Right to Manage: Do Shared Facilities Disqualify a Building?

The reforms have therefore brought a substantial number of mixed-use developments within the scope of the RTM regime for the first time. As more leaseholders seek to exercise RTM in larger and more complex developments containing commercial premises and shared amenities, disputes concerning qualification are likely to become increasingly common.

This decision provides important guidance as to whether shared facilities can affect a building’s eligibility for RTM.

So in this case the question was whether the complex arrangements that would need to be made in respect of shared facilities if management control were to be acquired by its leaseholder should prevent them from being able to enjoy the right; the building hosted facilities such as a gym, leisure facilities and even a zen room that were used by the occupants of another building.

If so, then leaseholders might find it very difficult to organise themselves to exercise the right in respect of a larger envelope of ‘building’.

Alternatively, was the statutory test confined to the physical characteristics of the building?

In Skyline Central One RTM Company Ltd v Places for People Homes Ltd, the Tribunal confirmed that a building can qualify for RTM even where occupiers of a neighbouring building enjoy rights to use facilities located within it, including communal leisure and concierge facilities.

The Issue

The RTM company sought to acquire the right to manage Skyline Central One, a residential building in Manchester.

The landlord resisted the claim on the basis that the building was not “self-contained” for the purposes of section 72(1) CLRA 2002 because residents of a neighbouring building enjoyed rights to use facilities situated within the premises.

These included:

• a car park;

• gymnasium;

• concierge facilities;

• roof terrace;

• garden areas;

• leisure facilities; and

• a “zen room”.

The landlord argued that the existence of these shared rights meant that the premises could not properly be regarded as a self-contained building and therefore fell outside the RTM regime.

In support of that argument, reliance was placed on the Supreme Court’s decision in Settlers Court RTM Co Ltd v FirstPort Property Services Ltd, where difficulties associated with estate-wide shared facilities featured prominently in the Court’s analysis.

The Statutory Test

Section 72(1) CLRA 2002 provides that a building qualifies for RTM if it is:
“a self-contained building or part of a building, with or without appurtenant property.”

The central question was therefore whether rights enjoyed by third parties to use facilities within the building could prevent it from satisfying that requirement.

The Tribunal’s Decision

The Upper Tribunal rejected the landlord’s argument and upheld the decision of the First-tier Tribunal.

It held that the qualifying conditions in section 72(1) are concerned solely with the physical characteristics of the premises.

The concept of a “self-contained building” is therefore an entirely physical one. The Tribunal concluded that there is no scope within section 72(1) to introduce wider management, operational or functional considerations as additional qualifying criteria.

The fact that occupiers of another building enjoyed rights to use facilities located within Skyline Central One did not alter the physical reality that it remained a structurally detached and self-contained building.

The Tribunal emphasised that Parliament had prescribed specific qualifying conditions for RTM. Those conditions should not be expanded by implication simply because practical management difficulties may arise after acquisition.

Distinguishing Settlers Court

The decision is also important for what it says about the scope of the Supreme Court’s reasoning in Settlers Court.

The Upper Tribunal noted that Settlers Court was concerned with shared estate facilities situated outside the RTM premises and the practical consequences of dividing management responsibilities between different parties.

Those concerns did not arise in the same way where the facilities themselves were physically located within the RTM premises.

The Tribunal therefore rejected the suggestion that Settlers Court had introduced a broader principle requiring tribunals to examine the practical consequences of RTM when determining whether premises satisfy section 72(1).

Practical Implications

The decision is likely to be welcomed by leaseholders and RTM companies.

Modern residential developments frequently include shared amenities which may be enjoyed by occupiers of more than one block. Had the landlord’s argument succeeded, many otherwise eligible buildings could have been excluded from RTM merely because third parties enjoyed rights to use facilities located within them.

The Tribunal’s approach preserves what has generally been understood to be the purpose of section 72: a straightforward assessment of whether the premises are physically self-contained.

For practitioners, the key point is that the existence of reciprocal rights benefiting neighbouring buildings should not automatically lead to the conclusion that an RTM claim cannot proceed. The focus remains on the physical nature of the premises rather than on the complexities of subsequent management arrangements.

Comment

This decision continues a trend of the higher courts resisting attempts to impose additional restrictions on the RTM regime beyond those expressly contained in the legislation.

It is also a reminder that qualification for RTM and the practical exercise of management functions are separate questions. A building may qualify for RTM notwithstanding complex arrangements for shared facilities. The existence of those arrangements may create challenges for the RTM company once it acquires management responsibilities, but they do not necessarily deprive leaseholders of the statutory right itself.

With the RTM reforms already in force and a far wider range of mixed-use developments now qualifying, Skyline Central One is likely to become an important authority.

Many modern developments contain shared gyms, concierge facilities, roof terraces, car parks and landscaped areas used by occupiers of more than one building.

The Tribunal’s confirmation that qualification under section 72 remains a fundamentally physical test will make it more difficult for landlords to argue that the existence of such shared rights prevents an otherwise self-contained building from exercising RTM.

For leaseholders considering RTM in larger mixed-use schemes, the decision represents a helpful reaffirmation of a broad and practical approach that the courts have generally adopted when interpreting the legislation.

It also provides useful support for RTM companies faced with arguments that shared facilities or reciprocal rights enjoyed by neighbouring buildings are sufficient to defeat an otherwise valid claim.

Mark Vinall, Partner, Ashley Wilson Solicitors LLP