One Building or More

Can a Right to Manage Company acquire the right to manage more than one building?

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Buildings come in all shapes and sizes. Some are structurally detached and others form part of a terrace.  They may be independent or form part of an estate perhaps sharing gardens, access roads and other amenities.  Where a group of leaseholders forms a right to manage company, is that company entitled to manage only a single building or can it manage the whole estate if that is what the leaseholders want?  This was the question posed to the Court of Appeal in the case of Triplerose Ltd v Ninety Broomfield Road RTM Co. Ltd  [2015] EWCA Civ 282.

Under section 72 of the Commonhold and Leasehold Reform Act 2002 the requisite proportion of qualifying leaseholders of flats can form a “RTM company” to acquire the right to manage “a self-contained building or part of a building”.  In Triplerose the freeholder owned two purpose-built, structurally detached, blocks of flats together with parking spaces, garden areas and a cycle and bin store. The RTM Company, Ninety Broomfield Road RTM Co. Ltd, was set up to acquire the right to manage both blocks and served a separate notice of claim in respect of each block.  There were sufficient qualifying tenants in each block to make the claim.  The landlord argued that the company was only entitled to manage one building and that consequently the claim was invalid.

The Upper Tribunal [2013] UKUT 0606 (LC) adopted a purposive approach.  It said that the “main objective” of the statutory provisions was to “grant long leaseholders the right to take over the management of their building without having to prove fault or pay compensation”. Where a number of self-contained buildings were managed together and shared appurtenant property, it said, that could “only” be achieved by adopting a purposive construction.  It held that one RTM company could acquire the right to manage more than one set of premises so long as each set of premises qualified for the right to manage, i.e, contained the requisite number of qualifying tenants and was “self-contained”. 

The landlord appealed to the Court of Appeal where it argued that the purpose of the legislation was to allow qualifying leaseholders to take over the management of their own block via their RTM company.  The legislation was not, they said, intended to allow anyone else to do so.  The landlord said that the complex statutory provisions of the 2002 Act could only be construed as meaning that there had to be one RTM company for each exercise of the right, ie, one for each  block.  The reference to “premises” in the legislation had to have the same meaning throughout and could not stretch to multiple buildings.

The Court of Appeal agreed.  It said:

  1. Section 72(1) of the Act provides that the right to manage applies to premises if they satisfy three separate conditions. The first of these is that the premises “consist of a self-contained building or part of a building” which satisfies various conditions.  So the right does not apply to a number of blocks or self-contained buildings in an estate but to a single self-contained building.
  2. Section 74 of the Act provides that the persons who are entitled to be members of the RTM company are qualifying tenants of flats contained in those premises (ie, the premises described by s. 72).  Accordingly, only qualifying tenants of premises A are entitled to be members of the RTM company set up to manage premises A;
  3. There were practical problems with the Upper Tribunal’s construction. For example, where two blocks of different sizes were managed by one RTM company, the members belonging to the larger block would  tend to dominate decisions referable to the smaller block.

This decision continues the current trend of rejecting arguments based on a “purposive” approach in favour of a more literal construction of the statutory provisions. However, in practice it is likely to cause leaseholders little practical difficulty because if they really want the whole estate to be managed by a single RTM company, there is nothing to stop the neighbouring RTM Cos from agreeing to delegate management to one particular RTM company.

This article was written for The Solicitors Journal - May 2015