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A right old mess! Practical problems arising from ‘Right to Manage’ legislation

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17/10/2019

Why is this case of interest?

In the recent case of FirstPort Property Services v Settlers Court RTM Company Limited [1], the Upper Tribunal considered some significant issues which can arise on multi-block estates as a result of ‘Right to Manage’ (RTM) legislation.

The Commonhold and Leasehold Reform Act 2002 allows qualifying long leaseholders of flats to establish an RTM company through which they make take over the management of their building and any appurtenant property. Court of Appeal case law [2] has previously confirmed that, on a multi-block estate, that can mean that an RTM company of one block becomes responsible for the management of the wider estate, as well as or in place of the landlord.

This potential overlapping of responsibility can result in significant uncertainty and practical difficulties. For example, managing a wider estate may be beyond the means of the RTM company and there may be no mechanism for the RTM company to collect contributions from leaseholders in any other block. In addition, any failure by the RTM company to manage the wider estate could place a landlord inadvertently in breach of its obligations to leaseholders in other blocks.

This case is of significant interest as it represented an opportunity for the Upper Tribunal (Lands Chamber) (UT) to potentially resolve these issues.

Unfortunately, the UT concluded that, as a matter of law, it was unable to construe the legislation and case law so that RTM companies would only acquire rights to manage their own block, and not any wider estate. This legal conclusion means that the practical problems explained above will continue.

What are the practical implications?

The UT noted that the practical difficulties which arise on multi-block estates arise from the legislation itself. As we have reported previously, however, the Law Commission has recently consulted on proposals to improve the RTM regime. It is anticipated that conclusions following that consultation will offer some workable solutions.

In the meantime, this decision does at least clarify that, in the case of multi-block estates, landlords and any RTM companies can and should expressly agree between themselves responsibility for, and the conduct of, the management of wider estate areas.

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[1] [2019] UKUT 243 (LC)
[2] Gala Unity Ltd v Ariadne Road RTM Company Ltd [2012] EWCA Civ 1372

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