Eastpoint Block A RTM Co Ltd v Otubaga [2023] EWCA Civ 879
15 December 2023
Can a Right to Manage Company apply under section 168, Commonhold and Leasehold Reform Act 2002, for a determination that a leaseholder is in breach of covenant?
The FTT was not sure.
The Upper Tribunal said “certainly not”.
The Court of Appeal reversed the Upper Tribunal, and said “yes”.
The question arose at Eastpoint Block A, a fifteen-letter address over which the eponymous Right to Manage Company had acquired the right to manage.
By section 168(4) of the Commonhold and Leasehold Reform Act 2002:
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.
How can that be, given that the text specifically states that “a landlord” may apply?
Lord Justice Lewison, giving the lead judgment, set out the key provisions of the Commonhold and Leasehold Reform Act 2002, the legislation that introduced the right to manage to England and Wales.
Of those provisions, sections 96 and 100 are the most relevant.
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.
The RTM Company’s first argument was that section 96 empowered the RTM Company to apply to the FTT for a determination under section 164 because that application would be part of the RTM Company’s “management functions”.
The Court of Appeal did not agree.
The argument that did however find favour was a simple one predicated on section 100, which reads this way:
(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)."
Lord Justice Lewison described the Right to Manage Company’s second argument thus:
Section 100 gives the RTM company the right to enforce "untransferred covenants". The expression is a puzzling one, since the Act does not refer to transferred covenants. But it must refer to those covenants which are outside the scope of section 96. The key sub-section is section 100 (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."
Thus section 100 (2) expressly provides that untransferred covenants are enforceable by the RTM company. It does not remove the power of the landlord to enforce them. But what is critical, on this argument, is that both the RTM company and the landlord are entitled to enforce the covenants "in the same manner". If, therefore, the landlord could enforce the covenant by applying to the FTT for a determination that the lessee is in breach, so, too, may the RTM company.
Having considered the practical reasons for accepting that second submission, the Court of Appeal allowed the appeal.
Right to Manage Companies may now make an application to the FTT under section 168, Commonhold and Leasehold Reform Act 2002, for a determination that there has been a breach of covenant.