On 7 February 2025, the Upper Tribunal handed down judgment in two appeals heard together concerning the right to manage legislation: The Courtyard RTM Co Ltd & others v Rockwell (FC103) Ltd & another; 14 Park Crescent Ltd & another v 14 Park Crescent RTM Co Ltd & another [2025] UKUT 39 (LC). The appeals were heard together as they both concerned the proper interpretation of s. 72(3) of the Commonhold and Leasehold Reform Act 2002 (“CLRA 2002”).
CLRA 2002, s. 72 defines the premises to which the right to manage applies. These include a “self-contained part of a building” within the meaning of s. 72(3). The Upper Tribunal considered various issues raised by the appeals as to the requirements of s. 72(3). In doing so, it has provided valuable guidance to First-tier Tribunals (“FTTs”) as to how to approach this issue in future cases.
Section 72(3) states:
“A part of a building is a self-contained part of the building if—
- it constitutes a vertical division of the building,
- the structure of the building is such that it could be redeveloped independently of the rest of the building, and
- subsection (4) applies in relation to it.”
Section 72(4) deals with independent service provision. Although one of the appeals raised an issue in relation to this provision, it was only a challenge to a factual finding of the FTT, which the UT rejected on the basis of existing authority.
There is relatively little pre-existing authority on what constitutes a “vertical division of the building” within s. 72(3)(a) and what is required for the structure of the building to be “such that it could be redeveloped independently of the rest of the building” within s. 72(3)(b). It is to these two aspects of the statutory test that the UT’s decision is primarily directed.
The properties
The RTM claims related to two very different types of property.
In The Courtyard case three RTM companies claimed the right to manage three buildings within a modern residential development in Liverpool. The right to manage was sought of each building down to basement level. The development included a large open plan basement car park. Part of the basement of each building included part of the basement car park. Because of the buildings’ connection to the car park, the RTM companies conceded that the buildings were not structurally detached and therefore could not constitute self-contained buildings within s. 72(2). The RTM companies therefore claimed that each building down to basement level was a self-contained part of a larger building within s. 72(3).
In the 14 Park Crescent case, an RTM company claimed the right to manage part of a residential terrace, which was originally constructed in 1820 and later used as the Central London County Court until its move to the Thomas More Building in 2014. The Crescent was redeveloped into flats between 2012 and 2018. The tenants of the flats in part of the Crescent claimed the right to manage it as a self-contained part of the building comprising the whole terrace.
Vertical division (s. 72(3)(a))
The UT held that the purpose and effect of s. 72(3)(a) were clear. It was to limit the acquisition of the right to manage to premises which do not overlap or underlap the remainder of the building of which they form part [46]. With this as its starting point, the UT determined five issues in relation to vertical division raised by the appeals.
- The UT decided that there is no requirement for the self-contained part of a building to have vertical faces on sides that are away from the point of division with the rest of the building [51]. It therefore rejected one landlord’s argument that projecting balconies on the far side of the building overhanging adjoining land could prevent the RTM company from satisfying the requirement of vertical division.
- The UT held that the requirement of vertical division applies only to the building elements that are physically connected to the rest of the building and did not include part of the premises unconnected to the rest of the building but which projects into the airspace above it. It therefore rejected one of the landlord’s arguments that a parapet which projected from the roof of the part of the building over the rest of the building prevented the RTM company from satisfying the requirement of vertical division [53-54].
- The fact that the notional dividing line between the part of the building and the rest of the building must 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 dividing line is a notional one [62]. Therefore, the fact that the notional line had to pass through a continuous basement slab or communal foundations did not prevent the RTM companies in the appeals satisfying s. 72(3)(a).
- To constitute a vertical division of the building, there must be a physical structure separating the premises from the rest of the building. As such, the right to manage could not be acquired over part of a building if that part shared a basement car park with the rest of the building and the car park was open plan, such that one could easily step or drive between the part of the car park over which the right to manage was claimed and the rest of the car park [73]. The RTM companies in The Courtyard case were therefore unable to satisfy the requirement of vertical division despite the fact that there was no real difficulty in identifying the area over which the right to manage was claimed.
- In order to satisfy the requirement of vertical division, it is unnecessary for the notional dividing line to form a straight line. Subject to the requirement that the notional dividing line must be vertical, it was permissible for it to deviate from a straight line (creating a “dog-leg”) [82]. Therefore, the fact that the notional dividing line needed to deviate by 90 degrees in some places was no bar to the acquisition of the right to manage in the 14 Park Crescent
Independent redevelopment
The UT held that the FTT was correct in the 14 Park Crescent case (LON/00BK/LRM/2023/0022) to conclude that the requirement in s. 72(3)(b) that the “structure of the building is such that it could be redeveloped independently of the rest of the building” simply meant that the premises over which the right to manage was claimed must be capable of being redeveloped while the rest of the building was not [88-89].
The conditions in s. 72(3)-(4) are purely physical tests, as the Court of Appeal confirmed in Eveline Road RTM Co Ltd v Assethold Ltd [2024] EWCA Civ 187; [2024] Ch 204, para. 36. The UT held that they therefore do not invite consideration of legal obstacles that might stand in the way of a redevelopment or of the RTM company’s entitlement to carry out redevelopment. What matters for the purposes of s. 72(3)(b) is the structure of the building and whether it lends itself to redevelopment at a time when the rest of the building is not being redeveloped [89; 92].
There was no reason to interpret “redeveloped” within s. 72(3)(b) as referring to building operations so comprehensive that nothing of the original premises remains. Whether sufficient work is involved in a particular scheme to merit the description “redevelopment” would obviously be a matter of degree, but something well short of complete demolition is likely to suffice [95]. Furthermore, the fact that a scheme of redevelopment might depend on providing support for adjoining structures until it was completed did not prevent the premises from being capable of independent redevelopment within s. 72(3)(b) [97].
Applying the above principles to the facts, the FTT had been correct in the 14 Park Crescent case to hold that the RTM company was entitled to acquire the right to manage. Meanwhile, the FTT in The Courtyard case had been wrong to find that the buildings failed to satisfy the requirement of vertical division because they shared an undivided basement slab. However, the RTM companies were nevertheless not entitled to acquire the right to manage as the parts of the building over which they claimed the right each included part of the open plan car park, which prevented them from satisfying the requirement of vertical division.
The UT decision is an important authority on CLRA 2002, s. 72(3), which has clarified various issues as to how the statutory test is supposed to work in practice. This is likely to provide more certainty to both landlords and tenants in future cases and reduce the scope for argument as to what does/does not constitute a self-contained part of a building.
Winston Jacob of Lamb Chambers appeared for the Appellants in The Courtyard case.