The Upper Tribunal has followed the Gala Unity Decision in relation to the RTM (Right to Manage) company being able to manage property that is appurtenant to other blocks, in the recent decision of Firstport Property Services Ltd v Settlers Court RTM Company Ltd & Others [2019] UKUT 243 (LC). 

What is the RTM?

The RTM legislation allows a group of leaseholders in a block of flats to form a RTM company and take over the management of their building. This is a powerful right as it is purely based on leaseholders satisfying the qualifying criteria rather than the necessity to prove any fault or negligence on the part of their landlord. It is a useful alternative where leaseholders may not see the right to acquire the freehold as a viable option financially.

Practical implications

In terms of how this can work in practice, there are numerous issues and potential complications. One of the key issues these cases considered was the extent of the areas the RTM company can manage.

The legislation allows the RTM company to manage "appurtenant property" which is defined at s112 (1) of the 2002 Act as:

in relation to a building or part of a building or a flat, means any garage, outhouse, garden, yard or appurtenances belonging to, or usually enjoyed with, the building or part or flat.

Therefore a RTM company can potentially take over management rights in relation to common areas. This could be a block of garages or parking spaces which the RTM block has rights to use. What happens where a RTM block on an estate has appurtenant property which is also appurtenant to other buildings not involved in the RTM claim? This is not an uncommon scenario as there are many multi block estates with common areas such as gardens. The binding case law states that a RTM block will be able to take over management functions in relation to those areas even where they are used in common with leaseholders or occupiers in other buildings.

Problems

This raises questions of how such areas are to be managed. It seems bizarre that a RTM company will be able to manage appurtenant property which is also enjoyed by other blocks where the landlord has obligations to manage those very areas. Surely on the face of it this could lead to duplication of services and possible issues with recovering money from leaseholders in other buildings. Moreover the RTM company may not even know where these area(s) are.

The judges in reaching their decision in Gala were not persuaded "that the consequences were so grave, or that the end result is so manifestly absurd". It was suggested that the parties would try to reach an agreement on how those areas would be managed.

The future

The recent Law Commission paper on the Right to Manage seeks to address some of the current issues and offer potential solutions. Where appurtenant property is shared with other buildings which are not party to the RTM claim it has been proposed that the management of those areas should not transfer automatically. The paper indicates that these areas should remain with the landlord unless the parties agree an alternative arrangement or the First-tier Tribunal makes a determination that some other arrangement should apply (on application by the RTM company). This should put to bed much of the criticism regarding the current position.