Right to manage – Procedural requirements – Chapter 1 of Part 2 of Commonhold and Leasehold Reform Act 2002 – Right-to-manage claim in respect of building containing three flats – Lessee of one flat signing relevant documentation for incorporation of respondent RTM company but dying before incorporation taking place – Whether respondent obliged to serve notice of invitation to participate and notice of claim on deceased lessee’s personal representatives – Whether such course unnecessary where deceased lessee still registered as proprietor of flat and listed on register of respondent’s members – Appeal allowed
In July 2011, the lessees of three flats in a in a converted house agreed to form the respondent RTM company for the purpose of acquiring the right to manage the building pursuant to Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002. Each of the lessees agreed to become a director and shareholder of the respondent and to contribute to the costs of the right-to-manage application. The lessee of one of the flats died before the respondent was incorporated, but, by then, she had already signed all the necessary documentation relating to the incorporation and her name continued to appear on the respondent’s register of members.
The respondent served notice on the appellant of its claim to acquire the right to manage; the appellant served a counternotice challenging the respondent’s entitlement. The appellant then applied to the leasehold valuation tribunal (LVT) for a determination, under section 84(3) of the 2002 Act, that it was entitled to acquire the right to manage at the relevant date. Opposing that application, the appellant contended that the respondent had not met the procedural requirements for its claim since it had failed to serve the personal representatives of the deceased lessee with either a notice inviting participation in the right-to-manage process, pursuant to section 78 of the 2002 Act, or a copy of the claim notice, pursuant to section 79.
The LVT determined that the respondent was entitled to acquire the right to manage. It held that the deceased lessee continued to be a qualifying tenant for the purposes of the legislation for so long as she remained registered as the proprietor of her flat and that, for as long as her name appeared on the respondent’s register of members, it was unnecessary to serve a notice inviting participation or a claim notice on her personal representatives. The appellant appealed.
Held: The appeal was allowed.
On the death of the deceased lessee, the leasehold interest in her flat had passed by operation of law either to the executors of her will, if she had left one, or to the Public Trustees if she had not: see sections 1(1) and 9(1) of the Administration of Estates Act 1925. That disposition took effect by operation of law without the need for any transfer and without the need for registration. Further, under section 27(2)(a) of the Land Registration Act 2002, a transfer by operation of law on the death of an individual proprietor was excepted from the general rule that registrable dispositions did not operate at law until registration was complete.
Accordingly, the qualifying tenants of the deceased lessee’s flat at the relevant time were her personal representatives, namely the executors or administrators of her estate or, in the event of her intestacy, the Public Trustee. The deceased lessee had ceased to be a tenant of the flat by the relevant time and consequently could not be a qualifying tenant. Nor was she ever a member of the respondent, since membership of an RTM company was conditional on retaining the status of qualifying tenant under section 75 of the legislation: see article 26(2)(a) of the RTM Companies (Model Articles) (England) Regulations 2009. A member who at any time failed to satisfy the requirements for membership, including the requirement to be a qualifying tenant, ceased to be a member of the company with immediate effect: see article 27(1).
The LV had not been entitled to rely on the register of members as conclusive evidence of membership of a company. Under section 127 of the Companies Act 2006, the register was only prima facie evidence of the matters recorded in it, which, in the instant case, had been defeated by the copy of the deceased lessee’s death certificate which the LVT had before it. Taken with the company’s articles of association, the death certificate was conclusive that, at the date on which the respondent was incorporated, the deceased lessee could not be a member.
Since the deceased lessee’s personal representatives were qualifying tenants but were not members of the respondent company, they had been entitled to receive a notice of invitation to participate under section 78 and, as qualifying tenants, a copy of the claim notice under section 79. There had been compliance with section 79 since a copy of that notice had been sent to each flat. However, the respondent had failed to comply with section 78 since no notice of invitation to participate had been given to the personal representatives before the claim notice was served on the appellant.
It was not appropriate to remit the case to the LVT to determine whether the respondent’s failure had caused any prejudice. Such a course was likely to perpetuate the dispute between the parties and create further potential for protracted appeals, in circumstances where the simplest course was for the respondent to begin again with a new notice inviting participation and a new notice of claim. The burden of satisfying the LVT that a defect in compliance with the statutory procedure laid down by the right-to-manage legislation had not caused prejudice fell on the party asserting that the right to manage had successfully been acquired. It had been open to the respondent, forewarned of the appellant’s contentions by its statement of case, to adduce evidence that there was no prejudice to the personal representatives of the deceased lessee or to the other leaseholders. The respondent had not taken that opportunity and there was no reason why it should be given a further opportunity to justify the original defective procedure: Avon Freeholds Limited v Regent RTM Co Ltd [2013] UKUT 0213 (LC); [2013] PLSCS 256 distinguished.
The appeal was decided on the written representations of the parties.
Sally Dobson, barrister
