Right to manage – RTM company – Premises – Appellant owning freehold of building containing 13 flats – Respondent company succeeding in claim to acquire right to manage building – Respondent’s model articles of association defining premises as “Flat 1-13” at the relevant address – Whether premises so defined a self-contained building to which right to manage applying – Whether referring to building as a whole or only 13 individual flats within it – Appeal dismissed
The appellant owned the freehold of a building which was located in a garden square in London, SW5, and was divided into 13 flats let on long leases. In 2004, the respondent company was formed with a view to acquiring and exercising the right to manage the building pursuant to chapter 1 of part 2 of the Commonhold and Leasehold Reform Act 2002. The subscribers to the respondent’s memorandum of association were all qualifying tenants of flats in the building.
The respondent’s articles of association were in the model form prescribed by the RTM Companies (Model Articles) Regulations 2009. They stated that the respondent was established with the object of acquiring and exercising the right to manage the “premises”, which were defined in article 1(1) as “Flat 1-13, 51 Earls Court Square, London SW5 9DG”. In 2008, the respondent served notice on the appellant of its claim to acquire the right to manage the Building, which it identified in the claim notice as “51 Earls Court Square”.
The appellant disputed the respondent’s claim, arguing that the premises defined in the respondent’s articles of association were not the building itself, so as to satisfy the qualifying conditions for chapter 1, but only a collection of individual flats within that building, in respect of which the statutory regime for the acquisition of the right to manage could not apply.
Rejecting that submission and allowing the claim, the first-tier tribunal held that a failure precisely to define the relevant premises at the time when the respondent was formed was not fatal to its status as an RTM company, since only its members were interested in its articles at that point; the need for precision arose only later when the respondent served its claim notice on the appellant, by which time there was no doubt that the respondent was claiming the right to manage the whole of the building identified in its claim notice as 51 Earls Court Square.
The FTT concluded that, giving the respondent’s articles a wide interpretation, they allowed it to claim the right to manage the whole building, such that the respondent was an RTM company entitled to acquire the right to manage under the 2002 Act. The appellant appealed.
Held: The appeal was dismissed.
(1) The FTT had erred in holding that the need for precision in the definition of the premises did not arise until the service of the claim notice. The existence of a company, properly constituted as an RTM company in relation to premises to which the statutory regime applied, was the first of the procedural preconditions to the acquisition of the right to manage. A company could not be an RTM company in the abstract, but only “in relation to premises”: see section 73(2) of the 2002 Act. Those premises were required to be identified in its articles of association as premises over which it was the company’s object to exercise the right to manage and, by section 72(1), had to consist of “a self-contained building or part of a building”. An unambiguous identification of the premises in relation to which a company was an RTM company was therefore important to the statutory scheme. It was important to be able to identify whether, in relation to any premises, there existed an RTM company, and in relation to which premises it was an RTM company. Under the statutory scheme, the only source of that information was the company’s articles of association, and in particular the definition of “premises” in article 1(1) of the model articles. The premises in respect of which a company sought the right to manage had to be those which were identified by their name and address in its articles of association. It was only those premises in relation to which the company would be an RTM company, and only those premises for which it would be within its objects to seek to acquire the right to manage.
(2) Nonetheless, the respondent had defined the premises with sufficient precision in its articles of association. Where a document, including a company’s articles of association, was ambiguous or reasonably capable of bearing more than one meaning, the court or tribunal required to interpret that document would give to it the meaning which was more consistent with the parties’ presumed intentions. If a document contained an obvious mistake, and it was clear what the parties must have intended, then the document would be interpreted in accordance with that intention. It was apparent that the respondent company, and any company which adopted the model articles of association prescribed by the 2009 Regulations, intended to acquire the right to manage in respect of a self-contained building or part of a building. The informed reader of the respondent’s articles, when choosing between possible alternative meanings, would conclude that the object of the respondent could not sensibly be the acquisition of the statutory right to manage 13 individual flats, that being an object which was legally incapable of fulfilment. The informed reader would instead conclude that the parties must have intended the right to extend to the whole of the building comprising the 13 flats, that being the only unit of property at 51 Earls Court Square capable of being the subject of an application for the acquisition for the right to manage. On that approach, it was it clear from the description in the respondent’s articles that the premises in relation to which it was an RTM Company were the whole of the building at 51 Earls Court Square.
Justin Bates (instructed by Scott Cohen Solicitors) appeared for the appellant; Mark Loveday (instructed by direct access) appeared for the respondent.
Sally Dobson, barrister
Click here to download the transcript of Avon Ground Rents Ltd v 51 Earls Court Square RTM Co Ltd.
