Right to Manage: Whether lessees of a shared estate were still liable to pay estate charges where an RTM Company has acquired rights to manage (FirstPort Property Services v Settlers Company RTM Limited – 2019)

Where an RTM Company has acquired rights to manage over a property which is part of a larger estate, how far does the right to manage extend and can the management company of the estate still claim estate charges from lessees?

The background

In FirstPort Property Services v Settlers Company RTM Limited [2019], the RTM Company acquired the right to manage Settlers Court, a block forming part of Virginia Quay Estate in London. FirstPort is the named management company in the leases of the flats at the estate. Following its acquisition, the RTM Company took over FirstPort’s responsibility for the performance of management functions and provision of services at Settlers Court.

FirstPort proposed to continue its provision of services to the whole estate, including Settlers Court, and to collect service charges, but a formal agreement wasn’t concluded. FirstPort later demanded service charge from the Settlers Court lessees. The RTM Company disputed FirstPort’s right to do so and applied to the First-tier Tribunal for a determination as to whether service charges were payable.

The FTT held that service charges were not payable to FirstPort, finding that the right to provide all management functions and services at Settlers Court passed to the RTM Company as part of the appurtenant property when the right to manage was acquired. The Court referenced an earlier decision in Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012] which found that the right to manage extended to parts of a wider estate including other areas enjoyed by the lessees, together with occupiers of other units on the estate.

FirstPort appealed to the Upper Tribunal on the basis that Gala Unity was decided ‘per incuriam’ (through lack of regard to the law) and that Settlers Court could be distinguished from the facts of Gala Unity.

The decision

The Upper Tribunal dismissed FirstPort’s appeal.

Despite the practical difficulties that Gala Unity raises in respect of management of a wider estate, the Upper Tribunal could not find that the decision in Gala Unity was made in error. The lessees of Settlers Court were not required to pay service charges to FirstPort, the RTM Company having responsibility for the delivery of services to the block and its appurtenant property.

Advice and action for landlords

Landlords and management companies of estates comprising multiple properties are advised to be aware of the rights transferred under an RTM claim, and in particular the extent of the property affected. Parties should determine during negotiation, and formally agree, the property affected and who is to be responsible for the provision of services. The default position will be that the RTM Company is responsible for the provision of all management functions to the block and any appurtenant property enjoyed by its lessees. If agreements cannot be reached, this can result in problems for the landlord or management company that continues to have contractual obligations to the other lessees on the estate that do not form part of the RTM block.