Court outlines limits on right to manage company's responsibilities

The Supreme Court has outlined the limits that should be placed on a right to manage company (RTM) of a block of flats that formed part of a large estate containing several other blocks.

The case involved FirstPort Property Services Ltd v Settlers Court RTM Co Ltd.

FirstPort was the named management company in the leases of all the flats on the estate. Settlers Court RTM had exercised the right to manage under the Commonhold and Leasehold Reform Act 2002 (The Act) in respect of one of the blocks.

FirstPort continued to provide services to the estate and sought to recover service charge costs in respect of maintaining shared estate facilities, namely those available to all residents on the estate and not exclusively used by the tenants of flats in a particular building.

Settlers Court disputed FirstPort’s right to collect service charges for those services.

The Upper Tribunal (Lands Chamber) determined that the service charges were not payable to FirstPort. The tribunal held that the management functions under the leases relating to both block and estate services had passed from FirstPort to Settlers.

The Supreme Court has overturned that decision.

It held that the Act made clear that an RTM company had the right to perform its allotted functions itself, to the exclusion of any other party. It had no obligation to share management with anyone.

That powerfully favoured a construction which confined the right to manage to that which the RTM company could manage on its own, namely the structure and facilities within the building, or part of a building, constituting the relevant premises and, where they existed, those facilities outside it which were exclusively used by the occupants of the relevant premises.

The apparently unconstrained right of the RTM company to perform management functions on its own ran into insuperable problems if those functions included management of shared estate facilities: the estate's landlord or third-party manager were obliged to manage those facilities under the leases of the flats in other blocks. 

The tenants of those flats had the right under their leases to insist that the landlord or third-party manager, and no-one else, performed those functions; it would be a very strange thing to read the Act as taking that away from them.

While a fundamental purpose of the Act was to confer management rights and responsibilities on a body which was controlled by the tenants affected by that management, the opposite effect would be produced if the RTM company's rights extended to the management of estate facilities used by tenants who were strangers to the RTM company.

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