Landlord and tenant – Breach of covenant – Right to manage – Appellant RTM company applying for determination whether respondent in breach of covenant in lease – First-tier Tribunal deciding lacked jurisdiction to consider application – Whether RTM company having right to make application under section 168(4) of Commonhold and Leasehold Reform Act 2002 – Appeal dismissed
The appellant was an RTM company. It had acquired the right to manage Pointer Close, a block of flats in Thamesmead, south-east London. One of the flats was occupied under a long lease by the respondent.
Part 2 of the Commonhold and Leasehold Reform Act 2002 made significant reforms to residential leasehold law. Chapter 1 of Part 2 provided for the acquisition and exercise of rights in relation to the management of blocks of flats by an RTM company, whose members were to be tenants holding long leases of flats in the block: sections 71 to 113. The law on leasehold enfranchisement was amended: Chapters 2, 3 and 4. Chapter 5 made other provisions about leases, including by a group of sections headed “Forfeiture of leases of dwelling”: section 167 to 171.
On 25 October 2021, the appellant applied to the First-tier Tribunal (FTT) for a determination under section 168(4) of the 2002 Act that the respondent was in breach of two of the covenants in the lease of his flat by using the premises to conduct a business and by permitting a subtenant to cause nuisance to other tenants and occupiers of the block. The FTT struck the application out on the grounds that it had no jurisdiction to consider it. The appellant appealed.
The issue for determination was whether an RTM company which had acquired the right to manage under Chapter 1 of Part 2 of the 2002 Act could apply to the appropriate tribunal for a determination under section 168(4) that a breach of covenant or condition had occurred.
The appeal was determined on written representations. The respondent did not participate in the proceedings.
Held: The appeal was dismissed.
(1) An application under section 168(4) might only be made by a “landlord”. That was consistent with the purpose of the group of sections in which section 168 was found, which were all concerned with “forfeiture of leases of dwellings”. The specific purpose of section 168 was to restrict the circumstances in which a landlord might serve notice under section 146 of the Law of Property Act 1925, as a prelude to forfeiture. Only a landlord could serve such a notice and only a landlord could forfeit a lease: “no one can forfeit except the person then legally entitled to the reversion”: see Woodfall: Landlord and Tenant, paragraph 17.080.
The substance of the right to manage was the acquisition by the company of a limited set of responsibilities, or “functions”, and the rights and obligations which went with them. In the same way, as a manager appointed by a tribunal under Part II of the Landlord and Tenant Act 1987 did not become the landlord of the property they were appointed to manage, so too, by acquiring the right to manage, an RTM company did not become the landlord.
(2) The FTT approached the issue by asking itself whether bringing an application under section 168(4) of the 2002 Act amounted to enforcement of a covenant (which an RTM company was entitled to do under section 100(2)), or was part of the exercise of a function of re-entry or forfeiture (which it was prevented from doing by section 100(3)). The FTT concluded that the procedure under section 168(4) was not about enforcing a covenant but was a pre-condition of forfeiture. But it was not necessary to approach the issue in that way. A simpler answer was available: only a landlord might make an application under section 168(4) and an RTM company was not a landlord.
The appellant accepted that the definition of “landlord” in section 112 of the 2002 Act did not immediately suggest that it included an RTM company, but contended that the definition did not prohibit that interpretation. The expression “landlord” was to be construed in accordance with the definitions of “lease” and “tenancy”, which included sub-lease or subtenancy and an agreement for a lease or tenancy. It submitted that the definition of “landlord” under section 112 was broad and encompassed landlord and tenant relationships where there was no privity of contract. However, that definition was not wide enough to include RTM companies.
(3) Two types of relationship were identified as being included in the expression lease or tenancy, namely sub-leases or sub-tenancies and agreements for leases or tenancies. The first category did not expand the concept of landlord at all, but simply clarified that it did not matter that the landlord might itself be a tenant of a superior landlord. The recognition of the parties to an agreement for lease as landlords and tenants was an expansion of the ordinary understanding of those expressions, but it did not go far enough to assist the appellant. In particular, section 112 did not provide that any person with responsibility for the discharge of management functions was to be treated as a landlord.
The appellant argued that a determination under section 168(4) could be seen as a form of enforcement and therefore as one of the “functions of enforcement” which an RTM company was entitled to exercise by virtue of section 100(2). If the division between forfeiture functions and enforcement functions had any significance, an application under section 168(4) fell clearly on the forfeiture side of the line, but even if it was treated as an enforcement function, it was not one which was available to an RTM company because it was not a landlord. In contrast, an RTM company would be entitled to ask the court for an injunction, or a declaration that a tenant was in breach of covenant, but those would not be applications under section 168(4) which could only be made to the appropriate tribunal.
(4) The premise of section 101 was that the landlord needed to be kept informed by the person managing the building (the RTM company) of any breaches of covenant, presumably so that it could consider whether to take steps to forfeit a lease or other enforcement action. There was no requirement that the RTM company took action of its own; any action it chose to take could not include an application under section 168.
Therefore, the FTT was right to strike out the application as one which the appellant was not entitled to make and which the FTT had no jurisdiction to determine.
Eileen O’Grady, barrister
Click here to read a transcript of Eastpoint Block A RTM Co Ltd v Otubaga