“Vertical Division” under the 2002 Act Requires a Physical Division: Undivided Basement Car Parks Defeat RTM Claims

Court: England and Wales Court of Appeal (Civil Division)
Neutral citation: [2026] EWCA Civ 712
Date: 9 June 2026
Appeals from: Upper Tribunal (Lands Chamber), Martin Rodger KC (Deputy Chamber President), [2025] UKUT 39 (LC)
Judges: Miles LJ (lead), Singh LJ, Foxton LJ

1. Introduction

This joined decision concerns the statutory “right to manage” (RTM) under Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”). In each appeal, an RTM company sought to establish that the premises claimed were a “self-contained part of a building” under section 72(3).

Two factual settings were considered:

  • Plaza Boulevard (Liverpool) (“PB appeal”): three residential blocks within a larger estate, all structurally connected at basement level by a single, open-plan underground car park and connected at ground level by a central podium. The RTM claimants contended each block was a self-contained part of the larger building.
  • 14 Park Crescent and 8 Park Crescent Mews East (London) (“No. 14 appeal”): premises within a terraced regeneration scheme, separated from neighbours by party walls, with arguments about misaligned façade movement joints and shared/overlapping foundations.

The key legal issues were:

  • What does it mean for premises to “constitute a vertical division of the building” (section 72(3)(a))—can the “division” be purely notional on a plan, or must there be an actual physical division?
  • What does “could be redeveloped independently” (section 72(3)(b)) require—must one assume complete demolition and reconstruction without any temporary works, neighbour cooperation, or impact?

2. Summary of the Judgment

  • PB appeal dismissed: the Court of Appeal upheld the UT’s conclusion that each block failed the “vertical division” requirement because the claimed premises necessarily included an undivided portion of an open-plan basement car park; a merely notional line through open space cannot supply the “division” required by section 72(3)(a). The Court did not decide the parapet point.
  • No. 14 appeal dismissed: the Court upheld the UT/FTT that the premises were a self-contained part: party walls can define the vertical division, and a dog-leg plan-form boundary does not offend section 72(3)(a). Foundations arguments failed because the test is physical and does not turn on asserted “ownership” of foundations on the other side of a party wall.
  • Independent redevelopment clarified: section 72(3)(b) is a structural/physical test meaning “redevelop without redeveloping the rest”, not a “scorched earth” complete-demolition test; temporary supports can be assumed; neighbour consent/impact is not part of the statutory criterion.

3. Analysis

3.1 Statutory Framework and the Two Core Tests

Section 72(1)(a) limits RTM to premises that “consist of a self-contained building or part of a building”. A “self-contained part” must satisfy all of section 72(3)(a)-(c):

  • Vertical division (72(3)(a));
  • Independent redevelopment (72(3)(b));
  • Services separability (72(3)(c) read with 72(4));

The present appeals turned on 72(3)(a) and (b); services did not ultimately feature ([130]).

3.2 Precedents Cited and Their Role

(a) Settlers Court RTM Co Ltd v FirstPort Property Services Ltd [2022] UKSC 1, [2022] 1 WLR 519 (“Settlers Court”)

Although Settlers Court concerned the scope of “appurtenant property” and estate facilities (rather than whether premises satisfied section 72(3)), it was influential in two ways:

  • It characterised section 72 as imposing “an entirely physical set of qualification requirements” ([42] of Settlers Court, applied at [85]). This supported the Court of Appeal’s treatment of section 72(3) as focused on built form, not legal title or managerial convenience.
  • It emphasised the RTM company’s “apparently unconstrained” exclusive management role and the “insuperable problems” of shared management of common facilities under multiple leases ([35]-[36] of Settlers Court, quoted at [101]). While not determinative, this informed the Court’s “workability” lens when assessing whether Parliament contemplated RTM over an undivided, shared car park.

The Court accepted that Settlers Court was not directly on the vertical-division question ([103]), but held its practical emphasis was relevant to interpretation ([104]-[105]).

(b) Eveline Road RTM Co Ltd v Assethold Ltd [2024] EWCA 187, [2024] Ch 204 (“Eveline Road”)

Eveline Road supplied a key statement of principle: whether premises meet the “self-contained building or part” definition is “a purely physical test” focused on “the built envelope, its internal structure, and the separability of services” ([36] in Eveline Road, applied at [84]). This was central to rejecting the No. 14 landlords’ attempt to turn “vertical division” into a dispute about who “owned” particular foundations.

(c) 9 Cornwall Crescent London Ltd v Kensington & Chelsea [2005] EWCA Civ 324, [2006] 1 WLR 1186 (“Cornwall Crescent”)

Cited for a pro-tenant, purposive approach to leasehold reform legislation ([53], [106]). The Court accepted purposive construction but cautioned (by reference to Day v Hosebay Ltd) against reading the statute as conferring more than Parliament intended ([106]).

(d) Day v Hosebay Ltd [2012] UKSC 41, [2012] 1 WLR 2664

Used as the counterbalance to a one-way “beneficial” construction: purposive interpretation must not “go beyond” legislative intention ([106]).

(e) Consensus Business Group (Ground Rents) Limited v Palgrave Gardens Freehold Company Limited [2020] EWHC 920 (Ch), [2020] L&TR 12

Though an enfranchisement case under the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”), it offered an important factual analogy: a basement car park under multiple blocks, formed by a continuous slab with no walls obstructing passage. Falk J rejected as “artificial” the idea that a block could be “self-contained” when part of it (the basement car park portion) was “patently not self-contained” ([114]-[117] of that decision, discussed at [108]-[109]). The Court of Appeal treated that “common sense” reasoning as applicable to “self-contained part” as well ([109]).

(f) Holding and Management (Solitaire) Ltd v 1-16 Finland Street RTM Co Ltd [2008] L&TR 16 and L M Homes Ltd v Queen Court Freehold Company Ltd [2020] EWCA Civ 371, [2020] QB 890

These arose via the PB landlord’s respondent’s notice on the “parapet/airspace” issue ([60]). The Court of Appeal declined to decide the parapet question because it was unnecessary given its conclusion on the basement car park ([112], [128]). However, it indicated there was “much to be said” for the UT’s approach ([112]).

3.3 Legal Reasoning

(A) “Vertical division” requires an actual physical division, not a purely notional line through undivided space

The Court drew a sharp distinction between:

  • Using a notional plane to locate the boundary through an existing dividing feature (e.g., the midpoint of a party wall); and
  • Treating a notional line as if it creates the dividing feature where there is none.

In the PB estate, at basement level the claimed premises necessarily included portions of an open-plan car park through which vehicles and persons could pass “unimpeded” between “managed” and “unmanaged” areas ([35]). That openness meant there was no physical division at basement level. A division could be achieved only by drawing lines on a plan—“virtual or imagined”—which was held insufficient ([99]).

Three strands supported this construction:

  • Textual contrast within section 72: section 72(3)(a) is expressed in actual terms (“constitutes”), whereas 72(3)(b) is explicitly hypothetical (“could be redeveloped”) and 72(4) similarly alternates between actual and hypothetical tests ([94]). This indicated that Parliament intended 72(3)(a) to ask whether the building is divided, not whether it could be divided.
  • Legislative borrowing from enfranchisement: section 72(3) uses materially the same language as section 3 of the 1993 Act, where “vertical division” helps avoid “flying freeholds” and presupposes physical separability ([79], [95]).
  • The natural meaning of the defined term: “self-contained part of a building” naturally connotes a part bounded by actual dividing features, “complete in itself”, not something “merely… drawn on a plan” ([96]).

The Court also endorsed “common sense” considerations and the workability concerns highlighted in the UT and in Settlers Court. An undivided, jointly-used car park is a paradigmatic shared facility calling for common management; splitting it would create impractical and potentially incoherent allocations of cleaning/lighting/security and cost recovery ([100]-[105]).

(B) In terraced structures, party walls (and their foundations) can define vertical division; “dog-leg” boundaries are permissible

For No. 14, the Court rejected the landlords’ attempt to defeat “vertical division” by arguing that foundations “belonged” to No. 14 even where they extended under adjacent property. The decisive points were:

  • The test is “purely physical” and “not… ownership of land” ([84]).
  • A notional plane through the centre of the party wall is an accepted method to identify the boundary; there is “no sensible reason” not to extend the same notional plane down through the foundations ([87]).
  • The “shared management” concerns from Settlers Court do not translate to the maintenance of party-wall foundations; otherwise, terraces would be excluded from RTM, which cannot be right ([88]).

The Court further held there is no statutory requirement that the boundary be a single straight line in plan or that “a” vertical division means only one perfectly straight vertical plane. A “dog leg” does not reintroduce the flying freehold mischief that the verticality criterion addresses ([89]).

(C) “Independent redevelopment” is not a “scorched earth” demolition-without-impact test

The Court decisively rejected a maximalist reading of section 72(3)(b):

  • “Independently” means “without the rest of the building being redeveloped at the same time”, not without any neighbour consent, cooperation, reliance, or “impact” ([116]-[120]).
  • “Impact on others” is unworkable as a criterion: almost any redevelopment affects neighbours (noise, disruption), and even management failures in terraces can affect adjoining owners ([117], [119]).
  • Temporary supports are not excluded: many redevelopments require props and restraints; nothing in the statute forbids assuming them as part of the hypothesis ([121]).
  • “Redeveloped” is an ordinary word; it does not require complete removal of every element (including foundations). Whether works amount to “redevelopment” is “fact and degree” suited to specialist tribunal evaluation ([122]-[126]).

This analysis also disposed of the landlords’ arguments (in both appeals) that independent redevelopment must assume complete demolition of steel frames/foundations and the impossibility of propping adjacent structures ([122]-[127]).

3.4 Impact

(1) A new practical boundary for RTM claims in multi-block estates with shared basements

The most significant development is the Court’s clarification that section 72(3)(a) requires an actual physical division, not merely a notional “slice” on a plan through open, undivided space. This makes it materially harder for RTM companies to claim individual blocks as “self-contained parts” where:

  • a continuous basement slab supports multiple blocks; and
  • the basement level is open-plan and functionally shared (e.g., car parks, plant areas, service corridors) without physical demarcation.

Developers, landlords, and tenant groups will likely focus on whether (and how) basements are structurally and physically subdivided if future RTM eligibility is desired.

(2) Strengthened viability of RTM in terraces and complex historic/regen schemes

Conversely, the decision supports RTM claims in terraced or attached contexts by confirming:

  • party-wall boundaries can be treated as vertical divisions even if foundations are complex or extend below ground; and
  • vertical division does not require a single straight line in plan (dog-leg divisions can qualify).

(3) A restrained, workable interpretation of “independent redevelopment”

The Court’s approach prevents section 72(3)(b) from becoming a near-universal disqualifier for attached buildings. By rejecting “complete demolition” and “no impact on neighbours” glosses, the test remains a realistic structural inquiry: can the part be redeveloped without requiring the rest of the building to be redeveloped?

4. Complex Concepts Simplified

  • RTM (Right to Manage): a statutory right allowing qualifying leaseholders (through an RTM company) to take over specified management functions from the landlord, without proving landlord fault.
  • “Self-contained part of a building” (section 72(3)): not any portion tenants would like to manage, but a part that is (i) vertically divided, (ii) structurally capable of independent redevelopment, and (iii) has independent (or independently-procurable) services.
  • “Vertical division”: a separation between the claimed premises and the rest of the building that is vertical (not a horizontal split). This case adds that there must first be a real, physical separation—an undivided open space cannot be “divided” by drawing a line on a plan.
  • “Independent redevelopment”: a hypothetical structural capability test. It does not require that the part could be demolished to nothing without any temporary works or any effect on neighbours; it asks whether that part could be redeveloped without having to redevelop the rest of the building.
  • “Dog-leg” boundary: a boundary that is not straight in plan. The Court held section 72(3)(a) does not require a single straight line in plan, so long as the separation is vertical where it matters.

5. Conclusion

[2026] EWCA Civ 712 draws a clear line between identifying a boundary using notional planes through existing dividing features and creating a “division” where none exists. For section 72(3)(a), a “vertical division” demands an actual physical division of the building: an undivided, open-plan basement car park beneath a block prevents that block from qualifying as a self-contained part.

At the same time, the Court reinforced a practical approach to terraces and regeneration schemes: party walls (and their foundations) can define vertical division, dog-leg plan boundaries can qualify, and “independent redevelopment” is not a complete-demolition/no-impact test but an evaluative, structural inquiry into whether the part could be redeveloped without redeveloping the rest.