August 2018
By Ana Kandri – Legal Adviser at LEASE
CQN RTM Co. Ltd v Broad Quay North Block Freehold & Anor [2018] UKUT 183 (LC).
Leaseholders of flats have the right to self-manage their properties under the law by way of a Right to Manage company provided that certain criteria are complied with. One of these is that the building itself must be self-contained. This is complied with if the building is structurally detached from any other buildings. This is provided under s.72 of the Commonhold and Leasehold Reform Act 2002 (the 2002 Act).
If the building is not structurally detached, the leaseholders may not have the right to self-manage via a Right to Manage company and their claim to do so may fail.
This was the issue which had to be determined by the Upper Tribunal in the case of CQN RTM Co. Ltd v Broad Quay North Block Freehold & Anor. The Upper Tribunal handed down its decision on 31 July 2018.
The Upper Tribunal dismissed the appeal by the appellant and decided to uphold the decision of the First-tier Tribunal (Property Chamber) (F-tT). It found that the building was not structurally detached and therefore the claim for the right to manage by the leaseholders could not succeed. Whilst mutual reliance or inter-dependency may indicate structural attachment, its absence does not, imply structural detachment, provided some part of the essential or core fabric of the subject premises is attached to some part of the essential or core fabric of another building.
Facts
The claim concerned the right acquire the right to manage premises at Central Quay North, Broad Quay, Bristol BS1 4AU and 8 Marsh Street, Bristol BS1 4AX (‘the premises’) under Chapter 1 of Part 2 of the 2002 Act. These buildings formed part of a redevelopment which took place between 2004 and 2009. This involved the demolishing of existing buildings except for a central concrete frame Tower Block which was retained, and is now the Radisson Hotel. New buildings were constructed on the North and South side of the central Tower Block.
Residential units occupy floors 1-7 and consist of 95 private apartments (knows as Central Quay North) and 30 social housing flats (known as 8 Marsh street). Both buildings have separate entrances.
A ramp from Marsh Street runs down to an underground car park. The car park is mostly underneath the central Tower and the South Block. However, part of the ramp is under the premises (which are constructed to the north of the Central Tower Block), which at that point is supported by concrete pillars, two of which rise from the central kerb that separates the up and down lanes of the ramp. There are water storage tanks and a pump in the basement area. The residential tenants do not have the use of the car park.
The RTM company served a notice on 5 October 2016 claiming the right to acquire the right to manage on the respondent who are the owners and managers of the premises. The respondents replied by stating that they could not do so as the premises did not consist of a self- contained part of the building.
What did the F-tT decide?
The main issue before the F-tT was whether the premises qualified as either a self contained building or self contained part of the building (s.72(a) of the 2002 Act). The F-tT acknowledged that for the purposes of s.72(2) the building is either structurally detached in which case it is self-contained, or is not structurally detached in which case it is not self-contained. The F-tT stated that is necessary to clarify the meaning of structurally attached in this context. To do so, the question to ask is what degree of attachment would prevent a building from being structurally detached for the purposes of s.72 of the 2002 Act. There was evidence to suggest that the North Block building was simply abutting neighbouring property such as 8 Broad Quay and that this was structurally detached from the North Block.
The North Block and the Central Tower were also constructed separately and of different materials and there was no load bearing connection between them. There is a decorative façade that runs across the buildings but the F-tT held that this element does not make buildings that are connected by such feature “structurally attached”.
The claim from the RTM company that it had the right to acquire the right to manage failed.
The F-tT held that there is no single visible division when one looks at the connection between the buildings on physical inspection of the premises. This is evident when looking at the car park ceiling and the floor slabs, where they join underneath the Central Tower and the North Block. The connection is more then mere touching.
The RTM company appealed this decision but the F-tT refused to grant permission to appeal.
The F-tT clarified its reasons for the refusal by stating that on visual inspection it found that the North Block and Central Tower were not merely touching but the integrated connection between the two buildings went beyond that, and amounted to structural attachment.
They had applied the test as established in the case of No 1 Deansgate (Residential) Ltd v No.1 Deansgate RTM Co Ltd. Paragraph 59 of the F-tT’s decision in this case referred to the absence of a visible division between the buildings, but that had been to contrast the position with No 1 Deansgate where there had been such a division, if one disregarded the non-structural weathering strips that covered the gaps. The F-tT found that No 1 Deansgate was distinguishable from this case because in that case there was a clear divide between the building and the surrounding buildings, which was simply hidden by weathering strips. Thus there was no structural attachment. In the present case no such division is discernible.
The appellant RTM company applied to the Upper Tribunal for permission to appeal, and also to find that it had the right to acquire the right to manage the premises.
What did the Upper Tribunal decide?
The Upper Tribunal gave permission to appeal on one issue only–whether the premises consist of a self-contained building within the meaning of s.72(2) of the 2002 Act. The FTT had failed to give adequate reasons; merely stating one reason – that there was no visible division where the car park ceiling and the floor slabs joined underneath the premises and the central Tower Block.
- The appellant’s argument
The appellant RTM company submitted that it was not clear what the F-tT meant by “no single visible division”. The F-tT had further elaborated their decision by stating that there was no “integral connection” between the two buildings. These are terms that are not found in the legislation or in any cases. The appellant argued that the F-tT was wrong in law and its reasoning was inconsistent. It relied on something like “integral connection” without adequate explanation as to why the visual inspection, done by the F-tT, led it to find that the premises did not meet the test under the law, given the unchallenged structural evidence.
The appellant further argued that the witness statement and the evidence from Mr Booth, who had been closely connected with the construction of the premises, suggested that the floor slabs and supporting structure were separate, and nothing was proven otherwise. What the F-tT members saw when they inspected the premises, was that there was no gap between the buildings. The F-tT’s visual inspection could only have been superficial, but it was obvious from the plans that structurally the buildings remain detached. Mr Booth’s evidence suggested that the floor slabs merely touch. They are separate and supported by two different sets of pillars (steel for the hotel extension and concrete for the premises). The floor slabs do meet, but they simply touch and are not connected.
- Respondent’s argument
The respondent submitted that the correct approach is first to identify which part of the premises are attached to some other building, and then, having regard to the nature and degree of the attachment, whether the premises are structurally detached. The fact that the premises are independent load-bearing structures does not mean that the buildings are structurally detached. The FTT having the benefit of the inspection of the building, had accepted that there was no load bearing connection. Nevertheless, they had found a sufficient degree of attachment and had cited two examples; the car park ceiling and the floor slabs.
- Decision of the Upper Tribunal
The Upper Tribunal dismissed the appeal and upheld the decision of the F-tT. It held that the F-tT had applied the correct test in law and it had found as a fact that the degree of attachment between the premises and the neighbouring hotel extension was insufficient to make the premises not “structurally detached”.
The F-tT recognised that (1) a connection by way of weathering materials did not prevent one building from being structurally detached from another, (2) accepted the appellant’s argument that there was no load bearing connection between the premises and the central Tower Block, and (3) a decorative façade that runs across buildings did not make them structurally attached to each other.
The Upper Tribunal decided to follow the meaning of “structurally detached” as established in the case of No1 Deansgate and the case of Albion.
In the case of No1 Deansgate, The Upper Tribunal accepted the argument presented by the respondent in that case, that to construe “structurally detached” as requiring the absence of any attachment, or touching, between the subject building and any other structure was to construe s.72(2) as though it said “detached” or “wholly detached” rather then “structurally detached”. It held that what was required (to construe the meaning of the “structurally detached”) was that there should be no structural attachment (as opposed to non-structural attachment) between the building and some other structure.
In the case of Albion Residential Limited v Albion Riverside Residents RTM Company Limited, the Upper Tribunal agreed that the words “building” and “structurally detached” had not been defined in the 2002 Act and should be given their ordinary meaning. The Upper Tribunal in the case of Albion, identified a two stage enquiry; first it is necessary to identify the premises to which the claim relates, and then whether the building which is the subject matter of the claim is self-contained, i.e. structurally detached. It further held that where continuous concrete structures, the ground and the basement floor slabs, are major integral components both of the building and of the car park, the piazza and Building 1, it is not possible to regard the building as structurally detached.
“The desirability of avoiding disputes and uncertainty about running costs if repairs are needed to shared structural elements, or where redevelopment is contemplated, is but one of the reasons why Parliament thought it appropriate for an RTM company to manage premises which are self-contained, and which in consequence are susceptible to being managed as a discrete unit”.
The F-tT had regarded the car park ceiling and its floor as a single and indivisible structure which straddled both buildings. This meant that they could not properly be regarded as being “structurally detached”. The F-tT rejected the need for there to be any load-bearing connection between the two buildings. Whilst mutual reliance or inter-dependency may indicate structural attachment, its absence does not, imply structural detachment, provided some part of the essential or core fabric of the subject premises is attached to some part of the essential or core fabric of another building. The F-tT had found that the visual inspection did not lead to the conclusion that there was a mere touching, but that the integrated connection between the two buildings went beyond that, to amount to “structural detachment”. On the basis of the visual inspection, it had concluded that the car park ceiling and its floor, or base, constituted a single composite structure.
What are the implications of this case for leaseholders?
Leaseholders ought to be aware of the qualifying criteria under the legislation before embarking on a claim to acquire the right to manage. As this case demonstrates, it may be difficult to establish from the outset whether the building qualifies as being structurally detached. Seeking professional advice may be helpful before starting the claim if there are doubts as to whether the building is structurally detached. As Judge Hodge QC stated in this case, the aim behind setting out such qualification criteria by Parliament, is to avoid any future uncertainty and disputes when running costs and repairs are concerned, in developments that share structural elements.
Further reading
Right to Manage – Advice guide
Important Court of Appeal judgment regarding Right to Manage and multi-building estates
