[2025] UKUT 39 (LC)

I begin with two preliminary points.

First, each of the conditions in section 72(3) describes a different aspect of the self-containment required for premises to be a self-contained part of a building. The few cases in which the definition has been considered have tended to focus on one or other of the conditions, but in interpreting each of them it is relevant to keep in mind that they are collectively intended to describe a single thing, “a self-contained part of a building”. The label which the statute applies to that thing is an important point of reference when trying to understand what the individual conditions mean. As Lord Hoffmann explained in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101 (although there speaking of a contractual rather than a statutory label):

“The words used as labels are seldom arbitrary. They are usually chosen as a distillation of the meaning or purpose of a concept intended to be more precisely stated in the definition. In such cases the language of the defined expression may help to elucidate ambiguities in the definition or other parts of the agreement.”

Secondly, in Craftrule, Smith LJ commented on the ‘rather odd’ expression ‘vertical division’ and implied that the natural meaning of ‘division’ was ‘a line of no thickness’. While that is one meaning of ‘division’, the word has a number of related meanings. A division is also one of the parts into which an object can be divided; a portion, or section. It can therefore refer both to the plane through which something is divided, and to the segments produced by the act of dividing it. Smith LJ explained that in this context the expression means that “the premises must be a vertical slice of the building”. But “slice” has the same dual meaning as “division”; it can be either a cut, or, the piece which is cut from something larger. In section 72(3)(a) the sentence as a whole indicates that the word “division” is there being used to refer to a part of a building, with substance and dimensions, rather than to a line of no thickness drawn through a building: it is the whole slice of cake, not just the line along which the cake is cut.

Although section 72(3)(a) might appear rather odd, its purpose and effect are clear. A self-contained part of a building must be a part of the building divided vertically, not horizontally. The effect is to limit the acquisition of the right to manage (or collective enfranchisement in the case of the 1993 Act) to premises which do not overlap or underlap the remainder of the building of which they form part.

In the case of the 1993 Act the requirement of vertical division has been said by the Law Commission to be important to prevent the creation of flying freeholds (Law Commission, Leasehold home ownership: exercising the right to manage, No 243, January 2019 at paragraph 2.74). The particular vice of flying freeholds is that they give rise to practical problems in relation to maintenance and support, which cannot be dealt with by covenant since the burden of a positive covenant does not run with freehold land. Under the right to manage, no ownership passes so the specific issues which may have been a concern to the drafters of the 1993 Act do not arise directly. Nevertheless, the statutory context and language are so closely aligned that it seems unlikely, though not impossible, that the test of self-containment should be different as between the 1993 and 2002 Acts. For the purpose of the 2002 Act it must have been considered important to avoid the creation of separate management responsibilities for overlapping parts of the same building.

Taken together, these preliminary points lead to a general observation about how the issue of vertical division might usefully be approached. In the course of argument in the appeals, and in the decisions of the FTT, attention was focussed exclusively on the location and features of one or more notional lines drawn through the relevant building either where it abutted its neighbour or on each of its sides. In Mr Bates KC’s submission these lines had to be straight and had to be capable of being drawn ‘from the earth to the sky”. I do not disagree that the boundaries between the premises and the rest of the building must be considered carefully, but the statutory language identifies a single wider question. That is, whether the premises as a whole are a vertical division of the larger building of which they are part, which I take to mean a vertical division rather than a horizontal division or any other configuration. That is the question to be determined, not whether a particular boundary line deviates from the vertical plane.

I can now address the issues concerning vertical division in both appeals.

First, in the Plaza Boulevard case the FTT accepted that it was necessary that no part of the premises should overlap any other land (unless the extent of the overlap was de minimis). It was “not persuaded … that it is sufficient for the test in s.72(3)(a) to be satisfied that there is established a vertical division in respect of one face only of the building in question”. It therefore had to address the four bays, or blocks of balconies, which projected over the public highway from the Sefton Street elevation of the Terrace and constituted a “deviation from the vertical line which runs down the steel frame wall”. These features are unconnected to any part of the Estate which is not itself included in the claim and they do not project over the podium or the car park.

Mr Allison, for the second respondent, did not seek to uphold the FTT’s reasoning on this point, and he was clearly right not to do so. There is no requirement that, to constitute a self-contained part of a building, premises must not overhang land which is not part of the larger building of which the premises form part. There is no requirement that the facades of the premises be free of projections, or bays or overhangs; what is required is that the part of the building over which the right to manage is claimed must “constitute a vertical division of the building”. The only boundaries of the premises which are relevant to this requirement are those which are connected to the rest of the building.

That much is obvious, and no contrary argument has been presented. It disposes of one of the FTT’s reasons for rejecting the claim in relation to The Terrace and makes it unnecessary to consider whether it was entitled to treat the projecting balconies as a de minimis deviation from the vertical face of the building. It also disposes of the step projecting from the vertical plane of the mews building at Park Crescent, which is not connected to the remainder of the building.

The second and trickier issue is whether the requirement of vertical division applies not only to those building elements which are physically connected to the rest of the building, but also to parts of the premises which are unconnected to the rest of the building but which project into airspace lying above it. The Terrace is structurally attached to the rest of the Estate (i.e. to the podium and the car park) at ground floor and basement levels only. Above the podium there is only airspace. The flank walls and the rear wall of the Terrace abut that airspace, with no further connection of any kind to the rest of the Estate. But at the very top of the flank walls and the rear façade, a parapet projects out into the airspace. The parapet is eight storeys above the podium, but Mr Allison submitted that it prevents the Terrace from constituting a vertical division of the Estate as a whole.

I do not accept that submission. It is not supported by the language of section 72(3)(a), which requires only that the premises constitute a vertical division “of the building”. There is no division between The Terrace and the remainder of the building at the level of the parapet, and The Terrace is not prevented from being self-contained, as that expression would ordinarily be understood, by the projection of the parapet. Nor is Mr Allison’s submission supported by consideration of the assumed purpose of restricting the right to manage to premises which comprise a vertical division of a building. No difficulty arises in relation to the enforcement of rights of support or maintenance part of the premises is not connected to the remainder of the building. The parapet derives no support from the podium or car park and will not be prejudiced by their general state of repair.

It is true that, as a general principle of law, ownership of the freehold or leasehold of a building carries with it the airspace above the built structure. That principle led the Court of Appeal in L M Homes Ltd v Queen Court Freehold Company Ltd [2020] EWCA Civ 371 to conclude that, in a collective enfranchisement claim under the 1993 Act, the nominee purchaser was entitled to acquire not only the freehold of the building itself, but also the airspace above it. Under section 1(1), 1993 Act, the qualifying tenants were entitled to acquire the “premises” which comprised “the building”. As Lewison LJ explained, although the primary meaning of a "building" may well be a built structure, the context may require a broader meaning. A “building” is not necessarily confined to bricks and mortar and in the 1993 Act its meaning can extend to the airspace immediately above the building necessary to enable maintenance to be carried out. But for the purpose of the 2002 Act, when the issue is whether part of a building constitutes a vertical division of the building as a whole, I do not consider that anything said in L M Homes compels a negative answer simply because part of the premises extends a short distance into the airspace eight storeys above the remainder of the building.

If I am wrong in that conclusion, and the presence of the parapet in the airspace over the podium is a relevant consideration, it would be necessary to consider whether the degree to which the premises did not constitute a vertical division of the building was de minimis. The extent of the projection, the practical consequences of its presence in the airspace, the rights and responsibilities which the RTM company would have in relation to it would all need to be considered before a judgment could be formed on that question. On the other hand, the entrance porch which projects beyond the face of the block on the podium side and which is presumably connected to the podium itself, is an example of a feature which if necessary I would have no hesitation in treating as de minimis.

I am therefore satisfied that neither The Terrace’s projecting bays or balconies, nor its projecting parapet, prevent it from being a self-contained part of a building.

Thirdly, the FTT also decided that each of the Plaza Boulevard blocks failed the test of self-containment because a vertical line drawn down the face of the building to reach basement level would hit the concrete basement floor slab (it would also pass through the podium, unless the line was drawn tightly to the steel frame which would leave the cladding attached to it outside the premises). In contrast, the FTT which determined the Park Crescent application was untroubled by the fact that a vertical line drawn down the internal face of the party wall of No.14 would pass through the solid foundation supporting the wall. It dismissed the landlord’s objection saying: “there is nothing objectionable about running the dividing line through a shared part of the building”. So the question is, does it matter if a notional line dividing the premises from its neighbour intersects a solid building component running perpendicular to the line?

For the Plaza Boulevard RTM companies, Mr Jacob argued that for the purpose of the test of self-containment the division of the building is notional rather than physical and that it did not matter if the notional division passed through the basement floor slab. The contrary case was argued in different ways by each of the three counsel for the landlords.

In the Plaza Boulevard case Ms Rai, who was concerned only with The Courtyard and the Studios, conceded that it was not necessary for there to be “an identifiable physical division through the entire building in a vertical line” but nevertheless supported the FTT’s approach on the basis that “due to the nature of the continuous slab, the building cannot be divided”. Mr Allison could find relatively little to say in support of the FTT’s approach. He too accepted that there was no need for physical separation along the line of a vertical division, but he stressed the importance of certainty over where the management responsibilities of the RTM company were to begin and end. He assembled a collection of building components which he said had not been properly considered by the FTT and where the location of the notional dividing line was unclear. He also relied on the fact that the basement slab served the whole of the development, and many parties who were not leaseholders in The Terrace had rights over it. As the Supreme Court’s decision in Settler’s Court demonstrated, it was not part of the policy of the Act for an RTM company to have management of areas which were used in common with third parties. I will come to that point later.

In the case of a conventional terrace the boundary between one building and the next is likely to be a notional one running down the midline of the party wall, which will usually, or often, be a solid structure. The self-contained part of the terrace which the Court of Appeal considered in Eveline Road shared a party wall with the remainder of the terrace (paragraph [13]) but it was not suggested that that was a problem. It is difficult to see why it should be thought to create a problem, whether the building is a conventional terrace or a more elaborate structure. The law has no difficulty in coping with the repair of party structures, or protecting the rights of owners on one side or the other when work has to be done to in the vicinity of a party wall. There is no practical problem between adjoining owners and no reason why there should be between an owner and an RTM company.

Standing back and considering whether the premises as a whole constitute a vertical division of the building as a whole, the precise route of the notional dividing line between the premises and the rest of the building risks becoming a distraction and should not be taken to the extremes that have featured in these cases. In my judgment the FTT which decided the Park Crescent case was correct on this issue and the fact that a notional dividing line between the premises and the remainder of the building (wherever precisely it may be drawn) would have to pass through a solid structure running perpendicular to that line is no obstacle to the premises constituting a vertical division of the building. That is because the line is a notional one.

The FTT was therefore wrong to conclude that none of the Plaza Boulevard blocks could pass the test of self-containment because they shared an undivided basement slab. It follows that the issue raised in the cross appeal concerning the significance of the movement joint in the basement slab beneath The Studio does not arise.

The point was argued differently by Mr Bates KC in the Park Crescent appeal. He referred to the evidence about the way in which the foundations of the party walls between No.14 and its neighbours had been created: Mr Ilsley had explained that “the new foundations of No.14 now span under and in the voided areas of the neighbouring properties”. The whole of these new foundations served and belonged to No.14 and, Mr Bates KC suggested, they were all part of the premises over which the right to manage was claimed. There was no difficulty in drawing a notional line through the solid foundations, but that would leave part of No.14’s foundations on the wrong side of that line.

I do not accept that submission. There is no relevant sense in which the foundations on one side of a party wall “belong to” the building on the other side. Each building has rights of support from the foundations, but the foundations themselves are not jointly owned, let alone owned by one owner to the exclusion of the other. Each owner owns up to the midpoint of the party wall and the foundations beneath it. To put it another way, the foundations on the No.12 side of the party wall are not part of the premises over which the right to manage is claimed and it is therefore unnecessary to consider whether they prevent No.14 from constituting a vertical division of the Crescent.

Although Mr Bates KC did not have difficulty with the notion that a building might notionally be divided through a solid wall or foundation, he still relied on the off centre movements joints on the front and rear elevations as creating a problem for the RTM company. I do not see why. The movement joints do not define the boundaries of the premises, which conventionally run through the midpoint of the party walls. They are therefore of no more relevance to the vertical division requirement than the common foundations.

The next issue arises only in the Plaza Boulevard cases. It is related to the debate over whether it is necessary for there to be a physical division through the building. The FTT had focussed on the absence of a division through the undivided floor slab, but the respondents also argue that the undivided basement car park extending beneath each of the blocks in the complex means that none of those blocks is a self-contained part of a larger building.

At basement level there is no real difficulty in identifying the area over which the right to manage is claimed for The Terrace, The Studios and The Courtyard. In most locations it is marked by solid walls enclosing the basement storerooms or service areas beneath the individual blocks. In other areas it is delineated by the lines of steel columns which support the blocks. But in those locations one can easily step or drive between the columns and across the expansion joint, where it is present, and so pass unimpeded from the area of the basement for which the right to manage is claimed to the remainder of the Estate over which it is not claimed.

Third parties, without any interest in any of the blocks, have rights to park in the parking spaces immediately under the blocks; in some instances tenants of flats in one block may also been leased parking spaces under a different block.

These features of Plaza Boulevard, which are typical of many substantial modern developments, pose the question whether the requirement that the premises must constitute a “vertical division of the building” can be satisfied where part of the premises over which the right to manage is claimed is undivided from the remainder of the building.

Mr Jacob submitted that the purpose of requiring that the premises be a vertical division of the building was to enable the right to manage premises to be clearly identified and to prevent horizontal layers of management. Neither of these considerations was undermined by permitting the premises to contain an area undivided from the rest of the building. A notional dividing line could be drawn in an obvious location leaving the area beneath each block lying within the RTM premises and leaving management of the remainder of the car park with the landlords.

Mr Jacob acknowledged that the consequence of extending the right to manage to only part of the car park would be that responsibility for practical matters such as cleaning, lighting, signage and road markings would be divided between the landlords who would manage most of the car park and the three RTM companies which would each manage the portion of the car park lying immediately beneath their own block.

I do not accept Mr Jacob’s submission. At basement level the car park beneath the individual blocks is not part of self-contained premises in the ordinary sense; it is open-plan and undivided. It is only by drawing a notional line on a plan that a division is achieved, but this is an instance where focussing on a notional dividing line is liable to distract from the real question. To achieve a vertical division the premises must incorporate part of the car park because otherwise the footprint of the buildings at basement level would be smaller than at higher levels, creating an impermissible overhang. But by bringing in part of the car park the premises cease to be a division of the building. There is no division at that point. It does not seem to me to be an apt description of the part of the car park beneath the individual blocks to say that they each form part of a vertical division of the building otherwise consisting of the block above them.

Additionally, it seems to me to be unlikely to have been intended that the management of what in practice is an undivided space would be divided between the building owner and an RTM company. Such a division of responsibility is impractical, and is not contemplated by the RTM regime, as Lord Briggs JSC explained in Settlers Court, at [35]:

“[…] the RTM company has the right to perform its allotted functions itself, to the exclusion of any participation by the landlord, third party manager or even a manager appointed under the 1987 Act, save to the extent that the RTM company agrees otherwise. That is a very powerful pointer to a construction which confines the right to manage to that which the RTM company can manage on its own, namely the structure and facilities within the building or part of it constituting the relevant premises and, where they exist, those facilities outside it which are exclusively used by the occupants of the relevant premises.”

One difficulty which the RTM company would face is that others who are not tenants of the block have been granted rights, including in some cases leases, of parking spaces within the area over which it claims the exclusive right to manage. Lord Briggs anticipated the sort of problems that might arise, at [36]:

“The apparently unconstrained right of the RTM company to perform its management functions on its own runs into insuperable problems if those functions are construed to include management of shared estate facilities. This is because the landlord or third party manager will have the right and obligation to manage those facilities under the potentially very large number of leases of flats outside the RTM company’s allotted single block. All those tenants will have the right under their leases to insist that the landlord or third party manager (and no-one else) performs those functions, and it would be a very strong thing to read section 97(2) as taking that right away from them.”

I appreciate that the issue determined by the Supreme Court in Settlers Court was not concerned with the definition of “the premises”in the 2002 Act, but rather with the extent to which an RTM company was entitled to manage “appurtenant property”, as defined in section 112(1), where that appurtenant property was used in common by the tenants of all blocks on an estate. But the problems of managing appurtenant property used in common cannot be overcome simply by designating it as part of the premises, which is effectively what the RTM companies at Plaza Boulevard are forced to propose in order to bring their blocks within section 72(3)(a). Parts of a complex estate which have been left physically undivided from the remainder despite occupying the same footprint are often designed for joint use and call for common management of the sort which the RTM regime is not intended to provide. That consideration points strongly away from construing section 72(3)(a) as including such undivided spaces within the vertical division of the building to which the right is confined.

Although this was not the basis on which the FTT found against the RTM companies, it did consider that, because of Settlers Court, the premises could not extend beyond the footprint of each block because it would incorporate part of the basement car park. It did not apply the same logic to the area of car park within the footprint of each block, but, in agreement with Mr Allison and Ms Rai, I am satisfied that the presence of the undivided car park beneath each of the three blocks, means that individually the blocks do not constitute a vertical division of the Estate as a whole. That is fatal to the RTM claims at Plaza Boulevard.

The remaining vertical division issue in the Park Crescent appeal arises out of the configuration of the boundaries of No.14. A notional vertical division between No.14 and its neighbours would not be a completely straight line but would deviate in places, particularly at the rear, turning 90^o to the left or the right, to go round the projecting balcony of No.98. These dog-legs were said by Mr Bates KC to be fatal to the vertical division of the premises. He advanced a number of reasons why that was so, none of which I found convincing.

First, he submitted that the requirement is for “a” vertical division between the premises and its neighbour, and that there is no reference to “dog legs” in the Act. But that is not what section 72(3)(a) requires; what it requires is that the premises constitute a vertical division of the building. That division will usually have four walls, with those at the front and back usually being at right angles to the party walls separating the premises from its immediate neighbours. Nothing in that configuration prevents the premises from constituting a vertical division of the building and I can see no reason why twists and turns in the party walls themselves should do so.

Secondly, Mr Bates KC suggested that “multiple vertical divisions” would create uncertainty about the extent of the RTM company’s repairing responsibilities. I do not see why that should be, as those multiple vertical divisions do not create any uncertainty about where No.14 ends and its neighbours begin.

Thirdly, Mr Bates KC argued that the vertical division test must have been intended to exclude some properties from the right to manage and he asked rhetorically, if multiple vertical lines, dog legs etc are permissible, then what properties are excluded? The answer is simply that premises which do not constitute a vertical division of the building because they lie immediately above or below a part of the building which is not included in the claim are excluded.

In summary, section 72(3)(a) says nothing about the need for a perfectly straight boundary between the premises and its neighbour and no such requirement can be read into it.