Francia Properties Limited v Aristou & others [2016]:

Landlord’s right to redevelop a property managed by an RTM company

The background

The landlord held the freehold interest in a property which was managed by a Right To Manage company. The landlord proposed undertaking works on the roof of the property which would create an additional flat. The tenants of the top floor flat objected, arguing not only that the Lease prohibited development but that such works would interfere with their right to quiet enjoyment and the access of sunlight to their outdoor terrace area.

The RTM Company also contended the proposal. It argued that the development would interfere with its management function; the landlord’s works would involve removing the roof, which the RTM Company was obliged to repair and maintain. It was this issue which is of particular interest, given that there is currently no precedent.

The law

Given the lack of pre-existing case law, the Court took a wider approach to considering this key issue. It referenced a number of documents which preceded the Commonhold and Leasehold Reform Act 2002, including the Commonhold and Leasehold Reform Bill and Consultation Paper which stated the intention to protect the interests of landlords in properties managed by RTM companies.

What was proposed by the landlord could not be undertaken by the RTM Company, ie. the construction of a new dwelling within the building. Therefore, the Court noted that any issues raised by the landlord’s works and affecting the RTM Company could be resolved by the exchange of undertakings between the parties.

The decision

The Court held that the landlord could carry out the proposed development works but that its rights were nevertheless restricted. Under the Commonhold and Leasehold Reform Act 2002, whilst the landlord retained its rights of redevelopment over its freehold property, it must take reasonable steps to ensure that the RTM Company’s management functions are not disturbed.

JB Leitch comments on the decision:

“This case is now moving from the County Court to the Court of Appeal, given the significance of the issues under discussion and absence of any decided case law. It raises a number of key points, including how conflict between the RTM Company’s management obligations can be affected by a landlord’s rights to redevelop. For example, where both parties intend to carry out repair, maintenance and redevelopment at the same time or where the RTM Company has undertaken works which are then rendered unnecessary by the landlord’s redevelopment, whose rights should take precedence? We continue to watch this case progress.”