Double counting? The challenge of RTM Company management rights & obligations

Many modern housing developments contain a mix of leasehold and freehold properties, frequently with standalone apartment blocks within them.

When the right to manage is acquired for a block of flats in a larger estate, is the RTM Company also responsible for managing the wider areas of the estate that are enjoyed by its leaseholders? Or does this management obligation remain with the estate’s management company?

This question of who is responsible for managing the estate services was at the heart of a recent appeal case between FirstPort Property Services and Settlers Court RTM Company.

Settlers Court RTM Company vs FirstPort Property Services

Jeremy Weaver, Head of Litigation at Brady Solicitors explains the case and what it means for managing agents, RTM companies and freeholders.

Jeremy Weaver, property management solicitor Brady Solicitors
Jeremy Weaver, Brady Solicitors

In 2014, Settlers Court RTM Company acquired the right to manage the Settlers Court block of flats within the Virginia Quay estate on the bank of the Thames in Greenwich.

FirstPort was the management company for Virgina Quay, which also included several freehold houses and a further nine blocks of flats, a total of 778 properties in all.

The Settlers Court leaseholders had access to the wider estate and communal areas, such as the gardens.

This is known within the legislation as ‘appurtenant property’, meaning property belonging to or usually enjoyed with the building or any flat.

FirstPort continued to provide the estate services, as per its obligations to the leaseholders and freeholders on the rest of the Virgina Quay estate. FirstPort also sought to recover the estate charges from the Settlers Court leaseholders.

In late 2017, Settlers Court RTM Co indicated that they did not agree with FirstPort’s right to manage the estate or to collect services charges in respect of the estate services. The RTM Co also challenged the reasonableness of the fees.

In 2018, Settlers Court RTM Co asked the FTT to determine the payability of service charges for the management of the estate.

The FTT referred to the 2012 Gala Unity case and ruled in favour of Settlers Court RTM Co, deciding that the estate management functions had passed from FirstPort to the RTM Co when the right to manage was acquired in 2014.

Gala Unity v Ariadne Road RTMCo 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.

FirstPort appealed the FTT’s decision, arguing that the Gala Unity case had been decided ‘per incuriam’ – in other words, without due regard to the law or the facts.

Indeed, there were questions at the time as to whether the decision in the 2012 Gala Unity case was correct (or good). For those interested in the specifics (or needing a reminder), an excellent summary of the case can be found on the Nearly Legal blog here:

The Upper Tribunal dismissed FirstPort’s appeal and upheld the original judgment.

Judge Siobhan McGrath did not find sufficient reason to say that the Court of Appeal decision in Gala Unity was wrong. She did however acknowledge the challenges of the RTM legislation in the management of estates:

“The implications of Gala Unity are far-reaching and can cause real difficulties in the management of estates and in the effective implementation of the Right to Manage itself.

 “The challenges of creating a regime which gives lessees the right to manage the block of flats in which they live but which also seeks to give them rights of management in respect of the estate where the block of flats is located should not be underestimated.”

FirstPort may decide to appeal the decision. Regardless of a further appeal, we should expect the question of estate management services and right to manage to be considered as part of the Law Commission’s much-welcomed proposals to reform leasehold legislation.

Until then the practical problems that exist will continue to affect management companies and freeholders as well as RTM companies. Discussion and agreement where possible as to managing appurtenant property is recommended rather than ending up in an expensive litigated dispute.

For help or advice on your management rights or obligations, please contact the property management legal experts at Brady Solicitors.

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