Owners of residential leasehold property are able to exercise a statutory Right to Manage (RTM) under the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”).

The difficulties which can arise when dealing with estate services and well known, and were under consideration again by the Upper Tribunal (Lands Chamber) in Firstport Property Services Ltd v Settlers Court RTM Co Ltd & Ors [2019] UKUT 243 (LC).

 

Relevant facts

Settlers Court RTM Company Ltd ( “the RTM Company”) exercised its right to manage the development known as Settlers Court, which isa  block of flats that sits within a larger estate (consisting of both flats and houses).

Firstport Property Services Limited is the named management company in the tripartite occupational leases.  Accordingly, Firstport is obliged to provide certain estate services.

When the RTM Company acquired the right to manage, they assumed responsibility for providing services to the block at Settlers Court.

The issue here is the overall estate services and charges, because following the acquisition of the right to manage, Firstport continued to provide estate services.

To address this, Firstport proposed an agreement with the RTM Company in respect of the estate services and collection of service charges for those services.

Some lessees refused to pay their proportion of the charges incurred by Firstport, arguing that by virtue of the 2002 Act Firstport was no longer entitled to payment for their proportion of their service charge (as that entitlement had passed to the RTM Company).  Lessees also challenged reasonableness of the fees and management costs.

 

Decision of the First-Tier Tribunal (Property Chamber)

By its decision in May 2018, the First-tier Tribunal (Property Chamber) determined that the service charges were not payable to Firstport.  The FTT was bound by the Court of Appeal’s decision in Gala Unity Ltd v Ariadne Road RTM Co Ltd.

Gala Unity was the first RTM case to reach the Court of Appeal, and also involved a situation where the RTM company had acquired the right to manage a block of flats within a larger estate.  In Gala Unity, it was found that the right to manage extended to parts of a wider estate including other common areas enjoyed by the lessees.

The First-Tier Tribunal confirmed that the management functions under the residential leases had passed from Firstport to the RTM Company on the date the right to manage was acquired, those functions related to estate and block service obligations.

 

Decision of the Upper Tribunal (Lands Chamber)

Firstport appealed the FTT’s decision, arguing that Gala Unity had been decided ‘per incuriam’.

Firstport sought permission to appeal on the basis that the Court of Appeal decision of Gala Unity to the extent that the RTM Company acquired the right to manage the wider estate consisting of more than one block within a development.  Permission to appeal was granted by the Upper Tribunal.

The Upper Tribunal dismissed FirstPort’s appeal and upheld the FTT’s decision.

Nonetheless, the Upper Tribunal did recognise that Gala Unity is not only exceptionally far-reaching but also highly problematic.

The Court of Appeal’s decision in Gala Unity presents difficulties in dealing with the management of estates but also implementing the right of management.  However, this was not sufficient reason to find that, in this case, the Court of Appeal had made an error.

The lessees of Settlers Court were not required to pay service charges to Firstport and the RTM Company had the responsibility of providing those services to the block of flats and the appurtenant property.

 

Heading to the Supreme Court

This matter is now heading to the Supreme Court, with the appeal due to be heard in November 2021.