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Stan Gallagher is successful in an important RTM decision by the Court of Appeal that conclusively answers “The Terrace Problem”.

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8th March 2024

Assethold Ltd v Eveline Road RTM Co Ltd [2024] EWCA Civ 187 (4 March 2024)

Stan Gallagher, representing the RTM Company, successfully opposed an appeal to the Court of Appeal from the Upper Tribunal (Lands Chamber) on the question of how the right to manage provisions of the Commonhold & Leasehold Reform Act 2002 (“the RTM” and “the 2002 Act”) are to be applied to houses in a terrace that have been converted into flats.

 

The Issue Arising and Factual Background

The short, though deceptively difficult, point arising for determination was whether (as was contended on behalf of the landlord) the subject matter of the RTM claim, namely, the “premises” as defined by 2002 Act, s. 72 must be limited to the smallest part of a wider building that satisfies the qualifying criteria.

The Appellant landlord contended that the RTM claim must be limited to the smallest qualifying part of the building: in this case, each of the two adjacent houses in the terrace,  each of which contained two flats and were separated from each other by a party wall.

It was common ground that each of the two houses, taken individually, made out the “self-contained part of the building” limb of the definition of “premises” (2002 Act, s. 72(3)) and that the terrace as a whole, which was “air-gapped” at each end from other buildings, made out the “self-contained building” limb of the test because, taken as a whole, the terrace was structurally detached from any other building (2002 Act, s. 72(3)).

The long leases demising the four flats in the two adjacent houses (two flats in each house) per house established a unified service charge regime and scheme of management (including for insuring) across the two converted houses. The practical and cost-effective approach to exercising the RTM was therefore to establish only one RTM Company and for a single RTM Notice of Claim to be served speaking to the acquisition of the RTM I respect of both converted houses.

However, on the landlord’s case, that would not be possible: instead, two RTM Companies and two Notices of Claim (one for each of the two houses) would be required and, once the RTM had been acquired, any continuation of the unified management across the two houses would be dependent on on-going voluntary co-operation between the two RTM Companies.

The Decision of the Court of Appeal & Points for Practitioners  

The Court of Appeal dismissed the appeal, holding that nothing in the wording of the 2002 Act required an RTM Company to limit its claim to the smallest possible configuration of “premises.”

This conclusion rested on the wording of the applicable provisions of the 2002 Act and was supported by the decision of the Court of Appeal in 41-60 Albert Mansions Ltd v Craftrule Ltd [2011] EWCA Civ 185, [2011] 1 WLR 2425, a collective enfranchisement decision on the virtually identically worded definition of  “premises” in the collective enfranchisement provisions of the Leasehold Reform, Housing & Urban Development Act 1993.

In summary:  

• the terrace as a whole is “a self-contained building” and hence makes out the  “premises” test, provided that it is “air-gapped” and not structurally attached to another building e.g. by sitting on a podium over a more extensive underground carpark shared with other buildings; and
• “a self-contained part of a building” that itself contains a smaller self-contained part or parts satisfies the “premises” test;
• hence, though each of the two adjacent houses could have been individually the subject of their own RTM claim, both could, at the election of the leaseholders, properly be the subject of a single RTM claim (by a single RTM Company) speaking to acquiring the RTM of both houses, as occurred in this case;
• in the result (providing that the whole of the building or self-contained part of the building in question is in common freehold ownership – 2002 Act, Sch. 6, para. 2) leaseholders have the freedom to elect to make a claim to acquire the RTM of either:
  1. a self-contained part of the building regardless of whether it contains within it a smaller self-contained; or
  2. the whole of a self-contained building.

 

A copy of the decision can be found here.

Stan Gallagher 

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