Eastpoint Block A RTM Company Limited v Akehinde Olufunlola Otubaga

The Court of Appeal held that an RTM company is entitled to apply to the First-tier Tribunal under section 168(4) of the Commonhold and Leasehold Reform Act 2002 for a determination that a tenant has breached a covenant. The court reasoned that section 100(2) of the 2002 Act gives an RTM company the right to enforce untransferred tenant covenants "in the same manner" as the landlord, which is capable of encompassing both the remedies and the forum for determination. Section 100(3), which prevents an RTM company exercising functions of re-entry or forfeiture, does not preclude making a section 168(4) application because such an application is a discrete declaration that a breach has occurred and is not itself an exercise of forfeiture. The court allowed the appeal from the Upper Tribunal (Lands Chamber) and declined the RTM company's application for costs against the lessee.

Background and parties. Eastpoint Block A RTM Co Ltd (the RTM company) alleged that a lessee of a long lease permitted business use and that a sub-tenant caused serious nuisance. The RTM company applied to the First-tier Tribunal under section 168(4) of the Commonhold and Leasehold Reform Act 2002 for a determination that a breach of covenant had occurred. The FTT struck out the application; the Upper Tribunal (Deputy President Martin Rodger KC) dismissed the appeal. The RTM company then appealed to the Court of Appeal. The lessee did not participate in proceedings.

Nature of the application and issues. The central question was whether an RTM company may make an application under section 168(4) for a tribunal determination that a tenant has breached a covenant, given (a) the statutory scheme conferring management functions on an RTM company (sections 96–102) and (b) the prohibition in section 100(3) on exercising functions of re-entry or forfeiture. Sub-issues were whether an RTM company is to be treated as the "landlord" for this purpose and whether a section 168(4) application is effectively a step on the "forfeiture side of the line" and therefore forbidden to the RTM company.

Procedural history. The FTT struck out the RTM company's application. The Upper Tribunal upheld that decision, concluding that an RTM company is not the landlord and that a section 168(4) application was, as a practical matter, part of the forfeiture process. The Court of Appeal allowed the RTM company's appeal.

Reasoning. The court accepted that an RTM company is not the landlord in the literal sense, but held that section 100(2) expressly entitles the RTM company to enforce untransferred tenant covenants "in the same manner" as the landlord. That language is capable of including not only remedies (damages, injunction) but also the forum for determining whether a breach has occurred, namely the First-tier Tribunal under section 168(4). The prohibition in section 100(3) against exercising functions of re-entry or forfeiture was interpreted narrowly: an application under section 168(4) is a discrete statutory determination that a breach has occurred and is not itself a forfeiture or exercise of re-entry. The court also noted practical reasons supporting the conclusion (expert tribunal, no-costs jurisdiction, RTM company's role in monitoring covenants under section 101, and transfer powers in section 176A). The Court declined to order the lessee to pay the RTM company's costs because the jurisdictional point had been raised by the tribunal of its own motion and the lessee had not engaged.

Result. Appeal allowed: an RTM company may apply to the First-tier Tribunal under section 168(4) for a determination that a tenant has breached a covenant; however the RTM company may not itself exercise forfeiture or re-entry.

The appeal was allowed. The Court of Appeal held that, although an RTM company is not literally the landlord, section 100(2) of the 2002 Act entitles the RTM company to enforce untransferred tenant covenants "in the same manner" as the landlord and that this includes the ability to apply to the First-tier Tribunal under section 168(4) for a determination that a breach of covenant has occurred. Section 100(3) only bars the RTM company from exercising functions of re-entry or forfeiture and does not prevent making a section 168(4) application because such an application is a separate declaratory step and not itself forfeiture.

Appeal from the Upper Tribunal (Lands Chamber) (Martin Rodger KC) [2022] UKUT 319 (LC). The FTT had previously struck out the RTM company's application (no neutral citation given in the judgment). The Court of Appeal allowed the RTM company's appeal on 25 July 2023.