Big Win For RTM Companies: Court Allows Lease Change To Recover Unpaid Service Charges
A recent court case could make life a lot easier for Right to Manage (RTM) companies trying to recover unpaid service charges from uncooperative flat owners.
The case, 56 Westbourne Terrace RTM Co Ltd v Polturak and others, was heard by the Upper Tribunal (Lands Chamber) – and it’s an important one if you’re involved in block management.
What’s the issue?
The block in question had old leases from the 1980s. These leases didn’t include a clear clause saying the landlord or RTM company could recover legal and administrative costs when chasing service charge arrears. They only mentioned costs linked to forfeiture notices – which RTM companies aren’t even allowed to serve!
So when a couple of leaseholders didn’t pay their service charges, the RTM company found itself footing the bill for enforcement – with no way to recover those costs.
What did the RTM company do?
They applied to the First-tier Tribunal (FTT) to change the leases so they could add a clause allowing them to:
- Claim enforcement costs directly from the tenant as an administration charge; and
- Add those costs to the service charge if the tenant didn’t pay.
The FTT refused. But the RTM company appealed – and the Upper Tribunal overturned that decision.
What did the Upper Tribunal say?
The Tribunal said the FTT had used the wrong test. Instead of asking whether the lease “worked,” it should have asked whether it made satisfactory provision for recovering costs – which it clearly didn’t in this case.
They also pointed out that the law has changed a lot since the 1980s, and leases need to reflect the modern legal framework for managing blocks of flats.
In short, the Tribunal agreed that the leases should be updated to allow the RTM company to:
- Charge the leaseholder for enforcement costs directly, and
- Recover those costs from the wider service charge if the defaulting leaseholder doesn’t pay.
Why does this matter?
For RTM companies and landlords, this is a game-changer. It shows that if your leases are outdated and don’t let you recover costs when chasing arrears, you can apply to vary them.
This decision also clarifies that tribunals have the power to approve these changes – as long as they don’t cause unfair harm to leaseholders.
Final thoughts
If you’re part of an RTM company struggling with legal costs when leaseholders don’t pay, this case sets a useful precedent. It’s now clearer than ever that you don’t have to be stuck with outdated lease wording that leaves you out of pocket.
Our experienced commercial dispute solicitors support Right to Manage (RTM) companies, landlords, and managing agents with practical legal advice. Whether you’re dealing with service charge arrears, lease variations, or enforcement challenges, we’re here to help. Contact our legal experts on 0330 822 3451 for tailored guidance. Alternatively, request a callback at a more convenient time.