Eastpoint Block A RTM Company Ltd v Otubaga

Factual and Procedural Background

This appeal concerns the jurisdictional question whether a right to manage company ("an RTM company") is entitled to apply to the First Tier Tribunal ("the FTT") under section 168(4) of the Commonhold and Leasehold Reform Act 2002 ("the 2002 Act") for a determination whether a lessee of a flat is in breach of covenant. The FTT struck out the RTM company’s application, and the Upper Tribunal ("UT") dismissed the appeal. The RTM company then appealed to a higher court, which allowed the appeal and provided reasons in writing. No factual findings were made below as the application was struck out for lack of jurisdiction; the allegations were that a lessee was in breach of covenant by permitting business use and causing nuisance through a sub-tenant. The lessee did not participate in the proceedings.

Legal Issues Presented

1. Whether an RTM company, which is not the landlord under a long lease, is entitled to apply to the FTT under section 168(4) of the 2002 Act for a determination that a breach of covenant has occurred.
2. Whether the application under section 168(4) is properly characterized as a management function transferred to the RTM company or as a forfeiture-related function which the RTM company cannot exercise.
3. Whether section 100(2) of the 2002 Act, which allows the RTM company to enforce untransferred tenant covenants "in the same manner" as the landlord, permits the RTM company to make such an application to the FTT.
4. The proper interpretation of the term "landlord" in section 168(4) and whether it includes the RTM company.

Arguments of the Parties

Appellant's Arguments

• The RTM company is entitled to exercise the landlord’s right to apply to the FTT under section 168(4) even though it is not the landlord.
• Enforcement of covenants is part of "management" functions transferred to the RTM company under section 96 of the 2002 Act (though this was not strongly pressed).
• Section 100(2) expressly allows the RTM company to enforce untransferred tenant covenants "in the same manner" as the landlord, which includes applying to the FTT for a determination of breach under section 168(4).
• The RTM company’s right to enforce covenants should include the right to use the FTT forum, not just the remedies themselves.
• Practical considerations favour allowing RTM companies access to the FTT, which has specialist residential property judges, less formal procedures, and a no-costs regime, benefiting both RTM companies and lessees.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by acknowledging the jurisdictional division between the county court and the FTT in residential property matters and the difficulties that have arisen from this division. The key question was whether an RTM company, which is not the landlord under a long lease, can apply to the FTT under section 168(4) for a determination of breach of covenant.

The Deputy President in the UT had held that the RTM company is not the landlord and therefore cannot make such an application, reasoning that the application was more closely related to forfeiture functions, which RTM companies cannot exercise. The court disagreed with this characterization.

The court carefully examined the statutory framework, focusing on sections 96 to 101 and 168 of the 2002 Act. Section 96 transfers management functions from the landlord to the RTM company but excludes functions relating to re-entry or forfeiture. Section 100(2) explicitly allows RTM companies to enforce untransferred tenant covenants "in the same manner" as the landlord, except that they cannot exercise forfeiture functions (section 100(3)).

The court found that an application under section 168(4) is a discrete step to obtain a determination that a breach of covenant has occurred, not itself a forfeiture proceeding. The FTT’s jurisdiction is limited to determining whether a breach has occurred and does not extend to making forfeiture orders or granting relief against forfeiture. Therefore, making an application under section 168(4) is not exercising a forfeiture function prohibited to RTM companies.

The court also considered the practical advantages of allowing RTM companies to apply to the FTT, including specialist expertise, less formal procedures, and a no-costs regime, which benefits both RTM companies and lessees. It would be inefficient and illogical to deny RTM companies access to the FTT while allowing landlords to do so, especially since RTM companies are often better placed to monitor and prove breaches.

The court rejected the argument that the absence of statutory modification of section 168(4) in Schedule 7 of the 2002 Act precludes RTM companies from applying. The modifications in Schedule 7 mainly concern substantive rights, not procedural mechanisms like applications to the FTT.

Finally, the court agreed with the appellant’s interpretation that section 100(2) encompasses not only the remedies but also the forum for enforcement, thus enabling RTM companies to make applications under section 168(4) to the FTT. The only limitation is that RTM companies cannot pursue forfeiture.

Holding and Implications

The court ALLOWED THE APPEAL, holding that an RTM company is entitled to apply to the FTT under section 168(4) of the 2002 Act for a determination that a breach of covenant has occurred, despite not being the landlord under the lease.

The direct effect of this decision is to clarify that RTM companies have the same right as landlords to seek determinations from the FTT regarding breaches of covenant, except for forfeiture functions which remain outside their powers. This facilitates access to a specialist tribunal and avoids unnecessary procedural complications. No new precedent was set beyond this clarification of statutory interpretation and jurisdictional application.