The right to manage after the Supreme Court overturns Gala Unity in FirstPort Property Services Ltd v Settlers Court RTM Company Ltd

18 January, 2022

Last week (12 Jan), the Supreme Court handed down judgment in the much anticipated case of FirstPort Property Services Ltd v Settlers Court RTM Company Ltd & Ors [2022] UKSC 1.

The appeal concerned the extent of the statutory right to manage under the Commonhold and Leasehold Reform Act 2002 (“the Act”).

The court was asked to consider whether a company that has acquired the right to manage a single block on a multi-block development acquires the right to manage the wider estate facilities.

For a full background on the Upper Tribunal decision and appeal (please see in anticipation of First Port article).

Supreme Court judgment:

The Supreme Court unanimously allowed the appeal and held that Gala Unity should be overruled. The court held that the Act makes no provision within the statutory right to manage for management by an RTM company of shared estate facilities. In his concluding remarks, Lord Briggs stated:

“62. The right to manage is concerned only with management of the relevant premises, that is the relevant building or part of a building, together with appurtenant property (if any) which means nearby physical property over which the occupants of the relevant building (or part) have exclusive rights.

The right to manage is an exclusive right in the RTM company to manage the relevant premises, and no provision is made in Chapter 1 for any shared management of anything, save only where the RTM company chooses to agree otherwise.”

The court stated that to extend the scope of the right to manage would lead to outcomes that were both “absurd and unworkable”:

  • Contrary to the terms of the leases, the lessees of flats in the other blocks would be effectively disenfranchised by having shared estate services provided by an RTM Company with which they had no formal legal relationship: at 36-38
  • The decision in Gala Unity created real difficulties with the existence of overlapping rights to provide the estate services between a manager and an RTM Company: at 50.
  • If the RTM Company was responsible for the wider estate services, it would be entitled to recover estate charges only from the lessees of the building in respect of which it had been set up. In this case that would mean only some 15% of the costs could be recovered by the RTM Company. This would likely pose insurmountable solvency issues for it: at 54.

 

Comment:

This decision has provided much needed clarity and will be welcomed by those managing large multi-block estates. The judgment circumvents the issues that the Gala Unity decision has created and provides a clear delineation between the responsibilities of a landlord of an estate and an RTM company of a single block.

Landlord and management companies should continue to be mindful to formally agree and define the relevant premises and any appurtenant property exclusively enjoyed by the lessees of the RTM company.

For more information on the right to manage process, visit our pages here or get in contact with our enfranchisement team.