Gala Unity Ltd v Ariadne Road RTM Company Ltd

The President decided that each of the two blocks of flats was “undoubtedly self-contained since it is structurally detached (see section 72(2); and accordingly on the relevant date the RTM company was entitled to acquire the right to manage them.” (paragraph 13). He then considered the question: to what other parts, if any, of the estate currently managed by Hazelvine Ltd did RTM’s right to manage extend? Having considered the terms of the claim notice (paragraph 14), the President answered this question in paragraphs 15 and 16:

“15.

Thus the right to manage in the present case extends to the two blocks of flats and to appurtenant property. Property is appurtenant for this purpose, in my view, if it is appurtenant to a flat within the block. The appurtenant property attaching to each flat under the lease of it is of two sorts. Firstly there is the car port or car parking space that is included in the demise, and there can be no doubt, in my judgment, that each flat’s car port or parking space is appurtenant property for the purposes of the statutory provisions. The second sort of appurtenant property consists of the incorporeal rights of way and other rights granted under Schedule 2 of each flat’s lease. These are rights that are not exclusive to the particular flat but are shared with all or some of the other flats, including flats within the Managed Estate that are not within either of the two blocks in respect of which the claim notices were served. There is, I think, no reason why the right to manage should not extend to the maintenance of land over which tenants have incorporeal rights (cf, in relation to the appointment of a manager under Part II of the Landlord and Tenant Act 1987, Cawsand FortManagement Ltd v Stafford (LRX/145/2005 at paragraph 17)).

16.

There is clearly an argument, however, that it is implicit that “appurtenant property” should be construed as relating to land that appertains exclusively to the premises, excluding, therefore, land over which the tenants of the premises have rights in common with others whose flats (the two coach houses) are not the subject of the right to manage claim. The reason for such a construction would be that, if such land were included in the right to manage this could conflict with the rights in relation to that land of both the tenants of the coach houses and the landlord and any management company. Moreover section 97(2), which removes the landlord’s entitlement to do what the RTM company is required or empowered to do, might be thought to lend some support for this. I had myself reached the conclusion that this was indeed the correct approach, so that in the present case “the premises” would only extend to the buildings themselves and the car ports and parking spaces that were included in each demise, and I inquired of the RTM company whether, in the light of this, it wished to pursue its claims. Its response was that it did wish to do so. One further consideration I do not think that “appurtenant property” is to be so narrowly construed. There is nothing in the wording itself that would suggest this, and, although the scope for conflict of the sort that I have mentioned exists, this is insufficient reason for imposing a restriction on the meaning of the provisions.”

The President dealt with the practical implications of his conclusion that “appurtenant property” was not to be narrowly construed, so as to extend only to property that appertained exclusively to the flats (the numbered car ports or parking spaces), excluding land over which the lessees of the flats enjoyed rights in common with the occupiers of the coach houses (the bin area, roadway, gardens etc.), in paragraph 17 of his decision:

“The landlord is still required, and therefore entitled, under the leases of the coach houses to provide the services in categories A, B, C, D and F, including, therefore, maintenance of those parts of the Managed Estate over which those tenants have rights; and the tenants of those flats are still liable to pay to the landlord the service charge as provided under their leases. However, it would seem to me that if the landlord and management company continued to provide services in relation to those parts of the estate that the RTM company is obliged to the tenants of the 12 flats in the two blocks to maintain, the cost of such services would not be reasonably incurred and could be disallowed under section 19(1) of the Landlord and Tenant Act 1985.”

When granting permission to appeal the President said that the issue was of general importance for leaseholders who wish to exercise the right to manage and their landlords.

The Appellant was represented by one of its two Directors, Mr. McGurk. The Respondent was represented by Ms. Cameron-Daum, the company secretary.

Mr. McGurk’s principal concern was the desirability of the company’s estate being managed as a whole. If the management responsibilities were shared between the Respondent and Hazelvine Ltd there was the potential for at best wasteful duplication of management effort and at worst conflict as to, eg. whether/when maintenance was required. Understandably, Mr. McGurk’s submissions focussed on his perception of the practical difficulties of shared management responsibility rather than the statutory language. In a nutshell, he contended that Chapter 1 of Part 2 of the Act should be interpreted so as to enable a RTM company to manage the whole, but not a part of an estate.

Mr. McGurk accepted that the two blocks of flats were structurally detached, but he submitted that they were not “self contained” because they were unable to function independently, without the use of the shared appurtenances: the access way, the gardens, bin store etc. He accepted that all of the areas and amenities comprising “The Estate Common Parts” (see paragraph 5 above) were “appurtenant property”, as described in section 112, but he submitted that paragraph (a) in subsection 72(1) applied only to appurtenant property that was “self contained”, in the sense that it appertained exclusively to the “self contained building” in question. If, contrary to his submission, the blocks of flats were self-contained buildings, then their “appurtenant property” was limited to the car ports/parking spaces that were included in the leases of the flats, and it did not include the shared appurtenances.

Ms. Cameron-Daum submitted that the President’s decision was correct, for the reasons given in his decision.

In my judgment, there is only one issue in this case: the issue identified in paragraph 16 of the President’s decision (paragraph 6 above). Mr. McGurk’s wish that his company’s estate should be managed as a whole is understandable, but there can be no doubt that the two blocks of flats are self contained buildings for the purpose of section 72(1)(a). There is no challenge to the President’s factual conclusion, reached after he had carried out a site visit, that the two blocks are structurally detached. The Act defines a self contained building by reference to it being “structurally detached”, and there is no justification for imposing Mr. McGurk’s further requirement that the structurally detached building must be able to function independently, without the need to make use of any shared facilities such as private access roads, car parking, gardens or other communal areas. Mr. McGurk referred to the concept of an ability to function independently which is contained in subsections 72(3)-(5), but those subsections, which are concerned with whether a part of a building is a self contained part, are of no assistance in the present context.

There is no dispute that all of The Estate Common Parts are appurtenant property within the definition in section 112(1) (paragraph 2 above). Mr. McGurk accepts that if, as I have concluded, the two blocks of flats are two self contained buildings, then the designated car ports/parking spaces forming part of the demises for each of the flats are appurtenant property. That leaves the rest of the appurtenant property. As the President said in paragraph 16 of his decision there is nothing in the wording of the Act which suggests that appurtenant property is limited to property that is exclusively appurtenant to the self-contained building. Where Parliament wished words in the Act to have a particular meaning, it expressly said so: see eg the meaning of “self-contained building” in s. 72(2), and the meaning of “appurtenant property” and “flat” in section 112(1). In these circumstances, the Court should be slow to infer that Parliament must have intended to impose a further qualification.

Appurtenant property, as defined by section 112(1), includes appurtenances belonging to or usually enjoyed with the building, part of a building or flat. Appurtenances such as gardens and yards are frequently enjoyed by a building, or a part of a building or a flat, in common with other buildings, parts of buildings or flats. In ordinary language, the car parking ports/spaces included in the leases of the flats “belong to” the flats which comprise the self contained block, whereas the bin area, access road and gardens are “enjoyed with” the flats which comprise the two blocks. The fact that the occupiers of other property, in this case the two coach houses, also enjoy those appurtenances does not mean that they fall outside the definition in section 112(1). The fact that the definition is not limited to appurtenances which belong to the building in question is a powerful indication that Parliament did not intend that appurtenant property for the purpose of section 72(1)(a) should be limited to property that is exclusively appurtenant to the self contained building in question. In effect, Mr. McGurk’s approach is an attempt to substitute in section 72(1)(a) the words “self contained premises” for premises which consist of a self contained building together with appurtenant property.

In my judgment, the wording of section 72(1)(a) is clear: there is no requirement that the appurtenant property should appertain exclusively to the self contained building which is the subject of the claim to acquire the right to manage. The prospect of dual responsibility for the management of some of the appurtenant property in this and other similar cases is not a happy one. As Mr. McGurk submitted, there is the potential for duplication of management effort and for conflict between the “old” management company and the new RTM company in respect of such appurtenant property, but I am not persuaded that these consequences are so grave, or that the end result is so manifestly absurd, that we would be justified in adding a gloss to words – appurtenant property – which are already defined in the Act. It is always open to the parties, if they wish to avoid duplication and/or conflict, to reach an agreement which would make economic sense for all parties (see paragraph 18 of the President’s decision); if they are unable to do so, paragraph 17 of the President’s decision suggests a means of resolving disputes arising from dual responsibility for maintenance.

I would dismiss this appeal.