RTM: Gala Unity Ltd v Ariadne Road RTM Co Ltd – solved!
Legal
by
Elizabeth Dwomoh
The Supreme Court, in Firstport Property Services Ltd v Settlers Court RTM Co Ltd and others [2022] UKSC 1; [2022] PLSCS 5, has overturned Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012] EWCA Civ 1372; [2012] 3 EGLR 79, a decision that was widely viewed as problematic by practitioners and estate managers alike.
In Gala Unity the Court of Appeal found that under the right to manage provisions of the Commonhold and Leasehold Reform Act 2002, a right to manage company that had acquired the right to manage a single block within a multi-block estate could also acquire the right to manage appurtenant common estate facilities. In practice, the decision gave rise to practical difficulties in relation to the dual responsibility for estate management between RTM companies and landlords/third party managers.
Firstport Property Services concerned an estate situated on Virginia Quay Estate, London E14. Settlers Court was a block of flats within the estate. In November 2014, the respondent, Settlers Court RTM Company Ltd (Settlers), acquired the right to manage Settlers Court. Under the terms of a tripartite lease, the appellant management company, Firstport Property Services Ltd (Firstport), was responsible for providing estate services to Settlers Court and the wider estate. When Settlers acquired the right to manage Settlers Court an issue arose as to whether Firstport or Settlers was responsible for providing the estate services and collecting service charges.
The Supreme Court, in Firstport Property Services Ltd v Settlers Court RTM Co Ltd and others [2022] UKSC 1; [2022] PLSCS 5, has overturned Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012] EWCA Civ 1372; [2012] 3 EGLR 79, a decision that was widely viewed as problematic by practitioners and estate managers alike.
In Gala Unity the Court of Appeal found that under the right to manage provisions of the Commonhold and Leasehold Reform Act 2002, a right to manage company that had acquired the right to manage a single block within a multi-block estate could also acquire the right to manage appurtenant common estate facilities. In practice, the decision gave rise to practical difficulties in relation to the dual responsibility for estate management between RTM companies and landlords/third party managers.
Firstport Property Services concerned an estate situated on Virginia Quay Estate, London E14. Settlers Court was a block of flats within the estate. In November 2014, the respondent, Settlers Court RTM Company Ltd (Settlers), acquired the right to manage Settlers Court. Under the terms of a tripartite lease, the appellant management company, Firstport Property Services Ltd (Firstport), was responsible for providing estate services to Settlers Court and the wider estate. When Settlers acquired the right to manage Settlers Court an issue arose as to whether Firstport or Settlers was responsible for providing the estate services and collecting service charges.
In 2018, Settlers applied to the First-tier Tribunal for a determination as to the payability of the service charges for the management of the estate. Bound by Gala Unity, the FTT determined that pursuant to sections 96(2) and 97(2), Settlers had acquired the right to manage the wider estate and recover service charges. Firstport appealed to the UT, but the UT determined that it too was bound by Gala Unity.
In a leapfrog appeal to the Supreme Court, Firstport argued that the purpose of chapter 1 of the Act was to confer exclusive management rights on RTM companies in relation to a single building or parts of buildings. It was not intended to confer a wider right to share the management of estate facilities used in common by the occupants of several buildings within a development. In support of this proposition, Firstport relied on paragraph 88 of the Commonhold and Leasehold Reform Draft Bill and Consultation Paper, published in August 2000 (Cm 4843), which expressly stated that where a RTM company acquired the right to manage a single block in a multi-block development “[r]esponsibility for the management of the common facilities would remain as allocated under the lease, as would the liability of the leaseholders to pay towards the costs incurred”.
In allowing the appeal, the Supreme Court observed that if the right to manage under the Act was construed in the manner envisaged in Gala Unity, the problems created by the extension of the right to manage to shared estate facilities were so great “as to amount to absurdity”.
Conducting a purposive and contextual analysis of the right to manage provisions of the Act, the Supreme Court noted that save in certain specified circumstances, a RTM company was required to perform its allocated functions unilaterally. It had no obligation to share management with a third party. The Supreme Court commented that this was a “powerful pointer” in construing the right to manage conferred on a RTM company as being limited to the management of its sole block together with any appurtenant facilities which was used exclusively by the tenants of the flats within that block.
The Supreme Court highlighted that an RTM company that had an unfettered right to perform its management functions would run into insuperable problems if those functions were construed to include management of shared estate facilities. For example, a landlord or estate manager would have an obligation to manage the shared facilities under the terms of the leases of the other tenants whose flats did not fall within the RTM company’s allotted single block. Those tenants would have a legal right to insist on the performance of those functions by the landlord or third party manager, but such a legal obligation would not exist between those lessees and the relevant RTM company.
Elizabeth Dwomoh is a barrister at Lamb Chambers
