Right-to-manage companies cannot rely on section 100 of the Commonhold and Leasehold Reform Act 2002 to enter into agreements in relation to the management of multi-block estates, so says the Upper Tribunal (Lands Chamber) in G & A Gorrara Ltd and others v Kenilworth Court Block E RTM Co Ltd [2022] UKUT 90 (LC); [2022] PLSCS 52.
It is settled law that an RTM company has the right to manage only the self-contained building that it has acquired under the provisions of the Act: Triplerose Limited v Ninety Broomfield Road RTM Co Limited [2015] EWCA Civ 282; [2015] EGLR 51.
Additionally, in FirstPort Property Services Limited v Settlers Court RTM Co Limited [2022] UKSC 1, [2022] PLSCS 5 the Supreme Court ruled that an RTM company under the Act may acquire the right to manage “appurtenant property”, such as a garden or car park, but the right only extends to appurtenant property that is used exclusively by the lessees of its building.
An issue in dispute in G & A Gorrara Ltd and others v Kenilworth Court Block E RTM Co Ltd [2022] UKUT 90 (LC); [2022] PLSCS 52 concerned whether multiple RTM companies on a multi-block estate could, by virtue of section 100, enforce management agreements with each other in relation to the recovery of service charges for costs incurred in managing the wider estate?
Kenilworth Court, situated in Birmingham, was a multi-block estate comprising of five blocks – A to E. There was a total of 52 flats on the estate. In 2008, the respondent RTM company was established by the lessees of block E to acquire the right to manage their block. The lessees of blocks A to D had already exercised the right to manage their blocks in 2007. The second and third appellants purchased their flat in block E in 2004. In 2016, they assigned their interest to the first appellant, their family company.
Over a number of years, the RTM companies in charge of managing the various blocks at Kenilworth Court had demanded service charges from the 52 lessees for the costs of managing the whole estate. The appellants disputed that service charges could be demanded on such a basis and applied to the First-tier Tribunal for a determination of the payability and reasonableness of service charges.
The FTT found that under sections 96 and 97, the management function in respect of a single block was transferred from the landlord to an RTM company. No wider right was transferred to a RTM company to manage any other block. The FTT went on to observe that under the terms of the leases at Kenilworth Court, all the lessees had covenanted to contribute together to the costs of all the blocks and the wider estate. This was not enforceable under sections 96 and 97, but the FTT found that this obligation could be enforced under section 100 as an “untransferred tenant covenant”.
It was argued on appeal by the appellants that the FTT had misconstrued section 100. The UT agreed. Section 100 provided a mechanism to enforce “untransferred tenant covenants” such as the obligation not to cause a nuisance or to not use premises for anything other than a private residence. The purpose of section 100 was not to provide a mechanism for the enforcement of inter-RTM company agreements to recover costs incurred across a multi-block development. The obligations of an RTM company in relation to the management of its own block could not be delegated to another RTM company.
Elizabeth Dwomoh is a barrister at Lamb Chambers
