Baron Estate Management Ltd v Wick Hall (Hove) RTM Co Ltd

Landlord and tenant – Leasehold enfranchisement – Right to manage – Respondent RTM company failing to give notice of invitation to participate to qualifying tenants – Claim notice failing to include names of every person who was both qualifying tenant and member of respondent – Whether procedural defects sufficiently serious to prevent acquisition of right to manage – Appeal allowed The appellant owned the freehold of Wick Hall, a block of 168 flats in Hove, East Sussex. In September 2021, the respondent RTM company was incorporated to acquire the right to manage the block. Notices of invitation to participate were prepared by the respondent’s adviser and served by post on all those qualifying leaseholders, of whom the adviser was aware, who were not already members of the respondent. The registered proprietors of the lease of flat 121 were joint tenants. By mistake, the notice of invitation to participate served was addressed to only one of the two joint tenants. Further, on the date the claim was made, notices inviting participation had not been served on the qualifying tenants of flats 30 and 154. An issue arose whether the failure to comply with the procedure for acquiring the right to manage under the Commonhold and Leasehold Reform Act 2002 had the effect that the right had not been acquired by the respondent. The appellant relied on two procedural defects: (i) before making its claim, the respondent did not serve notices on some of the qualifying tenants inviting them to participate in the acquisition by becoming members of the company, contrary to section 78(1) of the 2002 Act; and (ii) the claim notice omitted the names of some of those who were both qualifying tenants of a flat in the premises and members of the respondent, contrary to section 80(3) of the Act. The First-tier Tribunal (FTT) decided that neither defect was sufficiently serious to prevent acquisition of the right to manage. The appellant appealed. Held: The appeal was allowed. (1) The consequence of failing to serve notices of invitation to participate on all qualifying tenants who were not already members of the respondent had been settled at the level of the Upper Tribunal (UT) by its decision in Avon Ground Rents Ltd v Canary Gateway (Block A) RTM Co Ltd [2020] UKUT 358 (LC); [2020] PLSCS 235, to which the FTT was not referred.  In that case the UT decided that the effect of non-service of notices of invitation to participate on all those qualifying tenants who were required by section 78(1) of the 2002 Act to be served was prescribed by section 79(2) and was that a claim notice might not be given.  There was no inconsistency between that conclusion and the approach to validity taken in Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89; [2017] PLSCS 46 in which it was explained that, in cases concerning the acquisition of rights over property (including the right to manage), the intention of parliament as to the consequences of non-compliance with the statutory procedure (where not expressly stated in the statute) was to be ascertained in the context of the statutory scheme as a whole. (2) Section 79(2) was an express statement of the consequence of non-compliance with the requirement to serve notices of invitation on all qualifying tenants who were not already members. It was therefore unnecessary to consider the statutory scheme as a whole to ascertain whether parliament intended non-compliance with section 78(1) to have the effect that the notice of claim was wholly valid or invalid. Parliament had said expressly that a notice of claim might not be served where section 78(1) had not been complied with. The appeal therefore had to be allowed for the reasons given in Canary Gateway. The FTT’s conclusion that notices inviting participation were not served on the qualifying tenants of flats 30 and 154 was sufficient to settle the issue, without the need to consider the different case of flat 121, where notice was served on only one of two joint tenants. The parties did not include a copy of the notice served at flat 121 in the appeal documents and, without seeing it, the UT was not prepared to reach any conclusion on its effect.  (3) The question whether the failure to include the name of the qualifying tenant of flat 87 in the claim notice invalidated the claim had not yet been considered in the UT. As Elim Court established, it was a question of interpretation of the statute whether a failure to comply with the requirement in section 80(3) to include the name of each person who was both a qualifying tenant and a member of the RTM company in the claim notice was fatal to the validity of the claim. The answer did not depend on the circumstances of any individual acquisition and should be the same in the case of a block of ten flats as in a block of one hundred.      In support of its argument that a failure to include the names of all qualifying tenants who were members of the company in the claim notice rendered it wholly void, the appellant pointed to the fact that the requirement was included in the statute itself, and not in secondary legislation or a prescribed form, and had been regarded by parliament as of central importance. Further, section 81(2) of the Act identified circumstances in which one type of defect in a claim notice would not invalidate the claim, but they did not include the circumstances of the present case. (4) The register of members of a company was not a public document and it was likely that the information required by section 80(3) was to be included so that the landlord could verify for itself whether the respondent had the necessary support, and knew who would be liable for its costs if the claim failed. For those reasons, the inclusion of that information might be considered of sufficient importance that its omission was fatal. On the other hand, the 2002 Act lacked a clear statement dealing with the consequences of non-compliance, such as was found in section 79(2). The issue was an important one and, since the respondent was not legally represented, the UT preferred not to reach a concluded view on it in this case and would leave it for decision in a case where the answer mattered. Accordingly, the respondent was not entitled to make the claim and had not acquired the right to manage. Paul Letman (instructed by Dean Wilson LLP) appeared for the appellant; The respondent appeared by its representative. Eileen O’Grady, barrister Click here to read a transcript of Baron Estate Management Ltd v Wick Hall (Hove) RTM Co Ltd