UT Neutral citation number: [2010] UKUT 1 (LC)

LT Case Number: LRX/80/2009

LANDLORD AND TENANT – right to manage – former institution in course of conversion – whether two-thirds of flats owned by qualifying tenants – numbers of flats – whether particular parts of buildings were flats – failure of LVT to address question – appeal allowed – case remitted – Commonhold and Leasehold Reform Act 2002 ss 72, 75 & 112(1)

                            TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

     IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE LEASEHOLD

        VALUATION TRIBUNAL FOR THE NORTHERN RENT ASSESSMENT PANEL

BY

                                                      STANHOPE CASTLE RTM

                                                           COMPANY LIMITED                                                    

                                                             Re: The Castle

                                                                     Stanhope

                                                                     Bishop Auckland

                                                                     DL13 2PZ

                                                           Before: The President

Decision on the basis of written representations

                                                                    DECISION

1. This is an appeal by Stanhope Castle RTM Company Limited against a decision of the Leasehold Valuation Tribunal for the Northern Rent Assessment Panel on an application by the company under section 84 of the Commonhold and Leasehold Reform Act 2002.  The LVT determined that the company was not entitled to acquire the right to manage premises at The Castle, Stanhope, Bishop Auckland.  The basis of its determination was that the building which was the subject of the application contained a total of fifteen flats and that, as only eight of these were occupied by qualifying tenants, there was a failure to comply with section 72(1)(c), which requires, for the right to manage provisions to apply, that the total number of flats held by such tenants is not less than two-thirds of the flats contained in the premises.  The company appeals with permission granted by me.  There is no respondent, and the appeal is being dealt with on the basis of the representations contained in the appellant’s notice of appeal and letters written to the Tribunal by its agent, Mr Charles Scott.

2. The decision of the LVT unfortunately contains no description of the premises, but from Mr Scott’s letters and a number of planning and building control documents appended to representations made by a company called Arrandene Ltd in resistance to the application for permission to appeal, it appears that they consist of a listed building that was formerly in use for educational purposes or as a residential boy’s home and has been, or is being, converted into units of residential accommodation, possibly with additional units being constructed.

3. In its decision the LVT referred to the issues that it had identified in directions following a pre-trial review.  They were:

“(a)   The extent to which the property is a self contained building or part of a building within the meaning of section 72 of the Act (Premises to which Chapter applies) and whether in particular section 72(1)(c) has been complied with.

 (b)    Whether the provisions of section 75 of the Act (Qualifying tenants) have been satisfied.

 (c)    Whether the provisions of section 79 of the Act (Notice of claim to acquire right) and particularly subsection (5) have been satisfied.

 (d)    The identity of the owners of the freehold of the Property.”

4. The Tribunal said it had directed that the matter be dealt with on written representations and that it had inspected the property “both internally (other than Flat 7) and externally”.  It then set out sections 72 and 75 and material parts of section 79 and Schedule 6.  Under the heading “Findings of fact or matters not in dispute” it said:

“1.  In their counter-notices the First and Second Respondents indicated that that they considered that the Applicant was not properly constituted as a RTM company, and that the relevant notices had not been properly served in accordance with the relevant chapter of the Act.  None of the Respondents submitted or contributed to a bundle in accordance with the Further Directions and there was no evidence to support those allegations.  The Tribunal rejected them.

2. In those counter-notices it was suggested that section 79(5) of the Act had not been complied with.  That was clearly not the case and the Tribunal so found.

3. There was no dispute that the participating tenants were all tenants under long leases.

4. The Property as defined by the Applicant is a self-contained building within the meaning of section 72(1)(a) of the Act.

5. There is a total of fifteen flats in the building.  Some areas are unoccupied and in course of development as residences.  Although the development appears to have been suspended for some time, each of the areas is clearly defined with its own individual access door or doors and the Tribunal took the view that each is intended to be occupied for residential purposes and therefore is not a non-residential part within the meaning of paragraph 1(2)(a) of Schedule 6 of the Act.  The former flat 3 at ground floor level on the east side of the Property above three garages has been demolished and was found to be a non-residential part.

6. The only parts of the Property not occupied or intended to be occupied for residential purposes and not common parts are the area formerly comprising Flat 3 and an L-shaped single storey block of which the roof has been destroyed by fire lying immediately to the left of the entrance to the Property opposite the Dales Centre.  It was clear from inspection that those areas do not comprise more than 25% of the internal floor area of the Property and therefore paragraph 1(1) of Schedule 6 of the Act has no application.

7. Eight of the fifteen flats are held by qualifying tenants, namely flats 1, 6, 8, 9, 11, 14, 15 and 16.

8. No finding of fact is made concerning the freehold ownership of the Property other than that flats 7 and 12 are in freehold ownership and not the subject of a long lease.”

5. On issue (1) the tribunal said:

“The Tribunal has found that the Property is a self-contained building but it has also found that only eight out of fifteen flats are occupied by qualifying tenants.  In order for the relevant Chapter of the Act to apply, section 72(1)(c) requires two thirds of the total number of flats (in this case ten) to be held by qualifying tenants.  The Application therefore fails to fulfil that requirement.”

On issue (2) the tribunal determined that there were qualifying tenants of eight flats and on issue (3) it held that section 79 had been satisfied.  On issue (4) it said:

“There was satisfactory evidence of freehold ownership in relation to flats 7 and 12 but no cogent evidence as to the remainder, part or all of which is apparently subject to an adjudication under the Land Registry Acts.  However in the event it was not necessary to make a finding on this issue.  The Tribunal did not consider whether paragraph 2 of Schedule 6 read with section 72(3) and (4) had application in relation to flats 7 and 12.  If it did, it would have the effect of disapplying the relevant Chapter of the Act so that the Applicant could not succeed.  However it was not possible to inspect Flat 7 internally and one of the plans supplied indicated some integration with the rest of the building.  Also it seemed possible that flat 12 had some overlap with another flat.  For these reasons the Tribunal did not feel it could come to a firm conclusion on the matter.”

6. Then, under the heading “The decision”, the Tribunal said:

“It was clear both from the written evidence and the inspection that cogent management of the Property was both necessary and urgent.  However to succeed the Applicant had to satisfy all of a number of statutory requirements.  If it failed to do so in relation to one then it could not succeed.  It failed to satisfy section 72(1)(c) of the Act – the need for at least two-thirds of the total number of flats to be held by qualifying tenants.  Therefore the application fails and the Applicant does not acquire the right to manage the Property.”

7. Mr Scott focuses his attention on flats 2, 10 and 17.  He says, relying on a letter from Wear Valley District Council, that these have never been banded for council tax valuation.  There is, he says, no registered freeholder and there is dispute as to the freehold ownership between a Mr Robson and a Mr Dennis Scott.  If these flats were left out of account, the flats held by the participating tenants would constitute two-thirds of the total, and thus section 72(1)(c) would be satisfied.

8. The crucial consideration, in my judgment, in whether the 15 numbered parts of the building that the LVT referred to as flats are indeed flats within the meaning of the Act.  (It is not clear why the numbers go up to 17.)  “Flat” is defined in section 112(1) to mean:

“a separate set of premises (whether or not on the same floor) –

(a) which forms part of a building,

(b) which is constructed or adapted for use for the purposes of a dwelling, and

(c) either the whole or a material part of which lies above or below some other part of the building.”

9. The LVT did not refer to this provision among those that it quoted at length, and thus it did not expressly consider, in particular, whether each of the numbered parts was a separate set of premises or whether in its existing state it was properly to be regarded as having been constructed or adapted for use for the purposes of a dwelling.  Although for the purpose of its consideration of whether the parts were non-residential parts under paragraph 1(2)(a) of Schedule 6, it said that each of the areas was clearly defined with its own individual access door or doors, the tribunal later said that the plans of flat 7 (which it did not inspect internally) “indicated some integration with the rest of the building” and that “it seemed possible that flat 12 had some overlap with another flat.”  If one of the “flats” had “some integration with” the rest of the building and if two other flats “had some overlap” with each other, this might suggest that none of them was a separate set of premises within the definition of “flat”.  In addition, although the tribunal took the view that each of the unoccupied areas was intended to be occupied for residential purposes, it did not consider whether the works had progressed to a stage at which it could be said that each was constructed or adapted for use for the purposes of a dwelling.

10. The failure of the LVT to address the vital question whether the unoccupied parts were indeed flats for the purpose of the Right to Manage provisions inevitably vitiates its decision, in my judgment.  It is also the case that the description of the building and its parts is so nugatory that it is impossible to form a view as to whether each of the parts might be said to satisfy the definition of a flat.  In a case of this sort, which is so crucially fact-dependent, it is essential for a tribunal to describe the building and its features with such degree of particularity as enables its conclusions to be understood.  The tribunal, to whom the case is remitted, will need to consider the question whether each of the areas is indeed a flat and to give reasons for its conclusions by reference to an adequate description of the building and its parts. 

11. The appeal is allowed.

                                                            Dated 8 February 2010

                                                            George Bartlett QC, President