In this article, Adaku Parker, a barrister at Sterling Court Chambers, considers the recent Court of Appeal decision in Triplerose Ltd v Ninety Broomfield Road, RTM Co Ltd  EWCA Civ 282 and discusses the impact of the decision on long leaseholders and landlords.
Since 30th September 2003, the Commonhold and Leasehold Reform Act (“CLRA”) 2002 has given long leaseholders of flats the right to manage their buildings after setting up a right to manage (“RTM”) company. This right is acquired subject to meeting the qualifying criteria and satisfying the relevant provisions. In the above case, the Court of Appeal considered an appeal from the landlord, Triplerose Ltd, against a decision of the Upper Tribunal which held that one RTM company could acquire the right to manage more than one set of premises, so long as all the qualifying conditions were met in relation to each set of premises.
Those representing the Landlords relied heavily on the complex statutory provisions of the act and it is worth setting out those provisions below.
The Statutory Framework
The right of the RTM Company to acquire management rights applies to “premises” within the meaning of Section 72. Therefore, the right to acquire the right to manage applies to premises if:
- They consist of a self-contained building or a part of a building, with or without appurtenant property;
- They contain two or more flats held by qualifying tenants; and
- The total number of flats held by those qualifying tenants is not less than two thirds of the total number of flats contained in the building.
The right to manage can only be acquired if the premises in question satisfies those conditions.
The Act goes on to explain that a building is a self-contained building if it is structurally detached, (section 72(2)) and that a part of a building is a self-contained part of a building if:
- It constitutes a vertical division of the building; and
- The structure of the building is such that it could be redeveloped independently of the rest of the building and relevant services are either provided independently or could be provided without involving works likely to result in significant interruption in the provision of any relevant services.
The procedure for acquiring the right to manage starts with the RTM Company giving a “Notice Inviting Participation” to the “qualifying tenant of any flat contained in the premises” who is not already a member of the RTM Company or who hasn’t already agreed to become a member of the RTM Company.
At least 14 days after giving the Notice Inviting Participation, and once membership of the RTM Company comprises at least 50% of the qualifying tenants, the RTM Company can serve a “Notice of Claim to Acquire Right” on any landlord (and any other manager).
Any of the people who have been given a Claim Notice may serve a Counter Notice. The Counter Notice will either admit that the RTM Company is entitled to acquire the right to manage, or deny that the RTM Company is entitled to acquire the right to manage.
Where an RTM Company has been given a Counter Notice, it may apply to the appropriate Tribunal for a determination that it is entitled to acquire the right to manage the premises.
On the acquisition of the right to manage, the RTM Company assumes the “management functions” previously exercised by the landlord (or other manager) under the terms of the lease. Such management functions include functions with respect to services, repairs, maintenance, improvements, insurance and management.
The arguments for and against
The landlord argued that the relevant provisions of the act could only be construed as meaning that there had to be one RTM company for each exercise of the right, i.e. for each block, and that the relevant provisions did not permit the concept of “global” RTMs applying to more than one set of premises in different “geographical locations”. In response, the leaseholder argued that the Upper Tribunal had decided the case correctly and that so long as each set of premises qualified for the right to manage, there was nothing to prevent an RTM company acquiring the management of more than one set of premises or self-contained buildings.
The Court of Appeal found that none of the provisions of the relevant sections (which require specification of the members of the RTM company) or the machinery for the acquisition of the right to manage makes sense if an RTM company is entitled to a right to manage “premises” in different geographical locations. They rejected the leaseholders’ arguments about the possible practical difficulties of two or more blocks on the same estate being under the management of different RTM companies. The court disagreed with the Upper Tribunal’s proposition that the “only” way to achieve the purpose of the legislation, in a situation where a number of different self-contained buildings had been managed together and share appurtenant property, was to give the statutory provisions a purposive construction, so as to enable one RTM company to exercise the right to manage in respect of multiple buildings.
The Court of Appeal found in favour of the landlord and held that the relevant provisions of the act, construed as a whole, necessarily points to the conclusion that the words “the premises” have the same meaning wherever they are used (save where otherwise expressly provided). That means that the references in section 72 to “premises” are to a single self-contained building or part of the building, and that likewise references to “the premises” or “premises” or “any premises” in sections 73, 74, 78, 79 and other provisions of the Act are likewise references to a single self-contained building or part of the building.
Previous uncertainty had existed as to whether a single RTM Company could acquire the right to manage more than one building and whether, if so, there should be separate claims in relation to each building. The Court of Appeal have now answered that question. The answer is simple. The answer is no.
Sterling Court Chambers