RTM company entitled to pursue covenant claim against tenant

A right to manage company was entitled in the same way as a landlord to pursue a case in the First-tier Tribunal (FTT) against the lessee of a flat who was in breach of covenant.

Rob Winder Senior Associate Chartered Legal Executive in our Dispute Resolution team reports on this recent case.

That was the decision of the Court of Appeal in a case involving Eastpoint Block A RTM Co Ltd v Otubaga.

The issue arose after Eastpoint had acquired the right to manage a block of flats. It alleged that one of the lessees holding under a long lease was in breach of covenant by permitting the property to be used for a business and permitting a sub-tenant to cause serious nuisance and annoyance to other residents in the block.

Eastpoint applied to the FTT under the Commonhold and Leasehold Reform Act 2002 (The Act) for a determination that breaches of covenant had occurred.

The FTT struck out the application on the grounds that it did not have jurisdiction. The Upper Tribunal (UT) dismissed an appeal, finding that such an application could only be made by a landlord.

The judge found that when an RTM company acquired the right to manage, it did not become a landlord.

The effect of the UT’s decision was that any such application had to be made to the County Court.

The Court of Appeal overturned that decision.

It held the Act gave the RTM company the right to enforce the covenant “in the same manner” as the landlord. That would include, for example, an action for damages for breach of covenant or an injunction restraining a breach.

It would also include a claim for a declaration that the lessee was in breach of covenant. The only remedy that the RTM company could not exercise was that of forfeiture.

An action for damages for breach of covenant or for an injunction restraining breach would have to be started in the County Court. However, if there were any issue about whether a breach had been committed, the County Court would almost certainly wish to transfer the case to the FTT.

If you would like more information about the issues raised in this article or any aspect of commercial property law please contact Rob on 01228 516666 or click here to send him an email.