[2024] UKUT 109 (LC)

Section 73, 2002 Act specifies what is an RTM company. Subsection (2) provides that:

“A company is a RTM company in relation to premises if –

(a)

it is a private company limited by guarantee, and

(b)

its articles of association state that its object, or one of its objects, is the acquisition and exercise of the right to manage the premises.”

Subsection (4) creates an exclusion, as follows:

“And a company is not a RTM company in relation to premises if another company is already a RTM company in relation to the premises or to any premises containing or contained in the premises.”

The Court of Appeal has recently considered section 73(4) in Assethold v Eveline Road RTM Co Ltd [2024] EWCA Civ 187, where Lewison LJ explained its purpose as follows, at [40]:

“Sections 73(4) envisages the theorical possibility of two RTM companies: one in respect of “premises” and another in respect of premises “containing or contained in” the premises. It solves that problem by preventing the second company from being an RTM company.”

In this case Brecon House RTM Co Ltd was incorporated on the same date as the appellant, 19 May 2022. At that time section 73(4) caused no difficulty, because the appellant’s objects did not include the acquisition of the right to manage Brecon House. The position changed when the articles of association of the appellant were amended to include the acquisition of the right to manage Brecon House as one of its objects.

The FTT decided, at paragraph 14 of its decision, that the appellant was not an RTM company in respect of the whole of the premises of which it claimed the right to manage because Brecon House RTM Co Ltd remained in existence. Mr Fain submitted that Brecon House RTM Co Ltd was not an RTM company and its objects were therefore irrelevant and did not engage section 73(4). He relied on the explanation of the scheme of Chapter 1 provided by Gloster LJ in Triplerose, at [62], which underpinned the Court of Appeal’s determination that an RTM company cannot acquire the right to manage more than one set of premises as defined in section 72(1):

“Accordingly in my judgment the relevant provisions of the Act, construed as a whole, in context, necessarily point to the conclusion that the words “the premises” have the same meaning wherever they are used (save where otherwise expressly provided). That means that the references in section 72 to “premises” are to a single self-contained building or part of the building, and that likewise reference to “the premises” or “premises” or “any premises” in section 73, 74, 78, 79 and other provisions of the Act are likewise references to a single self-contained building or part of the building. That interpretation is consistent with the provisions for model articles contained in the Regulations and is the only basis upon which the machinery for acquisition for the right to manage can operate.”

Mr Fain submitted that the reference to “premises” in section 73(4) meant premises to which Chapter 1 of Part 2 of the 2002 Act apply, as defined in section 72(1). That requires that those “premises” must themselves be a self-contained building or part of a building. It follows that a company which has as its object the acquisition of the right to manage premises which do not comprise a self-contained building or part of a building, as defined in section 72, is not an RTM company.

I accept Mr Fain’s submission on this point. A company is only an RTM company if it satisfies the description in section 73(2). Thus, a company can only be an RTM company “in relation to premises” and only then if its object is the acquisition and exercise of the right to manage those “premises”. Each of the references to “premises” in section 73 is to premises as defined in section 72(1), namely, to a self-contained building or part of a building. A company having as its objects the acquisition and exercise of the right to manage property which does not comprise a self-contained building or part of a building and which therefore does not comprise “premises” for the purposes of the Act (such as a single flat, or a number of flats in different parts of the building), is not an RTM company. In my judgment the existence of a company having those objects, which cannot itself be an RTM company, would not prevent the formation of a properly constituted RTM company whose objects were the acquisition and exercise of the right to manage the whole of the building (or a self-contained part of the building).

However, even if the appellant is right that, taken together, all three blocks are a self-contained building, it would still be necessary to determine whether Brecon House alone is or is not a self-contained part of that larger building. If it is, section 73(4) and the existence of Brecon House RTM Co Ltd at the time the appellant changed its objects to include the acquisition of the right to manage Brecon House, would prevent the appellant from being an RTM company in relation to the three blocks.

Whether part of a building is a self-contained part is to be determined in accordance with section 72(3) and (4). One requirement is that the part in question must constitute a vertical division of the building. Another is that the structure of the building must be such that it could be redeveloped independently of the rest of the building. Without even a plan of Brecon House showing its relationship to the structures within the underground car park it is not possible to know whether either of these conditions is satisfied. Section 72(4) imposes further conditions in relation to the separation of services, about which there is simply no evidence.

I cannot therefore be satisfied that the FTT was correct in its conclusion that the appellant is not an RTM company; the evidence available to it did not justify a conclusion one way or the other. Had it undertaken an inspection of the buildings it may have been able to make the necessary findings of fact. As it is, it made no relevant findings and did not consider the critical questions. I set aside its decision on this issue for those reasons.