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On appeal from [2019] UKUT 243

Settlers Court is a block of flats on the Virginia Quay Estate in East London (the “Estate“). The flats in Settlers Court are held under long leaseholds. The lessees under such long leaseholds are granted the “right to manage” by the Commonhold and Leasehold Reform Act 2002. The right to manage permits them to take over management of the block of which their flats form part from the existing manager via a single purpose company, the Respondent. The Respondent, formed by the lessees of the flats in Settlers Court, obtained the right to manage in respect of Settlers Court on 8 November 2014.

The Estate contains other blocks of flats beyond Settlers Court. These other blocks share facilities and amenities with Settlers Court. Prior to the lessees of Settlers Court exercising the right to manage, the service of managing the Estate Facilities was provided by the Appellant for the benefit of the entire Estate. The Appellant was entitled to levy charges from the lessees on the Estate in respect of providing the Estate Services.

The Respondents claimed that the statutory right to manage extends beyond Settlers Court so as to include the Estate Facilities, and that consequently they were now responsible for providing the Estate Services to the lessees of Settlers Court and the Appellant was no longer entitled to levy the Estate Charges from them.

The Appellant disputed this, maintaining that it remained exclusively responsible for providing the Estate Services to the entire Estate because the right to manage does not extend beyond the block over which it is exercised.

The Appellant therefore applied to the First-tier Tribunal to determine whether it was entitled to levy Estate Charges from the lessees of the flats in Settlers Court. The Tribunal found against the Appellant, considering itself bound by the decision of the Court of Appeal in Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012] EWCA Civ 1372. The Upper Tribunal dismissed the Appellant’s appeal on the basis that, amongst other things, it too was bound by Gala Unity. The UT did however issue a leapfrog certificate for an appeal directly to the Supreme Court. This was the first time that the UT has issued such a certificate.

 

Held – Appeal unanimously allowed, and held that Gala Unity was wrongly decided.

 

The right to manage grants the Respondent the right to perform the relevant management functions over “the premises”. Treating it as applying to shared common facilities raised insuperable problems. The lessees of flats in blocks other than that over which the right to manage has been exercised would be effectively disenfranchised by having shared Estate Services provided by an RTM Company with which they had no formal legal relationship. This would also be contrary to the terms of their leases and was the opposite of what the right to manage under the 2002 Act was supposed to achieve.

The statutory language in the 2002 Act included numerous signposts pointing against the Estate Facilities forming part of the “premises” over which the right to manage was exercisable. That construction of the 2002 Act was confirmed, but no more than that, by the Consultation Paper which accompanied the draft bill which later became the 2002 Act.

The scope of the right to manage contended for by the Respondents would lead to outcomes, such as on the facts of the present case, which were both absurd and unworkable. It was obviously preferable to interpret the 2002 Act in a way which did not lead to an unworkable situation absent such agreement.

The right to manage under the 2002 Act does not therefore extend to the Respondent managing the shared Estate Facilities, which do not form part of the “premises” over which it is exercisable. The Appellant remains the sole party responsible for providing the Estate Services to all lessees on the Estate and entitled to levy Estate Charges accordingly, including from the lessees of flats in Settlers Court. Gala Unity was wrongly decided and should be overruled.

 

For a PDF of the judgment, please see: Judgment (PDF)

For a non-PDF version, please see: Judgment on BAILII (HTML version)

For the Press Summary, please see: Press summary (HTML version)

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10 Nov 2021 Morning session Afternoon session
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