Where There is Unity: Gala Unity v Ariadne Road RTM Company Limited

The Right to Manage may only be claimed in respect of premises which consist (among other things) of “a self-contained building or part of a building, with or without appurtenant property” (s.72(1)(a), C&LRA 2002).

In the first right to manage case to reach the Court of Appeal (Gala Unity v Ariadne Road RTM Company Limited); the meaning of the term “appurtenant property” was considered.

The Upper Tribunal had found in favour the RTM company, noting that the right to manage extended to “appurtenant property”, and determining that “appurtenant property” falls into two categories: property demised to tenants, outside the main block (garages and parking spaces, for example); and “incorporeal rights of way and other rights granted under ... each flat’s lease” (in other words, the estate common parts).
Importantly, the UT also held that there was no need to identify the appurtenant property in the claim notice; nor was it even necessary to specify whether appurtenant property was included in the claim.

The Court of Appeal agreed with the Upper Tribunal. Dismissing the freeholder’s appeal, Lord Justice Sullivan held that “appurtenant property” includes land “usually enjoyed with” the building (by virtue of section 112 of the 2002 Act); and the term “appurtenant property” should not be restricted to meaning property demised to tenants.

In the case of a stand alone block, this does not pose a problem. On a modern development, with multiple blocks and/or houses, we are confronted with much greater difficulties.

There are a number of technical objections to the decision, the detail of which goes beyond the space permitted by this article. It is perhaps unfortunate that both parties were self-represented. Neither the UT, nor the Court of Appeal made reference to other authorities on the meaning of “appurtenant property” (albeit in a different context), such as Clymo v. Shell Mex and BP; Trim v. Sturminster Rural DC and Sovmots Investments Ltd v. Secretary of State for the Environment. It is also considered significant by some that express provision is made for “appurtenant property” in the case of a collective enfranchisement claim under the LRH&UDA 1993, whereas no such provision is made for the right to manage.

We are left to ponder what might happen where one block claims the right to manage in a development consisting of multiple blocks. Would the other blocks be prevented from exercising the right to manage, by virtue of ss.73(4) and/or 81(3) of the 2002 Act? It is arguable, either way.

Of greater concern, however, is the “double management” problem, where the landlord and RTM company find themselves obliged by contract and statute respectively to maintain the same area of land. It is surely unsatisfactory to suggest that the parties must simply come to an agreement. The Act contains no mechanism for producing such an agreement and, in the absence of a statutory scheme; the parties cannot be forced to agree.

Further, an inability to recover 100% of the service charge expenditure means that the members of the RTM company will either have to make additional payments in order to ensure that the RTM company does not become insolvent, or increase their service charge proportions (to bring the total back up to 100%), by varying the leases of the apartments under the control of the RTM company by applying to the LVT under ss.35 or 37 of the LTA 1987.

It is unlikely that any landlord will be brave enough to challenge Gala Unity in the near future. Until then, we will have to wait for the next big decision: there are at least two appeals to the Upper Tribunal, which will deal with the question of whether one RTM company can serve multiple claim notices and exercise the right to manage over more than one self-contained block (one of those is set for a hearing in early October 2013).