One RTM Company, One Building

An excellent article discussing a highly relevant ruling on Right to Manage Applications

This article was written by Cassandra Zanelli  of Taylor & Emmet Solicitors and published by News on the Block on 15/08/2015

This question has been the subject of much debate, until it was recently settled by the Court of Appeal in Triplerose Ltd v 90 Broomfield Road RTM Company Ltd. Prior to this, there had been much uncertainty: could a single RTM company acquire the right to manage more than one building? If so, should there be separate claims in relation to each building?

Why does it matter? If you live in a single self-contained building which meets the qualifying criteria, then the so-called “RTM estate controversy” doesn’t impact. However, what about those estates that are comprised of a number of residential buildings?

The Commonhold and Leasehold Reform Act 2002 gives leaseholders the right to acquire the management of their building, subject to meeting the qualifying criteria and satisfying the relevant provisions. And anyone involved with RTM knows the importance of getting the paperwork right.

But, until now, we’ve had little by way of guidance as to whether the right set out in the Act means that there has to be one RTM company for each building.

The Court of Appeal could not have been clearer in its decision: one RTM company, one building.

The Court considered that if a RTM company was able to acquire the management of multiple buildings, that it could lead to absurd situations where the company managed different buildings in different parts of the country. Also, the Court was concerned about the consequences for estates with buildings of different sizes: would the members of the larger blocks outvote those in the smaller block and act contrary to their interests?

For these reasons, the Court decided against the management of multiple buildings by a single RTM company.

Therefore, there’s no scope for a single RTM company to acquire the management of multiple buildings.

What are the practical consequences? If an estate is comprised of a number of buildings, perhaps all sitting under the same freehold title, then each building will need to separately exercise the right to manage. Each building will need to form its own RTM company, ensure that it (individually) meets the qualifying criteria, then ensure that it satisfies the relevant provisions of the Act.

Careful consideration will need to be given to these kind of scenarios to ensure that the qualifying criteria are met, particularly when deciding if the ‘premises’ meets the criteria for the right to manage. The financial consequences of getting it wrong can be harshly felt.

It may be, where an estate is comprised of multiple RTM companies, that they delegate management to one of those companies. There’s also nothing to prevent multiple RTM companies appointing a single agent.

Right to Manage is still a viable option for leaseholders who want to acquire management functions, but it’s important to be alive to the conditions and technicalities that need to be negotiated.

Finding a practitioner who understands this complex area of the law will help you negotiate your way through those technicalities.