Right to manage – Chapter 1 of Part 2 of Commonhold and Leasehold Reform Act 2002 – RTM company – Respondent company held to be entitled to acquire right to manage block of flats owned by appellant – Respondent’s articles of association specifying its objects as acquisition and exercise of right to manage block – Respondent’s company name not containing letters “RTM” – Whether that omission disqualifying respondent from being RTM company for failure to comply with prescribed articles of association in RTM Companies (Model Articles) (England) Regulations 2009 – Appeal dismissed
The appellant owned the freehold of a large, purpose-built block of flats in St Helens. In that capacity, it managed and insured the block and collected service charges from the long lessees of the various flats. The respondent was a private company limited by guarantee; its objects, as stated in its articles of association, were to acquire and exercise the right to manage the block in accordance with Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002. It applied, under section 84(3) of the 2002 Act, for a determination that it was entitled to acquire that right from the appellant.
Opposing the application, the appellant contended that the respondent did not qualify as an RTM company since the letters “RTM” did not appear in its name, contrary to the prescribed articles of association for RTM companies set out in RTM Companies (Model Articles) (England) Regulations 2009, made under section 74 of the 2002 Act. It submitted that the departure from article 2, stating that “The name of the company is [name] RTM Company Ltd”, meant that the respondent did not meet the statutory requirements for an RTM company.
That argument was rejected by the leasehold valuation tribunal (LVT), which found that the respondent was entitled to acquire the right to manage. The LVT distinguished between compliance with the 2009 Regulations and satisfaction of the statutory requirements for an RYM company, which, in its view, were found exclusively in sections 71(1) and 73 of the 2002 Act. It concluded that, where the respondent satisfied the criteria in section 73, it was an RTM company regardless of whether its articles of association conformed to the 2009 Regulations. The appellant appealed.
Held: The appeal was dismissed.
The respondent satisfied the description of an RTM company in section 73(2) of the 2002 Act, being a private company limited by guarantee, with articles of association that stated that its object was the acquisition and exercise of the right to manage the premises. The 2009 Regulations, made six years after the commencement of the 2002 Act in substitution for earlier regulations, were not part of the material forming the background or context of the terms of the Act itself and could not be taken into account as an aide to its interpretation. Regulations could not impose additional conditions to be satisfied for a company to be an RTM company unless the 2002 Act so provided, which it did not. It followed that, whatever had to be in its articles of association, a company would be an RTM company if it satisfied the requirements of section 73(2) and was not excluded by any of the provisions of sections 73(3) to (5).
Moreover, the legislation imposed no sanction or consequence for a failure to comply with the 2009 Regulations. The combined effect of section 74(4) and (5) of the 2002 Act, taken together with regulation 2 of the 2009 Regulations, was that if a company was an RTM company, its articles of association were those prescribed in the schedule to the regulations whether or not they had been adopted as such. Any omission to adopt or include a prescribed article was cured by regulation 2. If different articles were adopted, then they would also form part of the articles of association of the RTM company provided they were not inconsistent with the prescribed articles. Any adopted article that was inconsistent with a prescribed article would have no effect. Accordingly, the omission of the words “RTM” from the respondent’s name had no effect so far as that omission was inconsistent with the prescribed articles. If the letters “RTM” were essential, then they were part of the respondent’s name because it was an RTM company and, by regulation 2(2), the prescribed articles had effect whether or not they were adopted.
Where a statute or regulation prescribed that a certain procedure “shall” be adopted, that did not mean that a failure to adopt that procedure would be fatal to the validity of the steps permitted by the statute. The 2009 Regulations made it clear that, in the event of a failure by an RTM company to adopt one of the prescribed regulation, or of an inconsistency between the adopted articles and the prescribed articles, the prescribed articles took precedence. Parliament had not intended the absence of the letters “RTM” from the name of a company, where that company otherwise satisfied the requirements of section 73 of the 2002 Act, to be fatal to the company’s status.
Justin Bates (instructed by JB Leitch LLP, of Liverpool) appeared for the appellant; Benjamin Jenkins, of Crooks Commercial Solicitors, of Wakefield, appeared for the respondent.
Sally Dobson, barrister
Fairhold Mercury Ltd v HQ (Block 1) Action Management Co Ltd
Right to manage – Chapter 1 of Part 2 of Commonhold and Leasehold Reform Act 2002 – RTM company – Respondent company held to be entitled to acquire right to manage block of flats owned by appellant – Respondent’s articles of association specifying its objects as acquisition and exercise of right to manage block – Respondent’s company name not containing letters “RTM” – Whether that omission disqualifying respondent from being RTM company for failure to comply with prescribed articles of association in RTM Companies (Model Articles) (England) Regulations 2009 – Appeal dismissedThe appellant owned the freehold of a large, purpose-built block of flats in St Helens. In that capacity, it managed and insured the block and collected service charges from the long lessees of the various flats. The respondent was a private company limited by guarantee; its objects, as stated in its articles of association, were to acquire and exercise the right to manage the block in accordance with Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002. It applied, under section 84(3) of the 2002 Act, for a determination that it was entitled to acquire that right from the appellant.Opposing the application, the appellant contended that the respondent did not qualify as an RTM company since the letters “RTM” did not appear in its name, contrary to the prescribed articles of association for RTM companies set out in RTM Companies (Model Articles) (England) Regulations 2009, made under section 74 of the 2002 Act. It submitted that the departure from article 2, stating that “The name of the company is [name] RTM Company Ltd”, meant that the respondent did not meet the statutory requirements for an RTM company.That argument was rejected by the leasehold valuation tribunal (LVT), which found that the respondent was entitled to acquire the right to manage. The LVT distinguished between compliance with the 2009 Regulations and satisfaction of the statutory requirements for an RYM company, which, in its view, were found exclusively in sections 71(1) and 73 of the 2002 Act. It concluded that, where the respondent satisfied the criteria in section 73, it was an RTM company regardless of whether its articles of association conformed to the 2009 Regulations. The appellant appealed.Held: The appeal was dismissed. The respondent satisfied the description of an RTM company in section 73(2) of the 2002 Act, being a private company limited by guarantee, with articles of association that stated that its object was the acquisition and exercise of the right to manage the premises. The 2009 Regulations, made six years after the commencement of the 2002 Act in substitution for earlier regulations, were not part of the material forming the background or context of the terms of the Act itself and could not be taken into account as an aide to its interpretation. Regulations could not impose additional conditions to be satisfied for a company to be an RTM company unless the 2002 Act so provided, which it did not. It followed that, whatever had to be in its articles of association, a company would be an RTM company if it satisfied the requirements of section 73(2) and was not excluded by any of the provisions of sections 73(3) to (5).Moreover, the legislation imposed no sanction or consequence for a failure to comply with the 2009 Regulations. The combined effect of section 74(4) and (5) of the 2002 Act, taken together with regulation 2 of the 2009 Regulations, was that if a company was an RTM company, its articles of association were those prescribed in the schedule to the regulations whether or not they had been adopted as such. Any omission to adopt or include a prescribed article was cured by regulation 2. If different articles were adopted, then they would also form part of the articles of association of the RTM company provided they were not inconsistent with the prescribed articles. Any adopted article that was inconsistent with a prescribed article would have no effect. Accordingly, the omission of the words “RTM” from the respondent’s name had no effect so far as that omission was inconsistent with the prescribed articles. If the letters “RTM” were essential, then they were part of the respondent’s name because it was an RTM company and, by regulation 2(2), the prescribed articles had effect whether or not they were adopted.Where a statute or regulation prescribed that a certain procedure “shall” be adopted, that did not mean that a failure to adopt that procedure would be fatal to the validity of the steps permitted by the statute. The 2009 Regulations made it clear that, in the event of a failure by an RTM company to adopt one of the prescribed regulation, or of an inconsistency between the adopted articles and the prescribed articles, the prescribed articles took precedence. Parliament had not intended the absence of the letters “RTM” from the name of a company, where that company otherwise satisfied the requirements of section 73 of the 2002 Act, to be fatal to the company’s status.Justin Bates (instructed by JB Leitch LLP, of Liverpool) appeared for the appellant; Benjamin Jenkins, of Crooks Commercial Solicitors, of Wakefield, appeared for the respondent.Sally Dobson, barrister