Eastpoint Block a RTM Company Ltd v Akehinde Olufunlola Otubaga
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lady Justice King,Lady Justice Andrews |
| Judgment Date | 25 July 2023 |
| Neutral Citation | [2023] EWCA Civ 879 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2023-000201 |
[2023] EWCA Civ 879
Lord Justice Lewison
Lady Justice King
and
Lady Justice Andrews
Case No: CA-2023-000201
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
MARTIN RODGER KC
Royal Courts of Justice
Strand, London, WC2A 2LL
Amanda Gourlay and Annie Higgo (instructed by Lazarev Cleaver LLP) for the Appellant
The Respondent did not appear and was not represented
Hearing date: 18/07/2023
Approved Judgment
This judgment was handed down remotely at 11.00am on 25/07/2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
The division of jurisdiction between the county court and the First Tier Tribunal (“the FTT”) in residential property matters has given rise to problems. In GR Property Management Ltd v Safdar [2020] EWCA Civ 1441, [2021] 1 WLR 908 a notice given under section 13 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) claiming to exercise the right to acquire the freehold was deemed to have been withdrawn because the lessees made an application to the county court rather than the FTT. In Keith v Benka [2023] EWCA Civ 821 a claim for forfeiture was stayed for over four years where the county court ordered certain issues relating to breaches of covenant to be referred to the FTT, but then failed to transmit the order to the FTT. Some of the problems were addressed by the flexible deployment of judges to sit in both the county court and the FTT; but even that has created its own problems. In Behjat v Crescent Trustees Ltd [2022] UKUT 115 (LC), [2022] L & TR 23 an order of the FTT purporting to strike out a county court claim was set aside for lack of jurisdiction.
This appeal throws up another jurisdictional problem: is a right to manage company (“an RTM company”) entitled to apply to the FTT under section 168 of the 2002 Act for a determination whether the lessee of a flat is in breach of covenant? The Upper Tribunal (Martin Rodger KC, Deputy President), upholding the decision of the FTT, said “no” and struck out the application. His decision is at [2022] UKUT 319 (LC), [2023] L & TR 16. At the conclusion of the argument we announced that we would allow the appeal, with reasons to be given in writing. These are my reasons for joining in that decision.
The background
Because the Deputy President upheld the FTT's decision to strike out the application, no facts have been found. So, what follows is what is alleged. Eastpoint Block A RTM Co Ltd is an RTM company which has acquired the right to manage Pointer Close, a block of flats in Thamesmead. The company alleges that one of the lessees holding under a long lease is in breach of covenant by permitting the property to be used for a business and permitting a sub-tenant to cause serious nuisance and annoyance to other residents in the block. The company applied to the FTT under section 168 (4) of the 2002 Act for a determination that breaches of covenant had occurred. The FTT struck out the application, and the UT dismissed an appeal. The lessee has played no part in the application or the appeal.
Section 168 (4) provides:
“A landlord under a long lease of a dwelling may make an application to the appropriate tribunal for a determination that a breach of a covenant or condition in the lease has occurred.”
In England the appropriate tribunal is the FTT. The principal reason why the FTT struck out the claim was because the application was not the enforcement of covenants; but was part of the process of forfeiture, which is not a function that an RTM company can exercise. The Deputy President considered that there was a simpler route to the same conclusion. He held that when an RTM company acquires the right to manage it does not become the landlord. Since an application under section 168 (4) can only be made by “the landlord”, it followed that an RTM company could not make such an application. He also considered, if the division between forfeiture functions and enforcement functions had any significance, that an application under section 168 (4) was “clearly on the forfeiture side of the line”.
The effect of the Deputy President's decision is not that the RTM company cannot apply for a declaration that the tenant is in breach of covenant or for an injunction restraining breaches or for damages for breach of covenant. It is that any such application must be made to the county court (which has concurrent jurisdiction) rather than to the FTT: see Realreed Ltd v Cussens [2013] EWHC 1229 (QB), [2014] 1 WLR 275.
The right to manage
The right to manage is a fault free entitlement on the part of an RTM company controlled by the lessees to assume management responsibilities in relation to property to which Chapter 1 of Part 2 of the 2002 Act applies. In essence the property to which that Chapter applies is a self-contained building or part of a building containing two or more flats held under long leases.
Section 96 of the 2002 Act provides:
“(1) This section and section 97 apply in relation to management functions relating to the whole or any part of the premises.
(2) Management functions which a person who is landlord under a lease of the whole or any part of the premises has under the lease are instead functions of the RTM company.
(3) And where a person is party to a lease of the whole or any part of the premises otherwise than as landlord or tenant, management functions of his under the lease are also instead functions of the RTM company.
(4) Accordingly, any provisions of the lease making provision about the relationship of—
(a) a person who is landlord under the lease, and
(b) a person who is party to the lease otherwise than as landlord or tenant,
in relation to such functions do not have effect.
(5) “Management functions” are functions with respect to services, repairs, maintenance, improvements, insurance and management.
(6) But this section does not apply in relation to—
…
(b) functions relating to re-entry or forfeiture.”
Section 97 (2) provides that the landlord under the lease is not entitled to do anything which the RTM company is required or empowered to do under the lease by virtue of section 96, except in accordance with an agreement made by him and the RTM company. Section 98 deals with the grant of approvals under long leases. It provides:
“(2) Where a person who is—
(a) landlord under a long lease of the whole or any part of the premises, or
(b) party to such a lease otherwise than as landlord or tenant,
has functions in relation to the grant of approvals to a tenant under the lease, the functions are instead functions of the RTM company.
(3) Accordingly, any provisions of the lease making provision about the relationship of—
(a) a person who is landlord under the lease, and
(b) a person who is party to the lease otherwise than as landlord or tenant,
in relation to such functions do not have effect.”
Section 99 lays down certain procedural requirements; and what happens in the case of an objection. The FTT has jurisdiction to deal with questions arising under section 99. Section 99 (5) provides:
“An application to the appropriate tribunal for a determination under subsection (1)(b) may be made by—
(a) the RTM company,
(b) the tenant,
(c) if the approval is to a tenant approving an act of a subtenant, the sub-tenant, or
(d) any person who is landlord under the lease.”
Section 100 deals with the enforcement of tenant covenants. It provides:
“(1) This section applies in relation to the enforcement of untransferred tenant covenants of a lease of the whole or any part of the premises.
(2) Untransferred tenant covenants are enforceable by the RTM company, as well as by any other person by whom they are enforceable apart from this section, in the same manner as they are enforceable by any other such person.
(3) But the RTM company may not exercise any function of re-entry or forfeiture.
(4) In this Chapter “tenant covenant”, in relation to a lease, means a covenant falling to be complied with by a tenant under the lease; and a tenant covenant is untransferred if, apart from this section, it would not be enforceable by the RTM company.
(5) Any power under a lease of a person who is—
(a) landlord under the lease, or
(b) party to the lease otherwise than as landlord or tenant,
to enter any part of the premises to determine whether a tenant is complying with any untransferred tenant covenant is exercisable by the RTM company (as well as by the landlord or party).”
Section 101 requires the RTM company to monitor compliance with tenant covenants and to make regular reports to the landlord.
The provisions I have set out so far deal with functions under the lease itself. They do not deal with rights or obligations imposed by statute. Statutory modifications are dealt with by section 102, which introduces a long list of statutory modifications set out in Schedule 7. These include modifications to section 19 of the Landlord and Tenant Act 1927 and the Landlord and Tenant Act 1988 (covenants against alienation); section 4 of the Defective Premises Act 1972; section 11 of the Landlord and Tenant Act 1985 (implied repairing obligations); sections 18 to 30 of the 1985 Act (service charges); sections 35, 36, 38 and 39 of the Landlord and Tenant Act 1987 (variation of leases), as well as others. The drafter's technique in these cases is to provide that references to the landlord are references to the RTM company; or that obligations of the landlord are, instead, obligations of the RTM company. Section 168 (4) of the 2002 Act is not among the modified statutory provisions.
The expression “landlord” is not defined by the 2002 Act, although section 112...
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