the issue. Whilst there is now a definitive decision on one aspect, this has come after more than 10 years since the Act came into force, and the gap in the legislation for estate claims remains.

I do not follow the so called practical concerns raised by the Court of Appeal. The potential risk that an RTM company might seek to exercise the right to manage separate blocks which are miles apart geographically, as far as I am aware, has never happened and I do not believe is realistically likely to happen. The suggestion that a larger block may dominate a smaller block cannot be a legitimate cause for concern. Most estates of one block are both designed to be, and in fact, run under one scheme of management. Is it really being suggested that the leaseholders of a smaller block would be worse off with management under the control of one RTM company where the leaseholders in the larger block had the majority vote instead of being under the control of the freeholder whose poor conduct in the first instance presumably lead to the desire to make a right to manage claim? In addition, all the statutory controls in relation to service charges and management apply equally to an RTM company as they do to any other landlord exercising management functions in respect of relevant blocks. The RTM company would be obliged to comply with the repairing and management, etc., covenants of the landlord in the leases of the leaseholders of the smaller block.

It is at least now clear that for a single RTM company to be entitled to claim the right to manage if more than one block would need an amendment to the 2002 Act. In this respect it should be not beyond the wit of man to draft the required wording which could, for example, limit the right to buildings which are part of the same estate which are or could reasonably be run under one scheme of management (an estate reasonably so called?!) and where the requisite majority of leaseholders of each block in respect of which the right is sought must agree to participate in the claim.

Any change to the legislation is some way off and may never happen. In the meantime there is a practical alternative. Each block on an estate can form its own RTM company and when each requires the right to manage an agreement is made between them to manage the estate under one scheme of management.

There is still the issue of appurtenant property (such communal parking areas) on estates and the extent to which these can be claimed as part of a right to manage. The decision in Gala Unity, also of the Court of Appeal, which held, amongst other things, that appurtenant property was not restricted to property demised to the leaseholders of the block concerned and could extend to areas over which other leaseholders on the estate may have rights, needs to be considered as there are practical management problems which can arise.

April 2015

Christopher SykesChristopher Sykes
Sykes Anderson Perry Limited
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