James Driscoll examines two recent cases involving errors in right to manage claim notices
Challenges to the validity of notices are a common source of litigation, whether the notice is provided for in a contract, or in a statutory context. If there is a mistake in a notice does this invalidate it (or the procedure it initiated)? Does it matter if the mistake is obvious (or trivial) so no one suffered prejudice?
Defective RTM notices
Of late, challenges to right to manage (“RTM”) claims have been much litigated. Two recent decisions of the Upper Tribunal provide practitioners with illustrations of how courts and tribunals are approaching the issue: Triplerose Ltd v Mill House RTM Co Ltd [2016] UKUT 80 (LC); [2016] PLSCS 68 and Gateway Property Holdings Ltd v Ross Wharf RTM Co Ltd [2016] UKUT 97 (LC); [2016] PLSCS 65. Those familiar with the RTM will recall that claims are made under Part 2 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”). To initiate a claim, the RTM company (formed by the participating leaseholders) must serve a claim notice on the landlord. Before doing this, it must first serve a notice on any leaseholder who is not a member of the company inviting them to participate. If the landlord serves a counter-notice the company must apply to the First-tier Tribunal (Property Chamber) (“F-tT”) for a determination that it has acquired the RTM. When serving notices, a party must use one or other of the forms that have been prescribed by regulations made under the legislation.
In Triplerose the landlord appealed a decision of the F-tT that the RTM company had acquired the right to manage even though it had failed to include the notes that are supposed to be part of a notice of invitation and the claim notice itself did not specify its registered office for service of any counter-notice. This appeal concerned their third RTM claim; the first proved to be defective and was withdrawn and the second also failed.
Consequences of defective notices
What is the proper approach for a tribunal to take when there is any departure from the statutory procedures? The Upper Tribunal (Lands Chamber) (“the UT”) referred to various authorities including the decision of the Court of Appeal in Osman v Natt [2014] EWCA Civ 1520; [2015] EGLR 11 that the particular circumstances of the parties should not dictate the outcome – prejudice caused by the non-compliance for example, is not a relevant consideration; one should also bear in mind any property consequences that non-compliance may have.
What was the legislative intention where statutory procedures are concerned? In some cases certain defects may be inconsequential. But in others the defect may critically affect the integrity of the scheme, so as to invalidate the claim or other procedure. Even though the RTM does not create or transfer property interests it does affect the position of leaseholders who are not members of the RTM company, intermediate and superior landlords, managing agents or other contractors, so in this sense affects property rights (applying Avon Ground Rents Ltd v 51 Earls Court Square RTM Co Ltd [2016] UKUT 22 (LC); [2016] PLSCS 18).
Turning to the defects or omissions in this case, the UT rejected the argument that raising the insufficiency of the participation notices was an abuse of process as it was not raised in response to the first two (failed) claims – they were separate claims. Where the tribunal is made aware of a procedural defect it must consider the consequence of that defect to the validity of the RTM claim and the rights of third parties. As the notes prescribed to accompany a participation notice are designed to inform a non-member leaseholder of the effects of the RTM (including liability for costs incurred by the landlord and possibly others) their exclusion invalidates the participation notices so that on this ground alone, the RTM is not acquired. The landlord’s submission that the claim notice was invalidated by substituting the RTM company’s solicitors address was also rejected, as section 84 of the 2002 Act does not require the counter-notice to be given at any particular address. Had the third claim been preceded by valid participation notices the RTM claim would have succeeded.
The Gateway case raised a short point on the interaction between sections 47 and 48 of the Landlord and Tenant Act 1987 (the first requires the landlord’s name and address to be contained in service charge demands, the second requires the landlord to give an address where notices can be served on him) and section 111 of the 2002 Act, which requires notices to be in writing and allows for service by post.
The landlords gave a counter-notice to a first RTM claim, which stated that any future communications should be sent to their solicitors. That RTM claim was not pursued. Later the landlord (via an associated company) served notices under sections 47 and 48 of the 1987 Act giving their address at which notices can be given.
In a second RTM claim, a member of the RTM company delivered a copy of the claim notice to the landlord’s registered office. This met with a second counter-notice denying the claim as it had not been given to the solicitors. Rejecting the landlord’s appeal against the determination that the notice was validly given, the UT accepted that the personal service was effective under section 111 of the 2002 Act. The reference in the first counter-claim to serving its solicitors only related to that claim, since which notices had been given under sections 47 and 48 of the 1987 Act. However, the UT disagreed with the lower tribunal’s rationale for its decision. The UT reiterated that the consequences of any non-compliance must be considered in the context of the legislation as a whole and that prejudice to a party is immaterial (citing the Triplerose decision).
James Driscoll is a solicitor and a writer
