The right to manage estate services - case update
A common issue on estates where the right to manage is exercised by flat owners is: what do they acquire management rights over? This long running issue is usually resolved by agreement between the parties but there can be complications where management responsibilities are blurred between a single block and shared services on a larger estate. The Supreme Court case of FirstPort Property Services Ltd v Settlers Court RTM Company and others [2022] UKSC 1 has now provided welcome clarification.
The right to take over the management by long leaseholders in a block of flats is commonly exercised, requiring no premium payment to the landlord nor any fault to be proved in the current management. The right is a good alternative to enfranchisement where leaseholders want to take some control over their building. Although the exercise of the right has been fraught with technicalities and hurdles, the process can be simple and effective.
The main issues concern the practicalities upon the acquisition of management. The Commonhold and Leasehold Reform Act 2002, which contains the right, has a lack of detail when it comes to what exactly the leaseholders obtain management rights over. Where there is a single block of flats with all services and facilities within or around the premises, there is usually little to dispute; the management of the whole is taken over by the newly formed right to manage company.
However, where there is a single block on an estate which includes facilities and services that cater for multiple blocks, there can often be disputes over who manages those shared services following an acquisition of management. It is usually left to the parties to agree on a practical solution, but this can cause further problems.
FirstPort Property Services Ltd v Settlers Court RTM Company and others [2022] UKSC 1 addressed this issue; the parties were not able to agree how the estate facilities should be managed, the estate charges levied, and to whom charges were payable.
The Supreme Court's decision
The Supreme Court decided that it was not for right to manage companies to acquire management of shared estate facilities and services. The reasoning was that other blocks of flats would be effectively disenfranchised by having shared estate services provided by an entity with which they had no legal relationship. Conversely, the right to manage company would have no recourse to recover estate charges from anyone other than the leaseholders of the block who exercised the right to manage. Extending the right to manage to shared estate services would be unworkable and would not provide equality for leaseholders across a wider estate.
This decision provides welcome clarification, although may frustrate some leaseholders who have issues with the provision of estate services. Proposed reforms to the right to manage process may address this further with options to create estate rights to manage, although the extent and enactment of these reforms remains to be seen.
If you would like further information about the right to manage or enfranchisement, please contact William Bethune.