Right to Manage – What is "significant interruption" to services under the Commonhold and Leasehold Reform Act 2002?

The Upper Tribunal has handed down its decision in a new RTM claim, which offers insight into what constitutes services and "significant interruption" under the 2002 Act. The Tribunal also gave a welcome reminder on the role of the First-tier Tribunal (Property Chamber) ("FTT") when assessing expert evidence.

Robert Boucher and Jenna Russell of Howard Kennedy acted for Oakwood Court Blocks 9 & 10 RTM Company Limited ("the RTM Company") in a successful application for right to manage, succeeding in the FTT, and on appeal to the Upper Tribunal (Lands Chamber). 

Right to manage claims continue to generate litigation more than two decades since its introduction. This decision acts as a timely reminder that the 2002 Act must be interpreted with its purpose firmly in mind, which is to enable leaseholders to exercise their right to manage their own building.  

Background

A pair of blocks, Blocks 9 & 10 Oakwood Court, which formed part of a larger building at Oakwood Court made a claim for right to manage. These blocks together constituted a self-contained part of the building and therefore satisfied the requirement under section 72 of the 2002 Act that it was a vertical division from the remainder of the building that was capable of independent redevelopment. 

The dispute arose because the landlord objected to the right to manage claim because it alleged the blocks did not satisfy section 72(4) of the 2002 Act. The landlord argued that certain services could not be provided independently to Blocks 9 & 10 without significant interruption to the occupiers of the rest of the building. If the landlord was right about that, Blocks 9 & 10 would not be entitled to the right to manage. 

The RTM Company succeeded at the FTT which decided that it was entitled to acquire the right to manage Blocks 9 & 10. The landlord appealed the decision to the Upper Tribunal on nine grounds, which focused on three key areas:

1. The individual services in dispute;
2. What is considered "significant interruption" for the purpose of the test under section 72; and
3. The expert evidence given at the FTT which included the role of the FTT in assessing expert evidence (as an expert tribunal) and the weight that the FTT gave to the expert evidence it heard.

The Upper Tribunal dismissed every ground of appeal. 

Oakwood Court revisited

Eagle-eyed practitioners will recognise the name of Oakwood Court. It is not the first time that part of this building has been the subject of litigation about rights that tenants of long leaseholders have been given by statute. 

In Oakwood Court (Holland Park) Ltd v Daejan Properties Ltd [2007] 1 E.G.L.R. 121, the leaseholders of Block 1 in Oakwood Court made a claim for collective enfranchisement. That claim was resisted by the landlord on the same basis as in this right to manage claim; that services could not be provided to Block 1 without significant interruption to the occupiers of the rest of the building. The wording of the test for enfranchisement (contained within the Leasehold Reform, Housing and Urban Development Act 1993) is identical to the wording in the 2002 Act. 

HHJ Marshall QC held in Oakwood Court (Holland Park) that a five-stage approach was needed to analyse what services the part of the building had that were not independent, whether they could be provided independently, and whether any interruption caused by providing the services separately would be significant. The Judge found in that case that Block 1 shared a boiler house with its neighbouring block (that was not part of the claim for enfranchisement), and that any separation of that service would cause significant interruption. The claim for enfranchisement failed.

Crucially in this case, the right to manage claim was  made by a pair of blocks that shared a boiler house. 

The legislative framework: Section 72 of the 2002 Act

Section 72 of the 2002 Act states:

"72 Premises to which Chapter applies

(1) This Chapter applies to premises if—

(a) they consist of a self-contained building or part of a building, with or without appurtenant property,

(b) they contain two or more flats held by qualifying tenants, and

(c) the total number of flats held by such tenants is not less than two-thirds of the total number of flats contained in the premises.

(2) A building is a self-contained building if it is structurally detached.

(3) A part of a building is a self-contained part of the building if—

(a) it constitutes a vertical division of the building,

(b) the structure of the building is such that it could be redeveloped independently of the rest of the building, and

(c) subsection (4) applies in relation to it.

(4) This subsection applies in relation to a part of a building if the relevant services provided for occupiers of it—

(a) are provided independently of the relevant services provided for occupiers of the rest of the building, or

(b) could be so provided without involving the carrying out of works likely to result in a significant interruption in the provision of any relevant services for occupiers of the rest of the building.

(5) Relevant services are services provided by means of pipes, cables or other fixed installations."

The focus of the FTT claim was on whether the premises complied with subsection 4. Expert evidence was adduced on both sides as to whether certain services were independent and if not whether they could be made independent without significant interruption to the occupiers of the remainder of the building. 

What constitutes a service?

The FTT claim and the subsequent appeal centred on the provision of independent services. 

The services the landlord raised objections about were in communal gas heating, hot water, lightning protection, door entry (intercom) system, access control system, telecoms system and fire alarm system. 

Section 72(5) of the 2002 Act identifies "relevant services" as "services provided by means of pipes, cables or other fixed installations."

The Upper Tribunal decided that:

• Porters who operate as part of a door entry system or access control system are not a "service" for the purpose of section 72(5) of the 2002 Act;
• The fact that telephone or broadband lines run through the basement of the property did not defeat the claim. This was because the basement was a non-demised part of the property which the landlord retains access to for maintenance. The simple fact that the cables run through a shared space did not pose an issue when establishing whether they are independent; and
• The expense of any works to separate services, nor the date by which it can be completed, are not criteria for the 2002 Act. 

What is "significant interruption"?

The most important aspect of the decision looks at what constitutes "significant interruption" for the purpose of the 2002 Act.

The question raised during this ground of appeal was whether such assessment should be made on a cumulative or individual basis when looking at multiple services which may be interrupted. 

The Upper Tribunal dismissed this ground of appeal and confirmed that this is a question of judgment by the FTT and that the Upper Tribunal will not interfere with that conclusion unless it is plainly wrong or irrational.

The Upper Tribunal therefore did not determine whether the test is a cumulative or individual assessment of interruption. Instead, they took a practical and common-sense approach, determining that the FTT was entitled to decide that a total of 22 hours of interruption was not significant, especially when some of that interruption time would not be experienced by each flat.

This decision serves as a practical benchmark for future right to manage claims, however practitioners should keep in mind that the FTT will be entitled to assess "significant interruption" on a case-by-case basis.

Expert evidence – a cautionary tale?

Much of the appeal was given over to the weight that the FTT placed on the expert evidence it heard, and its role as an expert tribunal. These grounds of appeal were met with scepticism by the FTT (which granted permission to appeal), and this scepticism was shared by the Upper Tribunal. 

The FTT expressed concerns about both parties' experts. The FTT identified that what matters is the cogency of the evidence it hears, and that the FTT will reach its conclusions on the totality of evidence before it. The Upper Tribunal agreed and found there were no grounds to disturb the findings that the FTT made on the evidence before it. 

The decision should also act as a reminder to experts that they should not assume the role of advocate and that they should not exaggerate or overstate their evidence in an attempt to put hurdles in the way of the other party. 

Conclusions

The FTT set out the approach it took as follows:

We consider it important not to lose sight of the wood for the trees and forget the purpose of the 2002 Act. Whilst the 2002 Act has spawned a considerable volume of litigation, the main objective of the legislation is clear and the intention was that the process should be “as simple as possible to reduce the potential for challenge by an obstructive landlord”: A1 Properties (Sunderland) Ltd v Tudor Studios RTM Company Ltd [2024] UKSC 27 at [25].

Without distorting the law or giving the statute a meaning that the language cannot support, we consider that we should construe this part of the 2002 Act in a practical way, so as to ensure that we do not render nugatory the rights conferred by the 2002 Act.

This approach was met by approval in the Upper Tribunal, describing it as "an entirely appropriate approach". 

Section 72(4) of the 2002 Act has now been considered twice by the Upper Tribunal, first in St Stephens Mansions RTM Co Ltd v Fairhold NW Ltd. [2014] UKUT 541 (LC), and now in Oakwood Court Blocks 9 & 10. 

It is to be hoped that these decisions give some clarity to how parties should assess shared services when considering, making or responding to a claim for the right to manage.

In particular, landlords should carefully consider whether objections are grounded in genuine challenges to the separation of services rather than speculative obstacles to defeat a claim, and whether they are falling into the category of "obstructive landlord" that the Supreme Court warned against in A1 Properties. 

For leaseholders in buildings with shared services this decision may provide renewed confidence for right to manage claims.

The decision is also relevant to claims for collective enfranchisement, where the relevant statutory language is identical.

The full decision of the Upper Tribunal can be read here.