Assethold Limited v Eveline Road RTM Company Limited

This is an appeal and cross appeal against a decision of the First-tier Tribunal Property Chamber (Residential Property) dated 19^th May 2022. The appeal and cross appeal concern the ability of the Respondent to acquire the right to manage the property known as 36 Eveline Road, Mitcham CR4 3LE (“the Property”) pursuant to the right to manage provisions in the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”).

The Property comprises four flats, known as Flat A, Flat B, Flat C and Flat D, each of which is let on a long lease. The Appellant is the freehold owner of the Property. As both parties are appealing the decision of the First-tier Tribunal (“the FTT”), it is convenient to refer to the Appellant simply as “Assethold”. The Respondent is the company formed to acquire the right to manage the Property. It is convenient to refer to the Respondent as “the RTM Company”, but this expression is used subject to the question, which falls to be answered in this decision, as to whether the RTM Company does qualify as an RTM company, within the meaning of the right to manage provisions in the 2002 Act, in relation to the Property.

By their decision (“the FTT Decision”) the FTT decided that the RTM Company was entitled to acquire the right to manage the Property. Assethold says that the FTT were wrong in this decision, because the Property did not qualify as premises to which the right to manage provisions in the 2002 Act applied, within the terms of Section 72 of the 2002 Act. The RTM Company does not accept that the FTT were wrong in their decision. If the FTT were wrong, the RTM Company contends, by its cross appeal, that the Property still qualified as premises to which the right to manage provisions applied.

As matters have developed the single point, or issue on which the appeal and cross appeal turn is a question of statutory construction. Specifically, the question is whether a part of a building can qualify as a self-contained part of a building, within the meaning of Section 72(3), if that part of the relevant building includes within it a part of the building which also qualifies as a self-contained part of the relevant building, within the meaning of Section 72(3). There appears to be no direct court or tribunal authority on this question. In any event, no such direct authority was cited to me.

The appeal and cross appeal are made with the permission of this Tribunal (The Deputy President – Martin Rodger KC) granted on 22^nd July 2022. The Deputy President directed that the appeal and cross appeal be heard by way of a review of the Decision, with a view to a rehearing.

Unless otherwise indicated, all references to statutory provisions in this decision are references to the right to manage provisions in the 2002 Act. Where appropriate, I will use the initials “RTM” to refer to the right to manage, as the right to manage is identified and established in Chapter 1 of Part 2 of the 2002 Act. Italics have been added to quotations in this decision.

The Property stands at one end of a terrace of properties which front on to Eveline Road, running from west to east. The Property is the last property at the eastern end of the terrace (“the Terrace”). At each end of the Terrace there is a gap between the end of the Terrace and the neighbouring building, so that the Terrace, taken as a whole, is structurally detached from the neighbouring buildings. The last property on the western end of the Terrace appears to be numbered 46.

The Property now comprises the four flats referred to above. There are two adjacent ground floor flats (A and C), and two first and second floor maisonettes above (B and D). Flats A and C each have an area of yard or garden immediately to their rear. Beyond that there are further areas of garden which are demised with, or at least enjoyed with, respectively, each of Flats B and D. Access to these areas of rear garden is obtained by a side gate from the path leading down the east side of the Property.

A photograph of the front of the Property which I have seen demonstrates that the Property has the appearance of a pair of semi-detached houses, with each house having different external decoration. This division is maintained through the remainder of the Property, in the sense that, on the western side, there is a Flat A, with Flat B above, while on the eastern side there is Flat C, with Flat D above. It is convenient to refer to these two parts of the Property, collectively, as “the Parts”, and to refer to the parts, individually, as the “the Western Part” (Flats A and B) and the “Eastern Part” (Flats C and D).

The history of the Property is not entirely clear. Planning permission was granted in September 2014 for various works, comprising the erection of a single storey rear extension, a two storey side extension including rear roof extensions, and the creation of the four Flats. Given the different appearance of the frontages of the Parts and looking at both the terms of the planning permission and the photographs of the Property which I have seen, what I infer, and find to have happened is as follows. The Property originally comprised only the Western Part, which was a single house. Pursuant to the planning permission the Eastern Part was then added, the ground floor rear extension was constructed to both Parts, the roof was extended upwards to create a second storey to the Property, and the four Flats were created within the extended envelope of the Property.

The freehold title to the Property is registered under three separate registered titles. The registered proprietor of each of these titles is Assethold. Assethold acquired the freehold titles to the Property in 2018, and was registered as proprietor of the freehold titles on 25^th February 2019. The registered freehold titles disclose that the existing long leases of the Flats were granted in 2014/2015, with the exception of the lease of Flat A, a copy of which I have seen, which was granted on 4^th March 2016. The dates of the grant of these leases are broadly consistent with the extension and conversion of the Property into flats pursuant to the planning permission granted in September 2014.

In order to understand the issues in the appeal and the cross appeal, and in order to understand the proceedings in the FTT, it is necessary to have in mind the terms of Section 72, which identifies the premises to which Chapter 1 of Part 2 of the 2002 Act (the RTM provisions) applies. Section 72 is in the following terms:

(b) they contain two or more flats held by qualifying tenants, and

(3) A part of a building is a self-contained part of the building if—

(4) This subsection applies in relation to a part of a building if the relevant services provided for occupiers of it—

For present purposes it is sufficient to note that, subject to the exemptions set out in Schedule 6, the RTM provisions apply to two categories of premises, provided that the conditions in sub-paragraphs (b) and (c) of subsection (1), concerning tenants and flats, are met. The first category of premises comprises self-contained buildings, which are required, by subsection (2), to be structurally detached. The second category of premises comprises self-contained parts of buildings, which are required to meet the physical criteria set out in sub-paragraphs (a), (b) and (c) of subsection (3).

I will use the expression “Qualifying Premises” as a general form of reference to premises which satisfy the requirements of Section 72. I will refer to the specific physical criteria set out in sub-paragraphs (a), (b) and (c) of Section 72(3) as “the Division Criteria”.

The RTM Company gave notice to Assethold of its claim to acquire the right to manage the Property by claim notice dated 28^th July 2021. The notice identified the premises in respect of which the claim (“the RTM Claim”) was made in the following terms (the bold print is in the original text):

Assethold responded with a counter-notice denying the right of acquisition. Paragraphs 1 and 2 of the counter-notice asserted that the RTM Company was not entitled to acquire the right to manage on the following grounds:

I allege that, by reasons of Section 73(2) of Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 on 10 August 2021, Eveline Road RTM Company Limited (“the company”) was not entitled to acquire the right to manage the premises specified in the claim notice because the Company is not a RTM company as defined by that section.”

On 19^th October 2021 the RTM Company made an application to the FTT, pursuant to Section 84(3), for a determination that it was on the relevant date (the date when the notice of claim was given) entitled to acquire the right to manage the premises. The premises were identified in the application notice as Flats A, B, C and D at the Property.

This application (“the RTM Application”) came before the FTT, for a determination on the papers. There was a bundle of documents before the FTT, but there was no evidence in the form of witness statements or expert reports. The FTT had the benefit of statements of case from the parties, setting out their cases on the RTM Application. These statements of case were as follows. The RTM Application was accompanied by a statement of case. Assethold responded with a statement of case. The RTM Company served a further statement of case in reply, to which Assethold responded with a further statement of case in response.

The essential issue which emerged from these statements of case can be summarised as follows:

In the FTT Decision, as I have said, the FTT decided that the RTM Company was entitled to acquire and had acquired the right to manage the Property. The essential reasoning of the FTT can be summarised in the following terms:

Assethold appeals against the FTT Decision on grounds which can be summarised as follows:

The RTM Company cross appeals against the FTT Decision on grounds which can be summarised as follows:

As I have said, permission for the appeal and cross appeal were granted by the Deputy President. The Deputy President also directed that the appeal and cross appeal should be heard by way of a review of the FTT Decision, with a view to a rehearing of the RTM Application if the FTT Decision was set aside. The Deputy President also gave further directions for the hearing of the appeal and cross appeal which included permission for each party to adduce the evidence of one witness, who might, but did not need to be an expert.

Accordingly, the issues to be determined in the appeal and cross appeal were conveniently divided into three, as follows:

The first and third issues remain in place, but by the time of this hearing, the second issue had effectively disappeared. The reason for this was that both parties did take advantage of the permission granted by the Deputy President to call one expert witness. The RTM Company served an expert report of Robert Heald FRICS. Assethold served an expert report of Daniel Procter, a building surveyor.

In what might have been an unfortunate development, each expert addressed a different question. Mr Heald concerned himself with the relationship between the Property and the remainder of the Terrace or, more specifically, the relationship between the Property and the immediately adjacent property in the Terrace on the western side, which I understand to be the property known as 38 Eveline Road (“Number 38”). Mr Heald concluded that the Property, in terms of its relationship with Number 38 (and thus with the remainder of the Terrace) satisfied the Division Criteria. Mr Procter, by contrast, concerned himself with the relationship between the Parts. Mr Procter concluded that each of the Parts, in terms of its relationship with the other Part, satisfied the Division Criteria.

At the hearing counsel on both sides sensibly conceded that the conclusions of the expert on the other side should be accepted. This effectively disposed of the second issue I have identified above. I am therefore able to proceed on the basis that each of the Property, the Western Part and the Eastern Part satisfy the Division Criteria. I should also mention that there has been and is no suggestion that any of the exceptions in Schedule 6 would apply either to the Property, or to the Western Part, or to the Eastern Part.

If therefore the FTT Decision does fall to be set aside, this leaves only the third issue, which is whether the Property can constitute a set of Qualifying Premises, and thus be the subject of an RTM claim, in circumstances where the Western Part and the Eastern Part also each constitute a set of Qualifying Premises. I will refer to this third issue as “the Self-Contained Part Question”.

I therefore turn to my discussion of the remaining issues in the appeal.

I did not hear a great deal of argument on this issue. Mr Bates addressed me only briefly. Mr Gallagher, quite reasonably, did not feel able to concede that the FTT Decision should be set aside, but sensibly decided to concentrate his submissions on the Self-Contained Part Question.

Mr Gallagher’s decision was a sensible one because, with due respect to the FTT, it seems to me that the FTT Decision does fall to be set aside. I do not think that the reasoning of the FTT can stand.

My reasons for this conclusion are essentially the same as those articulated by the Deputy President in his decision granting permission for the appeal and cross appeal. My reasons are as follows.

The essential reasoning of the FTT, by which they reached their decision on the RTM Application, is to be found in paragraphs 7-13 of the FTT Decision, the content of which I have already summarised. In paragraphs 7 and 8 the FTT stated what I take to be conclusions; namely that the Property constituted a single building for the purposes of the 2002 Act and that the RTM had complied with the statutory requirements for making an RTM claim. It therefore becomes necessary to look at the following paragraphs of the FTT Decision in order to identify the reasons for that conclusion.

At paragraph 9 the FTT set out Section 72, which identifies what premises, subject to the exceptions in Schedule 6, constitute Qualifying Premises.

In paragraphs 10 and 11 the FTT made reference to the Property having a single address, since its conversion to the four flats. The FTT also made reference to what was said to have been Assethold’s consistent treatment of the Property as a single building for the purposes of insurance and services. In paragraph 12 the FTT made findings (i) that Assethold had consistently treated the Property as a single building with a single address, and (ii) that the Property differed significantly in character from blocks of flats on an estate and characterised as separate buildings for the purposes of the 2002 Act. In paragraph 13 the FTT then stated, or restated their conclusion that the RTM Company had satisfied the FTT that it was entitled to acquire the right to manage.

The tests which are set out in Section 72 for the two categories of Qualifying Premises, namely self-contained buildings and self-contained parts of buildings, are physical tests. They depend upon the structure of the relevant premises and, in the case of self-contained parts of buildings, upon the ability to carry out independent redevelopment of that part and upon the nature of the services provided to that part.

As can be seen the FTT did not apply these physical tests. Instead, the FTT made reference to the address of the Property and to what was said to have been Assethold’s treatment of the Property. It seems to me that none of the matters considered by the FTT in paragraphs 10, 11 and 12 had any relevance to the matters which the FTT were required to consider, for the purposes of the test in Section 72. Put more simply, it seems to me that the FTT failed to apply to the Property the test in Section 72.

Beyond this, and so far as this is relevant, it is not clear what evidence there was to justify the finding that Assethold had consistently treated the Property as a single building. Assethold only acquired the Property in 2018, and was registered as proprietor of the freehold titles to the Property in 2019. There was no witness evidence, lay or expert, before the FTT. In terms of the documents which were before the FTT, I have seen some documents, which I understand to have been the same documents as were before the FTT, which relate to the management of the Property. It seems to me that these documents did not provide any proper basis for a finding that Assethold had consistently treated the Property as a single building. It is true that the Property has and has had a single address. Although I have not seen all the leases of the Flats, it is my understanding that the service charge structure of the Flats is that the service charge costs incurred in relation to the Property are shared between the tenants of the Flats, with each tenant paying 25% of those service charge costs. It seems to me however that these matters were not a reliable basis for the finding, in paragraph 12, that Assethold had “consistently treated the subject premises as a single building”. It seems to me that the only finding which the FTT was in a position to make in this respect was that the Property had had a single address, since its extension and conversion into four flats pursuant to the planning permission granted in September 2014. Indeed, in this respect the FTT seem to me to have been wrong in stating, in paragraph 10, that the Property had originally comprised two terraced houses with two different addresses. My own finding is that the Property originally comprised only the Western Part, known as 36 Eveline Road, which was then extended to create what is now the Property.

What I have said in my previous paragraph is of course subject to the prior, and more important point that the finding made by the FTT in paragraph 12, whether right or wrong, seems to me to have been irrelevant to the test, in Section 72, which the FTT were required to apply.

The FTT also stated in paragraph 12 that the Property differed significantly in character from blocks of flats on an estate, which were characterised as separate buildings for the purposes of the 2002 Act. I do not understand this point. Plainly, the Property is not of the same character as a block of flats, whether on an estate comprising several blocks of flats or standing on its own. I do not however see how this statement was relevant to the application to the Property of the test in Section 72.

In summary, and bearing in mind that at this stage of this decision I am engaged in a review of the FTT Decision and not a rehearing, I do not think that the reasoning of the FTT can be upheld. In my judgment, and with due respect to the FTT, their reasoning was seriously flawed and cannot be upheld.

I therefore conclude that the FTT Decision falls to be set aside. This therefore clears the way for the rehearing of the RTM Application in this Tribunal. As I have explained, the remaining issue in the RTM Application and the issue on which the RTM Application now turns is the Self-Contained Part Question.

There is one other point which is conveniently made in this section of this decision, before I come to my discussion of the Self-Contained Part Question. The point is relevant to my discussion of the Self-Contained Part Question. It seems to me that one of the matters which may have contributed to the flawed reasoning of the FTT in the FTT Decision was their failure to draw an important distinction in the context of Section 72.

As I have already noted, Section 72 applies to two categories of Qualifying Premises, namely self-contained buildings and self-contained parts of buildings.

So far as the Property is concerned, it is not structurally detached from Number 38. On its western side the Property shares a party wall with Number 38. As such, the Property is not structurally detached from the remainder of the Terrace.

Turning to the Terrace, I have not had the opportunity to inspect the Terrace, so I do not know this for certain, but the plans and photographs which I have seen suggest two features of the Terrace, both of which one would expect to find in a terrace of properties of this kind. The first feature is that none of the other properties in the Terrace are structurally detached from each other. In the usual way, the properties within the Terrace form a line of properties, structurally attached to each other. The second feature is that the Terrace itself is structurally detached from the buildings nearest to the Terrace. By way of example, the photographs and plans I have seen show a gap between the eastern end of the Terrace and the neighbouring building. In theory, there might be a feature such as an underground car park which runs under a part of the Terrace and an adjacent property, thereby comprising a structural link between the Terrace and the adjacent property. There is however no evidence of this, and it would be surprising to find such a feature in relation to a terrace of properties of this kind. In any event it is clear on the evidence that there is no such structural feature which affects the Property or the eastern end of the Terrace.

Returning to the Property it is now agreed that the Division Criteria are satisfied in respect of the Property, in terms of its relationship with Number 38, and thus the remainder of the Terrace. The eastern side of the Property comprises the eastern flank wall of the Terrace, with no structural attachment to the neighbouring building, with the consequence that the Division Criteria are not relevant in relation to the eastern side of the Property.

In relation to the Parts it is also now agreed that the Division Criteria are satisfied in relation to each Part, in terms of their relationship with each other and, in the case of the Western Part, in terms of its relationship with Number 38 and thus the remainder of the Terrace.

The above analysis has the following consequences:

I have taken some time to spell out the above distinction between a self-contained building and a self-contained part of a building because a failure to maintain this distinction can lead to confusion and, as it seems to me, did operate to confuse the reasoning of the FTT in the FTT Decision.

It is convenient to start with a brief summary of the rival arguments of the parties, as advanced by counsel at the hearing. I stress that this is only a brief summary. It is not a comprehensive statement of the written and oral arguments of counsel, all of which I have taken into account.

For Assethold, Mr Bates contended that, on its true construction, Section 72 does not include self-contained parts of buildings which themselves contain a self-contained part of the relevant building or self-contained parts of the relevant building. In such a case, an RTM claim can only be made in relation to those self-contained parts of the relevant building which are themselves indivisible; that is to say not capable of further division into a smaller self-contained part or self-contained parts.

If this argument is correct, it would apply in the present case to disqualify the Property from comprising a set of Qualifying Premises. This would be because the Property, although a self-contained part of the relevant building (which I am assuming to be the Terrace), is itself comprised of the Parts, each of which also comprises a self-contained part of the relevant building (the Terrace). There is no facility under the 2002 Act to amend the premises in respect of which the RTM Claim has been made. Equally, an RTM Company can only exist in respect of a set of premises which comprise Qualifying Premises. As such, the RTM Claim is invalid. The solution to this problem, so Mr Bates submitted, was for separate RTM claims to be made, in respect of each of the Parts. The tenants of the Parts could then co-operate with each other, through the two RTM companies making these claims, to achieve a unified management of the Property.

Mr Bates relied upon Broomfield as authority for the proposition that the same RTM company cannot make RTM claims in respect of multiple sets of Qualifying Premises. From this he extrapolated the point that an RTM claim could not be made in respect of a self-contained part of the building which itself contained a self-contained part or self-contained parts of the same building. Such a claim would, so he submitted, infringe the principle of an RTM company not being able to make a claim in respect of more than one set of Qualifying Premises, established in Broomfield.

In support of his case on statutory construction Mr Bates submitted that the RTM provisions in the 2002 Act had to be read as a whole, and construed in accordance with the overall scheme of these provisions. Mr Bates took me through a number of the provisions in Chapter 1 of Part 2 of the 2002 Act. Mr Bates commenced with Section 71, which provides as follows:

Mr Bates submitted that Section 71 introduces, in Chapter 1, a self-contained complete code governing the acquisition and exercise of rights to manage. The only qualification to this is that there are supplementary provisions in certain of the Schedules to the 2002 Act and in subordinate regulations.

In this context the principal point made by Mr Bates was that the scheme of the 2002 Act, in marked contrast to the 1993 Act, does not permit successive RTM claims to be made in respect of the same premises. Mr Bates took this point from Section 73(4). Section 73 specifies what is an RTM company. It is convenient to set out the whole of Section 73:

As can be seen, RTM companies exist in relation to premises. An RTM company can only be established in relation to a set of premises to which Chapter 1 applies; that is to say to a set of Qualifying Premises. Once an RTM company is established in relation to a set of premises there cannot be a further RTM company in relation to those premises. This is prohibited by Section 73(4). The prohibition extends beyond simply the same set of Qualifying Premises. The later RTM company cannot be an RTM company either in relation to the premises in relation to which there is an existing RTM company or in relation to premises containing those premises or in relation to premises contained within those premises.

In consequence, as Mr Bates explained, once a successful RTM claim has been made, the tenants of the relevant premises are stuck with the RTM company. A sub-group of these tenants cannot break away, even if tenants of their own self-contained part of the relevant premises, by making their own RTM claim. This, so Mr Bates submitted, was a powerful indication that Section 72 was not intended to include self-contained parts of buildings which themselves contained self-contained parts of the same buildings. This also helped to explain, so Mr Bates submitted, why it was wrong to apply the decision in Craftrule to the construction of Section 72. Craftrule was concerned with different types of rights, in a different Act, which operate in a significantly different fashion.

Mr Bates thus submitted that the appeal must be allowed, and the cross appeal dismissed. The Property is not a set of Qualifying Premises, the RTM Company is not therefore an RTM company, and the RTM Claim is invalid.

Turning to the RTM Company’s case Mr Gallagher, if I can put matters this way, kept things simple. His essential argument was that the limitation which Mr Bates sought to impose upon the terms of Section 72 was not one which could be extracted from the language of the Section. Mr Gallagher pointed out that each of the Property, the Western Part and the Eastern Part fell within the definition of a self-contained part of a building in Section 72. In order to exclude the Property from this definition, words of exclusion were required in Section 72, excluding a self-contained part of a building, such as the Property, which itself contained a self-contained part or self-contained parts of the same building. There are no such exclusionary words in Section 72, so Mr Gallagher submitted, and they cannot be read into Section 72 without resorting to the illegitimate device of writing additional words into the Section. This construction of Section 72 was supported by the decision in Craftrule. As a matter of statutory construction therefore, so Mr Gallagher submitted, the appeal must fail and the cross appeal should be allowed.

Before I come to my discussion of the Self-Contained Part Question, it is convenient to explain what was decided in Broomfield and Craftrule. I start with Broomfield.

Broomfield involved three RTM claims which were heard together in the Upper Tribunal, whose decision was appealed to the Court of Appeal. A fourth case was also heard in the Upper Tribunal, but not appealed. Each of the three cases involved RTM claims in respect of multiple blocks of flats which were structurally detached from each other. In two of the cases (90 Broomfield Road and Garner Court) there were two blocks of flats, in each case on land in the same freehold ownership. In each case the two blocks, which were structurally detached from each other, were managed together by the landlord and shared facilities. In the third case (Holybrook Estate) there were seven blocks of flats on the same residential estate, in the same freehold ownership. It was claimed by the RTM company that the whole estate had been managed as one entity.

The question in each case was whether one RTM company could make multiple RTM claims in respect of each of the blocks of flats on the relevant land/estate. The Upper Tribunal decided that this was permitted. As long as each block qualified for the right to manage, so the Upper Tribunal reasoned, there was nothing to prevent one RTM company acquiring the management of more than one set of Qualifying Premises. The Upper Tribunal also decided that it was open to an RTM company to serve one claim notice in respect of several sets of Qualifying Premises although, as I understand the facts of the three cases, each of the relevant RTM companies had served individual claim notices for the individual blocks of flats on the relevant land/estate.

The Court of Appeal disagreed with the conclusions of the Upper Tribunal. The Court of Appeal decided that the references to “the premises”, both in Section 72 and elsewhere in the RTM provisions in the 2002 Act, meant a single self-contained building, or a single part of the building. Gloster LJ, with whose judgment Patten LJ and Sir David Keene agreed, expressed her conclusions in the following terms, at [62]:

Craftrule involved a collective enfranchisement claim, made pursuant to the relevant provisions of the 1993 Act, in respect of a property which formed part of a terraced building comprising 160 flats in all. The building was divided into eight “handed pairs”, with each pair comprising 20 flats. Each half of each pair was vertically divided from the other half of the pair. The collective enfranchisement claim was made in respect of one of these pairs.

Section 3 of the 1993 Act identifies the premises to which, subject to certain exceptions, the collective enfranchisement provisions apply. As amended by the Housing Act 1996, Section 3 of the 1993 Act is in the following terms:

(b) they contain two or more flats held by qualifying tenants; and

(2) For the purposes of this section a building is a self-contained building if it is structurally detached, and a part of a building is a self-contained part of a building if—

It was not disputed that the property which was the subject of the collective enfranchisement claim in Craftrule (the relevant “handed pair”) satisfied the requirements of Section 3 of the 1993 Act. The point taken by the landlord was however that the property comprised two parts, namely each part of the handed pair, which themselves satisfied the requirements of Section 3. As such, the landlord contended that the collective enfranchisement claim was invalid. A collective enfranchisement claim could only be made in respect of the smallest possible self-contained part of a building, which in Craftrule meant that collective enfranchisement claims, in respect of the property in dispute, could only be made in respect of each part of the handed pair.

The landlord’s argument failed at first instance and before Henderson J (as he then was) on first appeal. The case reached the Court of Appeal by second appeal. The Court of Appeal upheld the decision of Henderson J. The Court of Appeal concluded that, in a case where a building contained a self-contained part which satisfied the requirements of Section 3 of the 1993 Act, but also contained within it a smaller self-contained part or smaller self-contained parts, Section 3 effectively gave the relevant tenants the right to choose as to whether to make a collective enfranchisement claim in respect of the larger self-contained part, or to confine the claim or claims to a smaller self-contained part or smaller self-contained parts. Provided that all of the relevant self-contained parts satisfied the requirements of Section 3, any of them could be the subject of a collective enfranchisement claim, provided that the other requirements of the 1993 Act for making a collective enfranchisement claim were satisfied.

In reaching this conclusion Smith LJ, with whose judgment Black LJ and Sir Andrew Morritt C agreed, considered various provisions in the 1993 Act which, as she concluded, provided powerful support for the tenants’ argument that the 1993 Act did permit a choice between self-contained parts of a building and self-contained parts of the same building within those self-contained parts. Smith LJ summarised her conclusions, prior to dealing with certain subsidiary arguments of the landlord, in the following terms at [21]:

One of the landlord’s subsidiary arguments was that the wording of Section 3 of the 1993 Act was ambiguous, with the consequence that it was permissible to have resort to Hansard. In rejecting this argument, Smith LJ said this, at [25]:

The starting point is Section 72 itself. As I have already noted, Section 72 applies to two categories of Qualifying Premises; self-contained buildings and self-contained parts of buildings. A self-contained part of a building is defined in subsection (3). Premises comprise a self-contained part of a building if they satisfy the Division Criteria, which is the expression I am using as a shorthand reference to the requirements in paragraphs (a), (b) and (c) of Section 72(3).

As a matter of simple language I find it difficult to see any answer to Mr Gallagher’s point that there is nothing to exclude from Section 72(3) a self-contained part of a building which itself contains a self-contained part or self-contained parts of the same building.

One can test this by considering the present case. For ease of reference, I repeat the Division Criteria, as they appear in subsections (3) and (4) of Section 72.

It is common ground that the Property satisfies the Division Criteria. The Property is vertically divided from the remainder of the building of which it comprises part, namely the Terrace. The Property is capable of redevelopment independently from the remainder of the Terrace. The services provided to the Property are sufficiently independent of the remainder of the Terrace to satisfy the requirements of subsection (4). It is also common ground that none of the exceptions in Schedule 6 apply to the Property. The reason why it is contended that Section 72 does not apply to the Property is because it contains the Parts, each of which also satisfies the Division Criteria and each of which is thus a self-contained part of the Terrace, within the meaning of Section 72. The obvious question which arises in relation to this contention is this. What is there, in Section 72, to exclude the Property on the basis that the Property itself contains two self-contained parts of the Terrace? The Property satisfies the Division Criteria. Where is the provision in Section 72 which imposes the additional requirement that the Property must not itself be comprised of parts of the Terrace which also satisfy the Division Criteria?

I agree with Mr Gallagher that there is no such exempting provision or additional requirement to be found in the language of Section 72. I agree that it is necessary, for Assethold’s argument to work, to write such a provision into the language of Section 72. This is however to re-write the wording of Section 72, which is not permissible.

I do not think that Broomfield assists Mr Bates in relation to the construction of Section 72. The issue in Broomfield was whether one RTM company could acquire the right to manage more than one set of premises. Gloster LJ commenced her analysis at [45], where she analysed Section 72 in the following terms:

As Gloster LJ went on to point out, this did not settle the question of whether one RTM company could acquire the right to manage more than one set of premises. In order to answer that question it was necessary to consider other provisions of the 2002 Act, as Gloster LJ explained at [46]:

The conclusions reached by Gloster LJ, following her review of other parts of the 2002 Act and the regulations to which she made reference, were expressed in the following terms, at [51]:

Pausing there, none of what was said by Gloster LJ is controversial in the present case. It is common ground that the RTM Company cannot, in the present case, acquire the right to manage in respect of more than one set of premises. The relevant set of premises in the present case is the Property. It can of course be said that the RTM Claim has in fact been made in respect of two sets of premises; namely the Parts. This however seems to me to beg the question. If the Property can qualify as a single set of premises for the purposes of Section 72, and it seems to me quite clear from the language of Section 72 that the Property can so qualify, it is hard to see why the Property should then be disqualified because it also comprises two sets of premises, namely the Parts, to which Section 72 also applies. This was not the situation which the Court of Appeal was considering in Broomfield, and it does not seem to me that the decision of the Court of Appeal can be said to have been directed to this situation.

The real point made by Mr Bates in relation to Broomfield was however a different one. Following the conclusions stated at [51] Gloster LJ went on to consider the practical problems created if one RTM company could make RTM claims in respect of a number of blocks of flats or separate buildings within the same estate. These problems were explained in the following terms, at [52]:

Mr Bates stressed what was then said by Gloster LJ, at [53], where reference was made to Section 73(4); the provision which was central to Mr Bates’ argument:

Gloster LJ expressed her acceptance of these points in the following terms, at [54]:

The essential point made by Mr Bates was that this reasoning is directly transferable to the present case. If the tenants within a self-contained part of a building, which itself is made up of self-contained parts of the same building, can instigate an RTM claim, the same practical problems arise as impressed Gloster LJ. There is the same risk of oppression of a minority of tenants in one of the component self-contained parts of the larger self-contained part. Most critically, there is the same inability for such a minority of tenants to break away and make their own RTM claim in respect of their own self-contained part of the relevant building. Section 73(4) prohibits such a break away claim.

It seems to me however that there are difficulties with this argument. I accept Mr Bates’ submission that Section 71 introduces, in Chapter 1 of Part 2 of the 2002 Act, a complete and self-contained code for the exercise and operation of rights to manage (subject to the supplementary provisions to be found in the Schedules and subordinate legislation). I also accept Mr Bates’ submission that it is necessary to construe Section 72 in the context of the RTM provisions as a whole, and that it is necessary to look at the purpose of the RTM legislation as a whole in order to determine whether, either by virtue of Section 72 or by virtue of some other provision or provisions or by virtue of a combination of Section 72 and some other provision or provisions, RTM claims are not permitted in relation to a self-contained part of a building which has within it a self-contained part or self-contained parts of the same building.

As I have pointed out however, I cannot find any such restriction in the wording of Section 72, and I do not consider it possible to write such an additional restriction into Section 72. Mr Bates was not able to direct me to any other provision of the 2002 Act which can be said, at least in express terms, to constitute such a restriction. In these circumstances, where it seems to me that the statutory language is perfectly clear in not containing such an additional restriction, I am doubtful that arguments based on the operation and effect of the RTM provisions can supply a restriction which Parliament has not itself supplied. In the case of Broomfield it seems to me that the question of statutory construction was rather different, and not so straightforward. There was scope for argument as to whether the RTM provisions did permit an RTM company to make an RTM claim in respect of more than one set of premises. That required an analysis of the RTM provisions. In the present case one is essentially asking whether, anywhere in the RTM provisions, one can find the additional restriction in the case of self-contained parts of buildings which is contended for by Mr Bates. I am not able to find any such additional restriction anywhere in the RTM provisions.

Beyond this however, and whether or not I am right in drawing a distinction between the present case and Broomfield, in terms of the nature of the question of statutory construction which arises, I do not accept that the practical considerations which were identified in Broomfield have anything like the same force in the case of self-contained parts of buildings. In Broomfield Gloster LJ was considering the practical problems which could arise if one RTM claim could be made in respect of different blocks of flats. The tenants of one block of flats could find themselves saddled with an unwanted management regime, from which they could not escape by making their own RTM claim. Their only means of escape would be an application for the appointment of a manager pursuant to the provisions of Part 2 of the Landlord and Tenant Act 1987, which would be a cumbersome and expensive process.

In the case of self-contained parts of the same building, these objections seem to me to lose their force. As Gloster LJ explained, at [53], the purpose of the RTM provisions is to achieve the objective of self-management. In the case of a building, an RTM claim may be made which a minority of the tenants in the building may not want and cannot break away from. In the case of a self-contained part of the building an RTM claim may be made which a minority of the tenants in the self-contained part may not want and cannot break away from. Situations of this kind are an inherent risk in the way the RTM provisions operate. If however there is a self-contained part of a building, it is hard to see how the objective of the RTM provisions is achieved in the case of a self-contained part which is not further divisible into self-contained parts, but is not achieved in the case of a self-contained part which is divisible into smaller self-contained parts. In each case the RTM claim will be made in relation to a self-contained part of a building. This is quite clearly what the RTM legislation was intended to achieve. The risk of a minority of tenants having a management regime foisted on them which they do not want and cannot escape from is a risk which exists in each of the cases which I have just identified, and seems to me to be a risk which is inherent in the operation of the RTM provisions. It is one thing for the tenants of one block of flats to impose their RTM regime on a separate block of flats. It seems to me a rather different thing for the tenants of a self-contained part of a building to impose their RTM regime on all parts of their self-contained part of the building. The latter is an inherent feature of the way in which the RTM provisions work.

In summary, I do not think that there is anything in the scheme of the RTM provisions in the 2002 Act which supports the argument that an RTM claim cannot be made in respect of a self-contained part of a building which itself contains a self-contained part or self-contained parts of the same building. Nor do I think that Broomfield provides support for this argument.

In this context I should make brief reference to the decision of the Supreme Court in Settlers Court RTM Co Ltd v FirstPort Property Services Ltd [2022] UKSC 1 [2022] 1 WLR 519, to which Mr Gallagher made reference in his submissions. The case involved a residential estate comprising ten blocks of flats, freehold houses and communal areas. A management company was responsible for the management of the estate. The tenants of one of the blocks of flats formed an RTM company and made an RTM claim in respect of their block. The issue which found its way to the Supreme Court in Settlers Court was whether the RTM company was entitled to share in the management of the estate services provided by the management company and whether, in the absence of agreement between the RTM company and the management company as to the terms on which the cost of providing those services was to be allocated, the tenants of the relevant block were required to pay any estate charges at all to the management company.

The Supreme Court allowed the appeal of the management company, which was made directly from the Upper Tribunal. Lord Briggs JSC, with whose judgment the other members of the Supreme Court agreed, decided that on the true construction of the RTM provisions in the 2002 Act the right to manage was confined to that which the RTM company could manage on its own, namely the structure and facilities within the relevant building or the relevant part thereof, and, where they existed, those facilities outside the relevant building which were used exclusively by the occupants of the relevant building or the relevant part thereof. This did not include assuming the management of shared estate facilities. The statutory scheme made no provision for an RTM company to take over such shared facilities, and such rights would be produce absurd and unworkable results.

Mr Gallagher sought to rely on Settlers Court as “authoritative and on point”. I understood Mr Gallagher’s argument to be that in a case such as the present case, where an RTM claim is made in respect of a part of a terrace of properties, no difficulties arise of the sort which arose in Settlers Court. Where an RTM claim is made in respect of a part of the terrace, all of the tenants will be entitled to be members of the RTM company, and can thus control the management of their part of the terrace. The right to manage is confined to the relevant part of the terrace.

I do not accept this part of Mr Gallagher’s argument, which seems to me to miss the point of Mr Bates’ submissions. That point is that if an RTM claim can be made in respect of a self-contained part of a building which itself is comprised of smaller self-contained parts of the same building, there is a risk of a minority of tenants in one of the smaller self-contained parts of the building finding themselves subject to management by an RTM company which they cannot control, do not want and, critically, cannot escape from save by the expensive and difficult route of trying to have a manager appointed pursuant to the provisions of Part 2 of the Landlord and Tenant Act 1987. I have decided that this argument of Mr Bates is not sufficient to produce the result for which he contends, but I would accept that Settlers Court is not conclusive against his argument; being concerned with a different point.

That said, I think that the reasoning of Lord Briggs does have some relevance to the Self-Contained Part Question. In the course of his judgment Lord Briggs stressed that the rights to manage created by the 2002 Act are intended to be confined to separate sets of premises, whether buildings or parts of buildings. They are not intended to encroach into areas subject to shared management with other sets of premises. In the conclusion to his judgment, at [62], Lord Briggs summarised the position in the following terms:

This seems to me to provide indirect support for a point which I have already made in the context of Broomfield and, in particular, in the context of what Gloster LJ said at [53] in her judgment. It is easy to see why the courts have been concerned to confine the rights to manage created by the 2002 Act to the particular premises in respect of which the right to manage has been exercised, together with appurtenant property; meaning nearby physical property over which the occupants of the relevant premises have exclusive rights. In relation to the premises in respect of which the right to manage is exercised, where one is not considering the question of how far the rights to manage extend beyond the relevant premises, the same considerations do not arise. Parliament has chosen to allow tenants, by the formation of RTM companies, to make RTM claims in respect of buildings or parts of buildings. It is simply inherent in the RTM scheme that a minority of the tenants in the relevant premises, whether a building or a self-contained part of the building, may not be supporters of the relevant RTM company taking over the management of the relevant premises. It is equally inherent in the RTM scheme that the minority will have no easy escape route from the new RTM management regime. I cannot see that the policy considerations which influenced Lord Briggs in Settlers Court have the same application in relation to an RTM claim in respect of a self-contained part of a building which itself contains smaller self-contained parts of the same building. As Lord Briggs explained, the “right to manage is an exclusive right in the RTM company to manage the relevant premises”. The relevant premises include self-contained parts of buildings, without Parliament having drawn a distinction between (i) a self-contained part of a building which itself contains a self-contained part or self-contained parts of the same building and (ii) a self-contained part of a building which cannot be so sub-divided.

What I have said so far is sufficient to determine the Self-Contained Part Question. The problems with Assethold’s case do not however seem to me to end at this point. There is also the decision of the Court of Appeal in Craftrule. I find it difficult to see how this decision can be put to one side in the present case.

In this context I start by acknowledging the obvious point that Craftrule was concerned with the construction of the collective enfranchisement provisions in the 1993 Act. I accept that, in construing one Act, passed to achieve a particular purpose, it can be misleading to look to the construction of the same or similar provisions in another Act, passed to achieve a different purpose.

I also accept Mr Bates’ point that the 1993 Act does not have the equivalent ban on successive collective enfranchisement claims which exists, by virtue of Section 73(4), in relation to RTM claims. In relation to the 1993 Act, subsections (8), (9) and (10) of Section 13 provide as follows:

The effect of these provisions is that only one collective enfranchisement claim can exist in relation to a set of premises at one time. For present purposes it is not necessary to go into the way these subsections define such premises. This restriction only applies however while the relevant initial notice of collective enfranchisement “continues in force”, as this last expression is defined in the 1993 Act. There is also a 12 month restriction which applies in the case of a withdrawal of a collective enfranchisement claim. Subject to these restrictions however, there is nothing to prevent the tenants of a set of premises making a collective enfranchisement claim in succession to a previously completed collective enfranchisement claim in respect of the same set of premises or in respect of premises containing or contained in those premises. Indeed, the result of this can be a situation where rival groups of tenants in the same block of flats engage in civil war for control of the freehold interest in the block, by the making of successive collective enfranchisement claims. There is nothing equivalent to Section 73(4) to prevent this.

As against this, the provisions of Section 3 of the 1993 Act, which I have set out above, are virtually identical to the provisions of Section 72. In particular, a self-contained part of a building is defined in the same way in both Sections.

Turning to the reasoning of Smith LJ in Craftrule, it is difficult to see why that reasoning is not capable of applying to the Self-Contained Part Question. As Smith LJ stated, in the first part of [10]:

This analysis of Henderson J, which was upheld by the Court of Appeal, is essentially the argument advanced by Mr Gallagher in the present case, which I have already accepted. It seems to me that what was recorded by Smith LJ, at [10], applies with equal force to the statutory language of Section 72, and confirms that Mr Gallagher is right in his argument.

Smith LJ then went on to consider two other provisions or sets of provisions from the 1993 Act which, as she concluded, supported the tenants’ argument that the right of collective enfranchisement was not confined to self-contained parts of the building which were themselves indivisible into smaller self-contained parts.

Smith LJ first considered subsections (8), (9) and (10) of Section 13 of the 1993 Act, which I have set out above. Her conclusion in respect of these subsections was as follows, at [15-17]:

In this context it is interesting to note the terms of subsections (4) and (5) of Section 73. I have already set out subsection (4), but I set out both subsections for ease of reference:

It seems to me that the reasoning of Smith LJ in [15] and [17] is also applicable to Section 73(4) and (5). The provisions of both subsections are applied not just to the premises in respect of which there is an RTM company, but also to premises containing or contained in those premises. Thus subsection (4) envisages that, but for the provisions of subsection (4), there could be a second RTM company not just in relation to the premises in respect of which the first RTM company is the RTM company, but also in relation to premises containing or contained in those premises. If the original premises comprised a self-contained part of a building, premises contained in those original premises, in respect of which a second RTM company might be constituted but for the restriction in subsection (4), would necessarily have to be a self-contained part of the original premises. To adapt what Smith LJ said in [15], if RTM companies could, but for Section 73(4), be formed in respect of both the original premises and the premises contained within the original premises, it follows that a self-contained part of a building (for the purposes of section 72) cannot be limited to the smallest possible self-contained part. The same point can be extracted from Section 73(5).

In this context it is also of note that, amongst the provisions of the 2002 Act to which Mr Bates drew my attention was Section 81(3), which provides as follows:

It will be noted that this provision, while much simpler in its drafting, is equivalent (albeit not precisely) in effect to the provisions of subsections (8), (9) and (10) of Section 13 of the 1993 Act. In particular, Section 81(3) has an equivalent reference, albeit achieved by simpler drafting, to “the premises” or “any premises containing or contained in the premises”. Again, this supports the point that the reasoning of Smith LJ in [15] and [17] can be applied to the construction of Section 72.

Smith LJ next considered Section 4(3A) of the 1993 Act, which was introduced into the 1993 Act by amendment in 1996. As Smith LJ explained, at [18]: