Right to manage – Block of flats – Commonhold and Leasehold Reform Act 2002 – Appellant RTM company serving claim notice on all parties entitled to serve counternotice but failing to give copies to qualifying tenants – Respondent serving counternotices as mortgagee in possession of landlord – Whether appellant entitled to acquire right to manage pursuant to second notice – Whether respondent entitled to serve counternotice under terms of relevant mortgage deed – Whether first notice valid and remaining in force such that second notice ineffective – Appeal dismissed
The respondent was a mortgagee in possession of the headlease of a block of flats. The individual flats were let on long leases. In December 2009, the appellant RTM company served notice on the freeholder, the headlessees and the respondent, under section 79 of the Commonhold and Leasehold Reform Act 2002, of its claim to acquire the right to manage the block. The respondent served a counternotice, signed by him as the “duly authorised agent” of the headlessees, disputing the right to manage. The appellant later took the view that its first claim notice was invalid, since copies had not been given to any of the qualifying tenants in the block as section 79 required. It accordingly served a second claim notice in identical form on all relevant parties. The respondent served a further counternotice.
The appellant applied to the leasehold valuation tribunal (LVT), under section 84(3) of the Commonhold and Leasehold Reform Act 2002, for a determination that it was entitled to acquire the right to manage the block pursuant to its second claim notice. Opposing that application, the respondent contended that the second notice was ineffective by reason of section 81(3), since the first notice had been valid and had not been withdrawn by the time the second notice was served. The appellants contended that, inter alia: (i) on the true construction of the mortgage deed, the respondent was not authorised to serve a counternotice on behalf of the headlessees; and (ii) the first notice was invalid and therefore did not need to be withdrawn. The LVT rejected those contentions and dismissed the application. The appellant appealed.
The relevant clause in the mortgage deed authorised “the Lender and their substitutes and separately any such receiver” to be the attorney of the borrower and to do such “acts matters and things as the Lender or such receiver shall in their or his absolute discretion think fit for the full exercise of all or any of the powers confirmed by this clause to which may be deemed expedient by the Lender or such receiver or in connection with any sale lease or disposition realisation or getting in by the Lender”.
Held: The appeal was dismissed.
(1) The clause in the mortgage deed gave a power to the lender in extremely wide terms as the irrevocably appointed attorney for the borrower. That power included the right to take any steps that he deemed expedient in the protection of his security. The respondent, as lender, had a clear interest in ensuring the good management of the block. The exercise of management functions by an RTM company could affect the respondent’s right to protect his security, since a badly run block was likely to diminish in value and cause a drop in the attractiveness of any particular flat, while a well-run block was likely to hold its value or increase in value and the attractiveness of flats might also increase. The right to manage under the 2002 Act was not predicated on establishing any shortcomings on the part of the landlord; the RTM company would gain the right to manage if the statutory requirements were satisfied. The persons who had to be given notice of such a claim, under section 79(6), included the landlord and any party to a lease other than a landlord or tenant; all such persons had the right to serve a counternotice under section 84. The respondent fell within section 79(6), and was consequently entitled to serve a counternotice, by virtue mortgage deed irrevocably appointing him as attorney to the borrower landlord, and entitling him to do all acts matters and things, including the service of notices, that in his absolute discretion he thought fit.
(2) The first claim notice had been valid. There was nothing on the face of that notice to make it invalid and it had been properly served on those who were entitled to receive it and to serve a counternotice. The failure to serve copies of the first notice on the qualifying tenants did not retrospectively make that valid notice invalid. It was open to the appellant to serve copies of the notice on the qualifying tenants at a later stage. The first claim notice had been validly given and remained in force until withdrawn pursuant to the provisions of section 81(4). Since it had not been withdrawn by the time of the second claim notice, the second notice could have no effect. Two claim notices could not be valid at the same time.
Amanda Eilledge (instructed by William Heath & Co) appeared for the appellant; Stan Gallagher (instructed by direct public access) appeared for the respondent.
Sally Dobson, barrister
