Does the appointment of a right to manage company prevent a landlord from carrying out development works?

In this article we provide you with an update regarding the case of Francia Properties Ltd v Aristos Aristou and 8 Ors (2016), the first case in which a Court has had to consider whether the appointment of a right to manage company prevents a landlord from carrying out development works.  Judge & Priestley acted on behalf of the 8th and 9th Defendants.

This case involved a purpose built block of 8 flats in south London, the leases of which are in similar terms.  On 14 August 2014 the Optic RTM Company Limited acquired the right to manage the Building pursuant to the Commonhold and Leasehold Reform Act 2002 (2002 Act), which gives qualifying leaseholders the right to manage their block.

In or around February 2015 the Claimant obtained planning permission to erect a roof extension to provide a single 2-bedroom flat. Following concerns raised by the lessees, the Claimant landlord brought a claim for a declaration that it was entitled to develop a new flat on the roof of the building. Under the terms of the Leases the roof of the building was retained by the landlord.

The Claim was opposed by the 8th Defendant Lessees (Penthouse Lessees) and 9th Defendant Right to Manage Company (RTM Company).

The Penthouse Lessees are the lessees of the top floor flat, which includes a private roof terrace within its demise.

The issues considered by the Court were:

  1. Whether on a true construction of the lease the Claimant was precluded from altering, developing or building upon the Building;
  2. Whether the construction of the new flat would amount to a breach of the covenant for quiet enjoyment as a result of the reduced amount of direct sunlight the private roof terrace would receive; and
  3. Whether the construction of the new flat would unlawfully interfere with the RTM Company’s management functions; 

Whilst this article does not focus on issues 1 and 2, we do provide a quick summary of the Court’s decision.  The Court found in favour of the Claimant on both issues in that the Lease did not prevent the Claimant from building the new flat upon the building and that the proposed development would not constitute a breach of covenant for quiet enjoyment by reason of the reduced sunlight received by the private roof terrace. However, the Court did intimate that had the private roof terrace been south facing and consequently received more sunlight during the day, the decision might have been different. The Court also left open the question of whether the building of a new flat could interfere with other aspects of the Penthouse Lessees’ occupation, for example noise nuisance.

Interference with the RTM’s Management Function

Chapter 1 of Part 2 of the 2002 Act introduced a statutory right to manage which is exercisable by a ‘Right To Manage Company’ formed by leaseholders specifically for that purpose. On the acquisition of the right to manage, the RTM company assumes the “management functions” previously exercised by the landlord or other management company under the terms of the lease.

S96(5) of the Act defines “Management functions” as functions with respect to services, repairs, maintenance, improvements, insurance and management. S97(2) of the Act provides that a landlord under a lease of the whole or any part of the premises is not entitled to do anything which the RTM company is required or empowered to do under the lease by virtue of section 86, without the agreement of the RTM company.

The definition of “management functions” is problematic in that it is partly circular, as “management functions” includes a function relating to “management”, which is not further defined within the 2002 Act. The RTM Company submitted that “management functions” were wider than simply “obligations” and could also include “powers” as set out in S97(2). The RTM Company further submitted that any works carried out by the Claimant which interfered with the exercise of the RTM Company’s management functions would not be permitted. 

Pursuant to the Lease the RTM Company is responsible for keeping the Building (which includes the roof) in good repair and accordingly, as submitted by the RTM Company, they have the obligation and the power to make decisions about the roof. It was argued that as s97(2) of the 2002 Act prevents the Claimant from doing anything which the RTM Company is empowered to do without the RTM Company’s consent, the Claimant is not permitted to develop on the roof of the building.

In support of this argument the RTM Company raised no less than 11 reasons in support of this conclusion, including that the RTM Company would be unable to manage the roof of the premises during any building work, that the development works carried out by the Claimant may significantly change the nature, size, structure and fabric of the premises over which the RTM company has acquired the right to manage and that the grant of a new lease would affect various management functions exercisable by the RTM Company.

The Claimant submitted that the rights of an RTM Company under the 2002 Act extend only to the right to manage the property and do not allow it to interfere with the proprietary rights of the landlord, except where those proprietary right are expressly fettered by the statute and that the development of a new flat would not interfere with the RTM Company’s management functions as the RTM Company would still retain the right to manage the building even after the addition of a new flat.  

The Claimant also submitted that if the Claimant was deprived of its right to develop the retained property without compensation, it would be a breach of Article 1, Protocol 1 of the ECHR because it is not in the public interest to prevent the development of land regained by the Claimant without the payment of proper compensation, which the 2002 Act does not provide for.


The Judge concluded that “on a proper interpretation of the 2002 Act, the appointment of the RTM company for the building does not, of itself, prevent the Claimant from building the New Flat on the roof.  But the Claimant’s right is not untrammelled and it is required to take all reasonable steps to minimise the disturbance to the management functions of the RTM both during and after the works”.

Permission to appeal to the Court of Appeal was granted by the Judge because the case raised a point of general principle and importance in the development of the substantive law.

I hope that the above update has been useful and please do not hesitate to contact Joseph Green or 0208 290 7310 or email should you have any enquiries or need further information.

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