Right to Manage: Whether an RTM claim could be made in respect of properties capable of further sub-division (Assethold Ltd v Eveline Road RTM Co Ltd – 2023)

Where a self-contained property contains further, self-contained units, does the building nevertheless qualify as a single address and can an RTM claim succeed?

The background

In Assethold Ltd v Eveline Road RTM Co Ltd [2023], the subject property comprised a building divided into four flats. Appearing as a pair of semi-detached houses, with different external decoration, the property contained two ground floor flats and two maisonettes spanning the first and second floors.

The respondent Right to Manage company made an application pursuant to the Commonhold and Leasehold Reform Act 2002 (“CLRA 2002”) for the right to manage the property. The appellant freeholder challenged the application, arguing that, although the property itself was self-contained, it comprised self-contained parts and the RTM company could not acquire rights to manage more than one qualifying property.

The First-tier Tribunal allowed the application on the basis that the freeholder had treated the property as a single building and a single address for purposes such as insurance and service charges. The freeholder appealed.

The decision

The Upper Tribunal dismissed the appeal, finding in favour of the RTM company and allowing the application for rights to manage.

The freeholder argued that the rights conferred by the CLRA 2022 did not include self-contained parts of buildings which themselves further contained self-contained parts of the building. It stated that the RTM company’s claim could only relate to self-contained parts which could not be further sub-divided into additional self-contained units.

S.72 of the CLRA 2002 states that rights to manage can be claimed for a detached property, or a self-contained part of a property, containing two or more flats held by qualifying tenants. Self-contained properties are defined as being structurally detached, or a ‘self-contained part’ if the subject property’s structure could be redeveloped independently of the rest of the building, or if the subject property represents a vertical subdivision of the building.

The Upper Tribunal stated that the FTT had not applied the physical tests set out at s.72 of the CLRA 2002, which considered the structure of the subject property and the possibility of independent redevelopment or delivery of services to those parts. By referring to the freeholder’s treatment of the property rather than its physical status, the FTT had not followed the test set down by s.72 and the UT found that the FTT’s decision should be set aside.

The UT also considered whether the self-contained property was excluded from s.72 of the CLRA 2002 because it itself contained two self-contained parts. The UT found no provision which prevented a right to manage claim being made in respect of a self-contained part of a building which contained further self-contained parts of the same building. Rights to manage claims such as that in the present case could succeed where self-contained parts were capable of further sub-division.

Advice and action for landlords

This judgment is useful clarification of the courts’ interpretation of s.72 CLRA 2002. RTM claims can succeed where a subject property contains self-contained units, which themselves comprise further self-contained units capable of sub-division.

When considering s.72, the courts must apply the physical tests to the subject property set down in the statute, rather than taking into account additional factors such as the freeholder’s treatment of the property for the purposes of insurance and/or service charges.