The right to manage (RTM) enables leaseholders of residential flats to take control of management of their building via an RTM company that they are members of so replacing the landlord or other third party appointed in the lease in this regard.

The RTM is available on a building by building basis; so the leaseholders of one building would exercise the right in respect of their building via a RTM company created to that end.  It cannot be used to claim the RTM in respect of another building or to make a claim in respect of a number of buildings at once or in sequence.

Where a building forms part of a larger estate with communal facilities or amenities then the question arises whether the management control acquired by the RTM company includes areas used in common with other buildings.

The Court of Appeal’s decision in Gala Unity Limited v Ariadne Road RTM Co Limited [2012] EWCA CIV 1372 (“Gala”) had stood as authority that the RTM company would acquire control of such areas.  This has been overturned by the Court of Appeal in the case of Firstport Property Services Ltd v Settlers Court RTM Co Ltd & Others (Settlers Court).

This is because the parties were fully represented in the Settlers Court case unlike Gala and the facts and applicable law differed; Gala concerned two blocks of flats plus a coach house that contained two flats.  At the time it was accepted that a single RTM company was able to exercise the right to manage in respect of more than one building and so the court was faced with a single RTM company in control of the entire estate with the only building not participating in the RTM (the coach house) being in support.  The situation in Settlers Court was very different; it comprised 10 blocks of flats plus rows of three storey freehold terraced houses surrounded by communal areas including access ways, gardens and grounds together with a river wall separating the estate from the Thames.

Settlers Court was conducted by way of a leapfrog appeal from the First-tier Tribunal straight to the Court of Appeal as both it and the Upper Tribunal were bound to follow the Gala decision.

The decision in Gala left parties having to attempt to enter into an agreement as to how common parts were to be managed as between parties with competing management responsibilities as there was nothing in the legislation to regulate how this was to be achieved.

Case Law

The RTM applies to premises that consist of a self-contained building or part of a building with or without appurtenant property where they contain two or more flats held by qualifying tenants and the total number of flats held by such tenants is not less than two-thirds of the total number of flats contained in the premises (s.72(1)).  Appurtenant property is defined (s.112(1)) as in relation to those premises meaning “Any garage, outhouse, garden, yard or appurtenances belonging to or usually enjoyed with the building or part or flat”.

In Gala the Upper Tribunal found that the premises included the appurtenant property and it in turn included incorporeal rights in the nature of easements over the estate common parts, and so following the reasoning in a case concerning the right to appoint a manager pursuant to Part II of the Landlord and Tenant Act 1987 the RTM therefore extended to all the estate common parts over which such easements existed.  The Court of Appeal took the same view also placing reliance on the phrase “enjoyed with” as meaning that appurtenant property that the RTM would apply to didn’t have to be exclusively enjoyed by the leaseholders of the relevant block.

Unfortunately the case that formed the foundation for the Upper Tribunal’s reasoning, Cawsand Fort Management Co Limited v Stafford [2007] LNTR13 (Land Tribunal) wasn’t safe; firstly the freeholder had conceded the point that the premises included the easements serving the building in that case.  Secondly “the broad discretionary nature of the Tribunal’s jurisdiction under the 1987 Act in particular as to appropriate terms of the manager’s functions naturally lent itself to a liberal construction of the outer boundaries of that jurisdiction.  In sharp contrast, the automatic and fixed nature of the right to manage under the 2002 Act calls for more rigorous limits and a less generous interpretation of its boundaries not least to protect and preserve the interests of other stakeholders in the estate (the tenants in all of the other blocks) who under the scheme are not entitled to be notified or to object to the exercise of the right to manage by the tenants within only one block” (para 49).

In Settlers Court the Court of Appeal analysed the legislation afresh with the benefit of counsel’s submissions and found that Gala couldn’t stand for the following reasons amongst others:

  • If the RTM were to apply to such shared areas then this would exclude any participation in management by the landlord or a third party lease appointed manager or even a manager appointed under the 1997 Act save with the agreement of the RTM company. So in this case a building with only a 15% share of the service charge expenditure for the shared areas would have control to the exclusion of all others in circumstances where leaseholders of the other blocks wouldn’t have a say as they had no contractual relationship with the RTM company, nor were they members of it (only the participants in the relevant block could be) and the 2002 Act does not provide for an RTM company to owe any obligations to leaseholders of other blocks.
  • By contrast the landlord (or in this case third party manager appointed in the leases) will have the right and obligation to manage those shared areas under the terms of the leases of the other flats in the development. This will be frustrated.  They would have no ability to influence how management was conducted or to hold the RTM company to account.
  • While the 2002 Act contains detailed rules around giving the claim notices, it doesn’t contain any machinery for leaseholders of other buildings to be notified of the exercise of the right to manage which you would expect if the legislators had intended that an RTM company of a single building had control to the exclusion of all others of shared areas.
  • On a purposive construction of the 2002 Act the court found a number of signposts pointing to the need for a very close connection between the function the RTM company is to be perform for the benefit of the participating tenants that can properly be performed.
  • The qualification requirement for the premises under the 2002 Act is much more restrictive than that under the 1987 Act i.e. the premises must be self-contained and if they constitute a whole building it must be structurally attached. If apart then it must be divided vertically from the rest of the building, be capable of being independently redeveloped and have services which either are or could without significant interruption to the rest of the building be made independent.  These requirements indicated that the right to manage be confined to separate premises where the quality of management provided by the RTM company would only affect the occupants of that building or the relevant part of it as opposed to the wider estate.
  • The court noted that the relevant chapter of the 2002 Act “is shot through with phraseology which describes the right to manage as a right to manage particular premises meaning a building or part of a building” which pointed strongly away from the right to manage including shared estate facilities.
  • If the right to manage were designed to apply to shared estate facilities then it would be expected to provide for how the RTM company would fit into relationships between the landlord and leaseholders in other buildings in the estate but it did not do so. On the other hand there are detailed provisions dealing with this as regards the building in question. So the court interpreted the reference to the RTM company being able to agree that the landlord/third party manager continue to perform some management functions as meaning those within the building and parts used exclusively by its leaseholders, the example given being that of a tenant’s car park where only some of the spaces were reserved for those leaseholders in which case the RTM company might agree to allow the landlord/third party to continue to manage the car park as a whole.
  • Having dispensed with Cawsand as a foundation for the Gala decision the court then looked at the term “appurtenant property” deciding that this pointed away from the inclusion of shared facilities as the relevant definition lists physical (corporeal) objects not incorporeal rights such as easements.
  • In addition to purpose built blocks of flats the Act is designed to apply to former houses that have been converted into flats and so appurtenant property for such cases would naturally refer to garages and the like found within the curtilage of a house and so closely linked with it they would be said to “belong” to it. In support, the use of “appurtenance” as a conveyancing term was seen as having such a restrictive meaning (paragraph 44) so this lends against appurtenant referring to property used on a shared basis with leaseholders above a block.
  • The relevant chapter refers to the right to manage applying to premises “with or without appurtenant property” so that a building that has appurtenant property doesn’t fail the test of being self-contained as a result of that. This supported the court’s view that appurtenant property referred to physical parts rather than rights; if appurtenant property was meant to include easements and other rights such as a right to light then that wouldn’t make sense as how could a given building exist without the benefit of the same.
  • If the RTM had control of shared areas on the estate then the rule against a later RTM claim being made in respect of the same property would prevent leaseholders of other blocks being able to exercise the RTM.
  • The court was persuaded that the Gala decision produced an absurd and unworkable result as compared to interpreting the RTM as extending only to the relevant building and facilities exclusively used by its occupants. ARMA’s advice was considered in support in this regard.
  • “The central problem with a construction which entitles the RTM company to manage or even share in the management of estate facilities is that the 2002 Act fails to put in place any structure of mutual rights and obligations between the RTM company and the tenants of other blocks which would enable them to force the RTM company’s management obligations or enable the RTM company to enforce payment of their share of the expenditure”. This was demonstrated by applying it to the facts in Settles Court which would result in the RTM company quickly going bust for want of being able to recoup 85% of the cost of maintaining the shared areas while it sought to negotiate an agreement with the landlord/third party as to their management.
  • The RTM company’s contention that the parties would be forced to reach a sensible agreement by the prospect that failing that an application could be made for the appointment of a manager under the 1987 Act was roundly rejected “In my view it is genuinely absurd to think the 2002 Act was framed with that route in mind as a tiebreaker solution in default of a sharing agreement between multiple managers of estate facilities” (paragraph 60).

Consequently the court concluded that the RTM makes no provision for a RTM company to acquire management of shared estate facilities.  “It is concerned only with management of the relevant premises that is the relevant building or part of a building together with appurtenant property (if any) which means nearby physical property over which the occupants of the relevant building (or part) have exclusive rights” (paragraph 62).


Landlords and RTM companies will need to review management arrangements with regard to estates where claims have been made in the past and the landlord has accepted that the RTM company has control of management of shared areas.

There may be a reduction in the number of claims made as some claims will be made as a consequence of Leaseholders being motivated to exercise the RTM to gain control of service charge costs in respect of the wider estate.