In anticipation of FirstPort Property Services Ltd v Settlers Court RTM Company in the Supreme Court
The Supreme Court will hear an appeal from FirstPort Property Services this week after its initial appeal “leapfrogged” the Court of Appeal. The case will decide whether a company that has acquired the right to manage a single block on a multi-block development under the Commonhold and Leasehold Reform Act 2002 (“the Act”) is entitled to acquire the right to manage the entire estate or purely its own building. This could have far reaching ramifications for landlords and management companies of estates comprising multiple blocks.
The Appellant (“FirstPort”) manages an estate in East London comprising of ten blocks of flats (“the Estate”). The Respondent leaseholders (“RTM Company”) acquired the right to manage one of the blocks, Settlers Court, and took responsibility for the management functions and provision of services at Settlers Court. FirstPort subsequently demanded a service charge from the lessees at Settlers Court to which the RTM Company disputed and applied to the First Tier Tribunal.
Decision of the the First Tier Tribunal
The Tribunal determined that the RTM Company had acquired the right to manage the Estate and the leaseholders had no obligation to pay the Estate service charge to FirstPort. The tribunal referred to the decision in Gala Unity Ltd v Ariadne Road RTM Co Ltd  finding that the lessees were not required to pay service charges to FirstPort as the right to manage had extended to all appurtenant property which included other areas of the wider estate. The Upper Tribunal subsequently dismissed First Port’s appeal but issued a leapfrog certificate to the enable an appeal to the Supreme Court.
The extension of the right to manage to wider parts of an estate in Gala Unity has led to widespread concerns. Namely, the problems associated with dual management of appurtenant property within estates and the difficulties of recovering expenditure when the delineation between the functions of a landlord/old management company and a RTM company are not clear. Notably, these are issues that the Law Commission are currently deliberating as part of the wider reforms of leasehold law.
This appeal offers the Supreme Court an opportunity to provide much needed clarity and to potentially overturn Gala Unity. The implications of a successful appeal would be significant within the right to manage landscape.
Whilst we await the decision of the Supreme Court, landlords and management companies should be mindful to formally agree the rights transferred and what property is to be affected by a RTM claim, to avoid potential litigation.
For more information on the right to manage process visit leasehold enfranchisement.