The Supreme Court has given a ground-breaking judgment in the Settlers Court case [FirstPort Property Services Ltd v Settlers Court RTM Company Ltd & ORS [2022] UKC1 (Settlers Court) 12 January 2022], an appeal on the extent of the statutory right to manage a residential building under the Commonhold and Leasehold Reform Act 2002.

This case considered whether a right to manage on a multi-block development extends to the entire estate or purely to the building over which leaseholders have exclusive rights. In Settlers Court, the RTM Company acquired the right to manage and following a Court of Appeal decision in Gala Unity Ltd Ariadne Road RTM Co Ltd, that right was treated as extending to communal land shared with neighbouring blocks. This presented a practical problem; the right to manage led to two or more parties having responsibility for repair and maintenance of the same parcels of land.

FirstPort was a party to each of the leases and covenanted to maintain the communal areas, subject to the flat owners paying an estate service charge. When seeking to recover this from the leaseholders, the RTM Company refused payment, asserting it had acquired the right to manage the whole of the estate. This dispute led to litigation.

On an application by the RTM Company, following Gala Unity, the First-Tier Tribunal determined that the company had acquired the right to manage the estate. The leaseholders therefore had no obligation to pay the estate service charge. The Upper Tribunal dismissed FirstPort’s subsequent appeal but issued a ‘leapfrog’ certificate enabling it to apply for permission to appeal to the Supreme Court.

The Supreme Court found in favour of FirstPort and held that Gala Unity was wrongly decided. The RTM company does not acquire the right to manage shared communal areas; it only acquires the right to manage property owned by, or exclusively benefiting, the residents of the block.

This brings a welcome clarification to the law and is a boon for landlords seeking to limit leaseholders’ rights. There is the question of what happens to developments where RTM companies have managed shared communal areas for years. Whether and how that arrangement can be unravelled, following this case, may provide the landscape for future litigation.

Anna Favre is partner at law firm Cripps Pemberton Greenish

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