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Court of Appeal rules in favour of shared ownership residents in right to manage dispute
Shared ownership residents in London have won a court battle over the right to manage their own homes, in a ruling that could have implications for leaseholders across the country.
The Court of Appeal has ruled on a dispute between the freeholder of a development in Canary Wharf, east London, and a group of leaseholders that have been trying to acquire the right to manage their 97-home block since 2019.
This week, a judgement rejected a challenge from freeholder Avon Ground Rents, which argued that some shared ownership residents did not qualify for the right to manage (RTM) process.
The dismissal of the appeal means the leaseholders have acquired the right to transfer management of properties to their company, Canary Gateway (Block A) RTM.
The appeal cleared up confusion surrounding the rights of shared ownership leaseholders. Mark Loveday, the lawyer who represented Canary Gateway RTM, said it sends a message that they are not “second-rate homeowners”.
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Avon’s appeal was focused on whether shared ownership residents met the requirements of the RTM process, specifically the need for “qualifying leaseholders” to have long leases of over 21 years.
The appeal turned on whether the shared ownership leaseholders, who had not yet ‘staircased’ their leases to 100%, fell within the definition of a “long lease”.
In his judgment, Lord Justice Newey decided that a shared ownership lease for a term of more than 21 years will be a “long lease” whether or not the tenant has a 100% interest.
He said tenants with long shared ownership leases who have not staircased to 100% “will still have an obvious interest in how the premises are managed, the more so since they will typically pay full service charges”.
Leaseholders at Canary Gateway first tried to take over the management of their blocks of flats from Avon back in 2019.
The development on St Anne’s Street has two blocks, with 97 mixed-tenure flats in Block A. Of these, 17 are let to Metropolitan Thames Valley Housing (MTVH) on a headlease and then sublet on shared ownership leases.
The other 80 flats in Block A are either leased to MTVH and underlet to social rent tenants or leased under conventional long residential leases.
According to the judgment, Avon opposed the 2019 RTM application on grounds that tenants with shared ownership leases who had interests of less than 100% were not “qualifying tenants” and that “notice of invitation to participate” should have been given to MTVH but was not.
In November 2020, the Upper Tribunal ruled that the 12 leaseholders had “long leases”, but held that MTVH should have been given notice of invitation to participate as the head lessee of the flats occupied by social rent tenants. The failure to do so invalidated the company’s claim, the tribunal ruled.
Canary Gateway RTM then tried again, giving notices of invitation to participate both to every tenant with a shared ownership lease and to MTVH and, in 2021, again claimed the right to manage Block A. Once more, however, Avon opposed the claim.
The RTM company’s claim was upheld by the First Tier Tribunal in 2022, and Avon lodged an appeal.
In a statement posted on Tanfield Chambers’ website, Mr Loveday said: “This is an important win for the Canary Gateway residents, but more importantly a massive win for tens of thousands of shared ownership leaseholders across the country.
“The Court of Appeal has sent the clearest possible message they are not a second-rate class of homeowners. They have the same legal rights as any other leaseholder.”
Introduced in 2002, RTM gives flat owners a right to collectively take over the management functions of their building.
Leaseholders, acting via an RTM company, can take control of services, repairs, maintenance, improvements, and insurance in respect of their building.
Right to manage is one of several areas of leasehold and commonhold reform that the government is currently exploring.
Avon and MTVH have been approached for comment.
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