Right to Manage – Not more than one building

Philip Rainey QC succeeds in the Court of Appeal in overturning the decision that a single RTM company can exercise the right to manage more than one self-contained building.

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Ninety Broomfield Road RTM Co Ltd v Triplerose Ltd

[2015] EWCA Civ 282

Summary

Philip Rainey QC has succeeded in the Court of Appeal in overturning the decision of the Upper Tribunal (Lands Chamber) that a single RTM company can exercise the right to manage more than one self-contained building.

This important decision for the management of residential buildings has cleared up an issue which has troubled many in the exercise of the right to manage under the Commonhold and Leasehold Reform Act 2002. 

The Court of Appeal has determined that the RTM company, which exercises the right to manage, can only manage one self-contained building and not more.  They endorsed Mr Rainey’s suggestion that for practical purposes, an estate of multiple buildings could be managed under the RTM provisions by each individual RTM company delegating management to either one RTM company or a third party manager. 

Further details

Part 2 of Chapter 1 of the Commonhold and Leasehold Reform Act 2002 provides a no fault mechanism to enable tenants to collectively take over the management functions of the building containing their flats through the vehicle of a Right to Manage company. 

It is common for a residential estate to comprise more than one self-contained building within its grounds.  An issue arose as to whether the 2002 Act permitted 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.   This was an appeal involving three different estates where a single RTM company had sought to exercise the right in respect of more than one self-contained building. 

The Upper Tribunal [2013] UKUT 0606 (LC) had considered that an RTM company may seek and acquire the right to manage more than one self-contained building.  In doing so it stipulated that each set of premises must satisfy all of the conditions in s72 of the 2002 Act. Further it held that it was not necessary for a separate notice claiming the right to be served in respect of each set of premises and one would be sufficient.

The Court of Appeal disagreed. 

  • Section 72 of the Act provided that the right applied to premises if ‘they consist of a self-contained building or part of a building’.  The use of the singular, ‘a’, was a clear indication that the right could only be exercised in relation to a single building;
  • Section 74, which provided for who could be members of the RTM company, referred to tenants of the same single building as defined in s72.  This reinforced the view that the premises referred to, was a single building;
  • The Regulations and the model articles of association of the RTM company also made it clear that a single building was intended; 
  • If that were not the case, then the voting mechanism of members under the articles would be ‘undermined’; 
  • There were numerous references to ‘the’ premises (i.e. ss78, 70 and 80), which was inconsistent with a construction that the reference to premises was plural rather than singular; 
  • If there was any ambiguity in the wording of the legislation, by reference to Hansard, the issue was beyond doubt, in that the prospect of multiple buildings had been canvassed in debates and rejected.  

Finally, a construction that the right was exercisable in relation to multiple premises meant that one RTM company could manage numerous buildings in geographically distinct locations.  The wider construction of the Act did not limit the exercise of the right to those buildings on one estate.  The Court of Appeal was troubled by this fact: 

‘None of the detailed provisions of these sections (which require specification of the members of the RTM company) or the machinery for the acquisition of the right to manage makes sense if an RTM company is entitled to a right to manage ‘premises’ in different geographical locations’

The Upper Tribunal adopted a purposive construction in order to facilitate one RTM company managing an estate.  The Court of Appeal considered that this objective was achievable without widening the Act.

‘With respect I disagree with the Upper Tribunal’s proposition that the ‘only’ way to achieve the purpose of the legislation, in a situation where a number of different self-contained buildings had been managed together and share appurtenant property, was to give the statutory provisions a purposive construction, so as to enable one RTM company to exercise the right to manage in respect of multiple buildings.  In my judgement there is no basis in the statutory provisions that justifies such a conclusion.  Indeed, as Mr Rainey pointed out, from a practical point of view there would be nothing to prevent two or more RTM companies, which were 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: the articles explicitly provide for delegation’.