The Supreme Court handed down a landmark decision last week which has clarified this point for Right to Manage Companies.
In the landmark case of FirstPort Property Services v Ltd Settlers Court RTM Company and others [2022] the Supreme Court has overruled the judgment handed down in Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012].
The leaseholders of a block of flats known as Settlers Court in East London formed a Right to Manage Company (“the RTM Company”) to take over the management functions of the block.
Settlers Court is situated in a wider estate containing additional blocks of flats, all of which share communal facilities. A dispute arose between the manager of the wider estate and the RTM Company as to whether the RTM Company acquired the management functions over the shared facilities of the estate to the extent that they affected Settlers Court.
The legislation provides that a Right to Manage Company acquires management functions over “the premises”. The Supreme Court therefore had to determine whether the definition “the premises” is limited to the building and land which exclusively serves the leaseholders of Settlers Court or if definition of “the premises” extends to the shared facilities of the estate.
The Supreme Court found that the definition of “the premises” does not include shared facilities and is limited to the block itself and any adjoining land which exclusively serve the leaseholders of that block.
Therefore, a Right to Management Company has no right to acquire management functions of shared facilities in a wider estate.
The reasoning given in this case was that it would cause an array of management issues, with the leaseholders in other blocks at the estate having no legal relationship to the RTM Company at Settlers Court and the collection of a service charge levy across the estate would be unworkable.
HEALTH WARNING:
Forming a Right to Manage Company can be a useful option for leaseholders who are dissatisfied with the service provided by the existing manager of a block whether that be the landlord or a management company.
However, leaseholders must now be aware that they will likely have restricted rights to manage communal facilities in a wider estate by exercising their right to manage as a result of this Supreme Court decision.
For more information, please contact Alex Porter by email on aporter@jpclaw.co.uk by telephone 020 7644 7273 or connect with him on LinkedIn, or Yashmin Mistry, Managing Partner by email on ymistry@jpclaw.co.uk or by telephone 020 7644 7294 or connect with her on LinkedIn.
