Much needed guidance for multi block estates
Following a recent Supreme Court decision, leaseholders exercising the Right to Manage (RTM) in a multi block estate will now only have the right to manage the building and other property which is exclusively enjoyed by that building.
The Supreme Court decision involving Firstport Property Services Ltd provides greater clarity for multi block scenarios where commonly enjoyed property, such as gardens and car parking spaces, are managed but utilised by more than one building. The legislation refers to this as “appurtenant property”. Up to now we relied on the Gala Unity decision which held that an RTM company for one block could potentially take over management of wider areas which may also be shared with other buildings on an estate. This has led to numerous practical difficulties in managing those areas and has had massive implications for multi block estates. It has also created some duplication of management.
The Court of Appeal, when dismissing the landlord’s appeal in Gala Unity, recognised the “potential duplication of management effort and for conflict between the 'old' management company and the new RTM company in respect of such appurtenant property,” and advised it was always “open to parties… to reach an agreement which would make economic sense for all parties.” Easier said than done.
The basics of the RTM
The Right to Manage is governed by the Commonhold and Leasehold Reform Act 2002. It gives leaseholders of flats, where they and the building qualify, a right to take over the management of the building. When the RTM came into force it was very exciting and presented a seemingly more cost-effective solution for leaseholders who were unhappy with the management of their building. Up to that point the only options, aside from negotiation and putting up with things, was to acquire the freehold, which can be costly, or to seek to appoint a new manager through a First-Tier Tribunal. The problem with the Tribunal option is it is not guaranteed.
Brief summary of Firstport v Settlers Court RTM case
Settlers Court is a block of flats on the Virginia Quay estate in East London. Firstport were the managers of the whole estate, which includes another block and some houses. There are shared amenities and facilities. When this block exercised the RTM a dispute arose as to how far its management control would extend. The RTM company argued its management control should cover shared facilities. Therefore, it should take over the management of those facilities. This argument was accepted by the Tribunal. Firstport’s appeal to the upper Tribunal was rejected but they were allowed to appeal to the Supreme Court. The Supreme Court allowed the appeal and overturned the Gala Unity decision. The Supreme Court made several key points:
- The relevant legislation used terminology to describe the right for qualifying leaseholders to take over the management of a particular set of premises. This does not lend itself to including management of shared estate facilities.
- If it was the intention to include shared facilities the 2002 Act fails to address how the RTM company would fit into already existing leases in a multi block estate.
- The use of the word “appurtenance” in conveyancing realms is usually taken to refer to that property only, rather than to describe shared facilities.
- If we continued to follow Gala Unity there would be problems if another block in the future exercised the RTM. What would happen to the management of the shared facilities? Would they remain with the first RTM company?
- Gala Unity did not address the “very real problems of making workable a shared management concept in relation to estate facilities”.
The Supreme Court has a duty to decide against an interpretation of legislation that would lead to unworkable and absurd result. And that is exactly what the Supreme Court did in this decision. It is a welcome common sense decision.