RTM Company Denied Right to Manage Premises Due to Non-Residential Parts

OUTCOME: Dismissed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AH/LRM/2020/0031 Property : [ADDRESS] [POSTCODE] Applicant : [redacted] : Ms. [COUNSEL] [NAME] Respondent : [redacted] : Mr [COUNSEL] of [NAME] : [NAME] in Right to manage Date of hearing Tribunal member(s)

:

29 March 2021 Judge Daley Mrs A Flynn MRICs

Date of decision : 11 May 2021

DECISION

This has been a remote video hearing. The form of remote hearing was V:CVPREMOTE. A face-to-face hearing was not held because it was not practicable, and all issues could be determined at a remote video hearing. The documents referred to are within the electronic bundle, the contents of which have been noted and taken into account by the Tribunal. The order made is set out at the end of the reasoning

Decisions of the Tribunal (1) The Tribunal determines that the Applicant does not have the Right to Manage.

2 The [NAME] 1. This was an [NAME] to acquire the right to manage [ADDRESS] [ADDRESS], London SE25 (“the premises”) under Part 2 of Chapter 1 of the Commonhold and Leasehold Reform Act 2002 ("the Act"). The Respondent freeholder has served a counter-notice asserting that the Applicant [COMPANY] was not on the relevant date entitled to acquire the right to manage.

The law 2. The relevant provisions of the Act are referred to in the decision below. The counter-notice 3. In its counter-notice, the Respondent raised Section 72 (6) Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002, Schedule 6, paragraph 1 on the grounds that the non-residential part of the premises exceeded 25 %. The Hearing 4. At the hearing the Applicant was represented by Ms [APPELLANT], the Respondent was represented by Mr [RESPONDENT] of [COMPANY].

5. In her written submissions and in her evidence, Ms [NAME] set out as follows- : The building is located in South Norwood London and is located at the corner of two roads. The entry to [ADDRESS] is on 1A [ADDRESS], [POSTCODE]. [ADDRESS] was completed in 2014, it contains fourteen flats and 2 shop units. Of the fourteen flats, seven flats have their own designated parking spaces; six flats are built with own balconies. and underneath is the retail unit -[NAME] on 1-9 [ADDRESS] [POSTCODE].

6. There is also a smaller commercial unit at the rear of the premises at the rear of the property inside the electric parking gate. Ms [NAME] informed the Tribunal that the smaller commercial unit had been occupied as a residential dwelling in 2015, as a dwelling for foreign workers, Ms [NAME] asserted that this had been occupied in this way for more than 2 years.

7. Ms [NAME] stated that she was aware of this as the tenants within the property had observed the occupation of the premises for at least two years.

3 8. In her Statement of Case Ms [NAME] stated that -: “On 5/1/2021, I had to report to Croydon Council – Housing Standard & Enforcement Team regarding the smaller shop unit’s continued use for residential purposes. Despite multiple [NAME]’ endeavour to inform Mr [NAME] that this unit should not be lived in due to its substandard quality as a dwelling, the foreign workers kept staying overnight. She stated that the [NAME] had in the past called the police as the occupiers had damaged the gate to the car parking.

9. Ms [RESPONDENT] also sought to rely on the Landlord’s intention as he had applied for planning permission to convert the small commercial unit into a one- bedroom flat in 2017. His [NAME] for Planning Permission had been refused by the Local Authority. However Ms [NAME] asserted that this part of the building should be considered as residential.

10. Ms [NAME] also referred to the fact that the unit had sought and been granted planning permission under class A1 for the premises to be used as Gym, and was let subject to contract, however, she stated that this had only happened after the [NAME] had claimed the Right to Manage. She stated that the company who were supposedly taking a lease of the property, was a dormant company. Ms [NAME] stated that the rent was £30,000 per annum. She was sceptical about the viability of the premises being rented out, and was concerned that this might be used as a device to defeat the right to manage claim.

11. Ms [NAME] also considered that other parts of the building should be considered as residential, such as the parking used by the [NAME], the balconies associated with the flats and the storage areas. She also considered that the areas in the [NAME]’s used by the staff for their welfare needs, such as the rest room should also be considered as part of the residential premises.

12. In her evidence Ms [NAME] referred to a detailed measurement based on the original architects drawing which was carried out on 21 January 2021, by [NAME] and [NAME] and [NAME]. She provided details of measurement for the building, which included the basement and ground floor. This included the commercial units. The basement was calculated as having 89.8 square metre,(residential) and 171.0 square metres (commercial). In respect of the ground floor the measurements were 238.4 (residential) and 311.3 (commercial). In the report he stated that taking into account the staff welfare area attached to the [NAME], the residential part of the building comprised 83.8%.

13. Ms [NAME] submitted that it was correct to include these areas, as Paragraph 3 of Schedule 6, which permitted any property of the premises used or intended to be occupied for residential purpose. Ms [NAME] stated that this included the Basement Boiler room as Ms [NAME] submitted that this was for the use of the [NAME]

4 14. On behalf of the Landlord, Mr [APPELLANT] did not agree with the Applicant’s submissions, or agree that the [NAME] had calculated the residential parts of the premises in accordance with the 2002 Act. He stated that if the building was measured in compliance with the requirements under the 2002 Act, then the Applicants did not meet the requirements to exercise the right to manage.

15. He submitted that with the percentages of Residential parts of the building were 71.04% and the commercial part of the building was 28.98%, disregarding hardstanding and external areas in the way required by the 2002 Act.

16. In his submissions he stated that-: “…The Applicants have referred to a planning [NAME] for change of use of this unit to residential which was refused on 15th Dec 2017. The Applicants contention is that the intended use of the premises is residential. However, this contention is at odds with the evidence the Applicant has provided proving that use of the premises for residential purposes would be in contravention of The Town and Country Planning Act 1990. The two cases referred to in the Applicant’s statement, [COMPANY] v [COMPANY] [2015] 1 W.L.R. 1713 and [COMPANY] v [COMPANY] [2020] are not relevant to this [NAME] as in both cases, the use of the premises for residential purposes did not contravene The Town and Country Planning Act 1990. At the date the Claim Notice was served in September 2020, number [ADDRESS] was unoccupied, under offer and the intended use was as a commercial gymnasium.” 17. He stated that these arrangements were in place prior to the Right to [NAME], he further relied upon the refusal of planning permission for the change of the building to residential use he had also included the terms of the lease and informed the Tribunal that the completion of the lease has been delayed due to Covid 19 restrictions, but the intended use of the premises remains the same.

18. He stated that this was part of the commercial space and should be excluded for the purposes of calculating the residential areas, in respect of the - [NAME], he also stated that the Applicant in their case had sought to include the welfare area of the [NAME], and that this approach was incorrect as the whole of the larger retail unit has planning use Class A1.He stated that Residential use is not permitted in any part of the retail unit and that by law [NAME] was required to provide welfare facilities for its staff.

19. Mr [APPELLANT] stated that the Applicant had also included the common parts within their calculations, and that in accordance with the 2002 Act these parts of the premises should be disregarded. Mr [NAME] also did not accept that the external car park should be included in the

5 calculation, he submitted that there was no reference in Schedule 6 to any external areas being included in the calculation.

20. In his statement of case he submitted that “…The letter from [NAME] and [NAME] dated 1st February 2021 states in the first paragraph that their measurements are of the gross external floor areas. This is incorrect as Schedule 6 refers only to the internal floor area. However, even using the measurements provided by [NAME] and [NAME], once the adjustments are made to comply with Schedule 6, the proportions are 28.96% commercial space and 71.04% residential space.” The Tribunal's decision and the Reason for the Decision

21. The Tribunal considered carefully the written and oral submissions of the parties. In respect of Schedule 6 of paragraph 1 (2) of the 2002 Act, the Tribunal noted that a part of the premises was to be considered as non-residential if it was neither occupied, or intended to be occupied for residential purpose.

22. The Tribunal in applying this test has given residential its ordinary and common sense meaning, of “a person’s home”, the fact of living in a particular place. Using the ordinary and normal meaning, it is clear to the Tribunal that the Tribunal Welfare Area within [NAME], is excluded from the residential part of the building and should be considered “Non- Residential” For this reason we have excluded the welfare area which comprising 28.70 square metres from the calculation.

23. The Tribunal has also applied the same test to the boiler/plant room, of the premises, we have also considered in respect of this area whether it can be said that this area is being used in conjunction in conjunction with a particular dwelling. The Tribunal has considered the photographic evidence, it has noted that this area appears to have been used as an informal storage area, and at best can be considered a communal space, as it is not used in conjunction with a particular area, Accordingly the Tribunal considers that the boiler/plant room is non-residential.

24. In respect of the [ADDRESS], the Tribunal noted that Schedule 6 1 (3) of the 2002 act refers to garages or parking space which is part of the premises. We consider that such a car park needs to be integral to the premises, such as an underground car park. The car parking in this premises is not “part of the premises.” Accordingly the Tribunal considers that this is not part of the residential premises.

25. In respect of the non- occupied commercial units, we considered the cases relied upon by the Applicant in particular [NAME] -v- [APPELLANT] [2015] 1WLR 171, and [NAME]) [COMPANY] -v- Premier Ground Rent No6 (2020). The Tribunal considers that these cases can be distinguished from the subject property. These cases involved student dwelling; however the Tribunal considers that the distinct difference in the subject case is that the commercial unit was never constructed or intended to be used for residential purposes. It was noted that factually they had been occupied as sleeping accommodation in the past, although the extent and the duration of the occupation is not agreed by the parties.

26. The Tribunal noted however that planning permission had been refused by the council to convert the premises into residential accommodation due to the unsuitability of the unit. No conversion had taken place and the photographs provided, show that there is a lack of cooking facilities and facilities and or bathing facilities within the premises. The Tribunal considers that this unit was not intended to be residential, and that at the time of the notice for the right to manage it was no longer occupied in that way. For this reason the Tribunal is not satisfied on a balance of probabilities that this unit was residential.

27. The Tribunal consider that the [NAME] for the Right to Management must fail as more than 25% of the premises is non-residential.

28. The Tribunal has in the annexe included the calculated floor area of the premises and its finding in respect of each of the areas in dispute. Costs 29. Section 88(3) of the Act states: “(3) An [COMPANY] is liable for any costs which such a person incurs as party to any proceedings under this Chapter before the appropriate tribunal only if the tribunal dismisses an [NAME] by the company for a determination that it is entitled to acquire the right to manage the premises.”

Name:

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Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made to the First- tier Tribunal at the regional office which has been dealing with the case. The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28-day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28-day time limit; the tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).

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Appendix one Gross [ADDRESS] metres Parties position Percentage of Total of the premises Tribunal’s findings Flats 1-14 1558.9 Agreed as Residential 0.59

As per agreed by the parties [NAME] 1

316 Parties agree as commercial 0.12

As per agreed by the parties [NAME] LG Stock/cold store) Welfare 114

28.70

Total:142.70 Disputed status 0.05 The Tribunal finds that this part of the premises is not residential [ADDRESS] (all ) Boiler/Plant ditto Communal 268.40 102.90 88.89 Total:460.19 Disputed status

0.17

The Tribunal finds that this part of the premises is not residential And must be excluded from the calculation

Commercial Unit 2 176.91 Disputed status

0.07

The Tribunal finds that this part of the premises is not residential And must be excluded

9 from the calculation

Total Residential Total Non-Residential