Supreme Court overturns Gala Unity

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The Supreme Court has today handed down judgment in the case of FirstPort Property Services Ltd v Settlers Court RTM Company Ltd & Ors [2022] UKSC 1. The appeal concerned the statutory “right to manage” conferred on long leaseholders by Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002. The court was asked to answer a single question of construction of the relevant provisions: to what extent (if any) does an RTM company in respect of a single building on a wider estate acquire the right to manage the wider estate facilities that are shared with the leaseholders of other buildings on the estate? That question arose in the context of the Virginia Quay Estate in East London which comprises 10 blocks of flats, rows of terraced freehold houses and substantial communal areas including accessways, gardens, grounds and a river wall separating the estate from the Thames. The estate is managed by the Appellant, FirstPort, the named management company in all the estate leases. One of the blocks of flats on the estate, Settlers Court, acquired the right to manage in 2014, leading to a dispute as to who was responsible – and entitled – to manage the shared estate facilities. The First-tier Tribunal and Upper Tribunal held that they were bound by the Court of Appeal’s decision in Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012] EWCA Civ 1372 to find in favour of the RTM company that it had acquired the rights to manage the wider estate facilities on behalf of the RTM leaseholders. The difficulty was that FirstPort continued to owe management obligations to the non-RTM leaseholders in relation to the same parts of the estate, giving rise to dual-management. After obtaining a rare “leap-frog” certificate from the Upper Tribunal, the Appellant appealed directly to the Supreme Court arguing that Gala Unity was wrongly decided and that the RTM company only acquired the right to manage the block itself and any estate facilities exclusively enjoyed by the RTM leaseholders. The responsibility for managing the shared estate facilities remained solely with FirstPort. The Supreme Court agreed. Lord Briggs (giving the unanimous judgment of the Court) concluded as follows:

“62.       I consider that the right to manage scheme in Chapter 1 of Part 2 of the 2002 Act makes no provision within the statutory right to manage for management by the RTM company of shared estate facilities. It is concerned only with management of the relevant premises, that is the relevant building or part of a building, together with appurtenant property (if any) which means nearby physical property over which the occupants of the relevant building (or part) have exclusive rights. The right to manage is an exclusive right in the RTM company to manage the relevant premises, and no provision is made in Chapter 1 for any shared management of anything, save only where the RTM company chooses to agree otherwise.”

Accordingly, Gala Unity was overruled. The court acknowledged that there may be many estates currently being managed under arrangements entered into pursuant to the Gala Unity decision but did not give guidance as to what should happen in these cases. In other instances, estates are known to be presently managed in ignorance or disregard of Gala, in which case their position will be now broadly regularised. There will inevitably be some uncertainty in application of the decision around the edges of the phrase “nearby physical property over which the occupants of the relevant building (or part) have exclusive rights”. Such property might include detached bin stores, gardens solely enjoyed by a particular building, and parking areas. Whilst in most instances parties are likely to be able to agree as a matter of common sense what is or is not exclusively enjoyed property, any disputes will need to be addressed by the First-tier Tribunal and the courts on a case by case basis going forward. Overall, however, the decision will come as a great relief to those living on and managing large estates, providing a much clearer demarcation in responsibility between RTM companies and existing managers and avoiding the significant practical difficulties that arise from shared management. Simon Allison leading Kimberley Ziya – both of Landmark Chambers - acted for the successful Appellant. Rupert Cohen, also of Landmark Chambers, acted for the Association of Residential Managing Agents, which intervened in the appeal. Mark Loveday leading Amanda Gourlay of Tanfield Chambers acted for the First Respondent RTM Company. A copy of the judgment may be accessed here and the recording of the judgment summary here.

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