The right to manage (“RTM”) company acquired the right to manage the block of flats under Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002. It alleged that one of the lessees, who occupied one of the flats under a long lease, was in breach of covenant by permitting the flat to be used for business purposes and permitting a sub-tenant to cause nuisance to other residents in the block. By section 168(4) of the 2002 Act “a landlord under a long lease of a dwelling may make an application to the appropriate tribunal for a determination that a breach of a covenant or condition in the lease has occurred.” However, by subsection (5)(b) the landlord could not make an application if the matter had been determined by a court. The company applied to the First-tier Tribunal (Property Chamber) under section 168(4) as the appropriate tribunal for a determination that the tenant had caused breaches of covenant to occur. The First-tier Tribunal struck out the application on the basis that the application was not the enforcement of covenants but was part of the process of forfeiture which was not a function that an RTM company could exercise with the consequence that the Tribunal had no jurisdiction to consider it. The Upper Tribunal (Lands Chamber) dismissed the company’s appeal for different reasons having held that (i) an RTM company did not become the landlord when it acquired the right to manage but an application under section 168(4) could only be made by “the landlord” so it followed that an RTM company could not make such an application, and (ii) if the division between forfeiture functions and enforcement functions had any significance, an application under section 168(4) clearly concerned forfeiture. The effect of that decision was not that an RTM company could not apply for a declaration that the tenant was in breach of covenant or for an injunction restraining that breach or for damages as a result but that the application had to be made to the County Court, which had concurrent jurisdiction, rather than to the First-tier Tribunal. On its further appeal, the RTM company submitted inter alia that it had the right to enforce the covenants against the tenant because they were “untransferred covenants” which were enforceable by both the landlord and an RTM “in the same manner” for the purposes of section 100(2) of the Act. A landlord was entitled to enforce a covenant by applying to the First-tier Tribunal for a determination that a lessee was in breach so it followed that an RTM company had the same entitlement. The key issue for the court was whether the right conferred on an RTM company under section 100(2) was precluded by section 100(3) of the Act which prevented an RTM company from exercising “any function of re-entry or forfeiture.”
On the company’s further appeal—
Held, appeal allowed. Section 100(2) of the Commonhold and Leasehold Reform Act 2002 gave an RTM company the right to enforce a covenant “in the same manner” as the landlord which not only included an action for damages for breach of covenant or an injunction to restrain a breach but also a claim for a declaration that the lessee was in breach of covenant. The only remedy not exercisable by the RTM company was forfeiture. There was no discernible policy reason why Parliament would have intended a radical difference in available dispute resolution mechanisms where the County Court was able to transfer the question whether there had been a breach of covenant to the First-tier Tribunal if the action had been brought by the landlord, but not if it had been brought by the RTM company because it would not have had jurisdiction on an application made by the RTM company. The express power given to the RTM company to enforce covenants “in the same manner” as the landlord was capable of encompassing both the remedies involved and the forum in which those remedies or issues were decided. The only restriction contained in section 100(3) of the Act related to the exercise by the RTM company of “the function of re-entry or forfeiture”, which suggested a narrow interpretation of that prohibition. An application to the First-tier Tribunal under section 168(4) was not, itself, a proceeding for forfeiture. While it may be a step towards exercising the right of forfeiture, it was a discrete and separate step. A determination under section 168(4) was no more than a declaration that a breach had taken place and could not without more be enforced in the County Court. Also, the First-tier Tribunal had no jurisdiction to entertain a forfeiture action and no jurisdiction either to make an order for possession or to grant relief against forfeiture because proceedings for forfeiture were questions for the County Court. Nor did the First-tier Tribunal have the power to consider whether a right to forfeit for breach of covenant had been waived or whether a breach had been remedied. There could be no question of subsequent forfeiture if a breach had been remedied. Therefore, an application under section 168(4) did not concern forfeiture functions. Accordingly, the inclusion of the word “landlord” in section 168(4) did not preclude an RTM company from making an application under that provision for a determination that a tenant had caused breaches of covenant to occur “in the same manner” as a landlord for the purposes of section 100(2) and such an application was not precluded by the prohibition in section 100(3) (paras 2, 33, 36–39, 40, 42, 45, 48, 49).
Amanda Gourlay and Annie Higgo (instructed by Lazarev Cleaver LLP) for the company.
The tenant did not appear and was not represented.