The right to manage (RTM) scheme was ushered in by the Commonhold and Leasehold Reform Act 2002 (the 2002 Act). An aim of the 2002 Act was to provide a cheap and simple mechanism to enable RTM companies to acquire the right to manage properties. A key step in that process involves the service of a claim notice by the RTM company on a landlord of the whole or any part of the premises pursuant to section 79(6)(a) of the 2002 Act.
In Lexham House RTM Co Ltd v European Investments & Development (Properties) Ltd [2019] UKUT 390 (LC); [2019] PLSCS 237, the Upper Tribunal (Lands Chamber) (UT) was asked to determine whether a failure to serve a claim notice on a landlord of part of the premises invalidated the notice.
The failure to give notice
Lexham House, 45-53 Lexham Gardens, London, W8, was a residential block of 24 flats. The respondent freeholder of the premises was European Investments & Development Properties Ltd (EID). Flats 22, 23 and 24 (the top-floor flats) were held on long leases, which were all substantially in the same form. The leases of the top-floor flats each contained an easement granting the lessees exclusive right to use the roof space above their flats.
In 2015, EID granted European Investments & Development (London) Ltd (EIDL) a 999-year lease of the roof of the premises, including the roof space over the top-floor flats, for development purposes; namely, to enable EIDL to construct two additional flats at roof level. It was a term of EIDL’s lease that construction could not begin while the easements subsisted. Further, until the development was realised, EID retained responsibility for repairs to the roof and roof space.
For the purposes of the 2002 Act, EIDL was a landlord of part of the premises because it held the reversion to the easements of the top floor flats. On 19 July 2018, Lexham House RTM Company (Lexham) served a claim notice on EID signalling its intention to acquire the right to manage the premises. Contrary to section 79(6)(a) of the 2002 Act, Lexham failed to serve the claim notice on EIDL. On 20 August 2018, EID served a counter-notice on Lexham disputing its right to acquire the right to manage. EID argued that the claim notice was invalid because Lexham had failed to serve the claim notice on EIDL in accordance with section 79(6)(a) of the 2002 Act.
The First-tier Tribunal decision
The leading case on the effect of a failure to serve a claim notice on an intermediate landlord pursuant to section 79(6) of the 2002 Act is Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89; [2017] PLSCS 46.
In Elim Court, the RTM company had failed to serve a claim notice on an intermediate landlord who held an interest in a single flat in a block comprising 40 flats. The Court of Appeal considered the purpose of the service of the claim notice within the broader context of the RTM scheme. The guidance given by the court was that when assessing whether there had been compliance with the requirements of a statutory scheme consideration must be given to the legislative intention in prescribing a particular procedure in light of the statutory scheme as a whole. The Court of Appeal held that, when an intermediate landlord had no management responsibilities, a failure to serve a notice of claim on that landlord did not invalidate the notice.
In the present case, the First-tier Tribunal (FTT) found in favour of EID and held the notice to be invalid. In reaching its decision, the FTT appeared to distinguish Elim Court on the basis that EIDL held a more significant interest in the premises than the intermediate landlord did in that case. The FTT also found for EID on three additional grounds. First, EIDL was landlord of three occupational leases. Secondly, the demise of the intermediate landlord in Elim Court was no greater than the demise of the lease of the flat to which it was subject; EIDL’s demise, however, included both the surface of the roof and the structure below. Thirdly, EIDL had management responsibilities. On the grant of the lease of the roof it became responsible for complying with the landlord’s obligations in respect of the areas demised under the leases to the top floor flats.
The reality of the situation
On appeal to the UT, Lexham argued that EIDL was not an intermediate landlord of the roof surface and structure. Further, even if EIDL was an intermediate landlord, on the facts of the case, a failure to serve notice on EIDL did not invalidate the claim notice.
The UT rejected Lexham’s first ground of appeal. It found that EIDL was an intermediate landlord within the meaning of section 79(6) of the 2002 Act because it held the reversion to the easements.
On the question of whether a failure to serve EIDL invalidated the claim notice, the UT queried the FTT’s rationale in distinguishing Elim Court. In focusing on the significance of the interest held by EIDL and the intermediate landlord in Elim Court, the FTT simply ignored the reality of the situation. Although EIDL held a lease of the roof over the surface of which the top-floor flats had easements, it had no practical involvement in the premises at all. As between EIDL and EID, only EID was responsible for the repair of the roof and for compliance with the covenants in the leases of the flats.
In allowing the appeal the UT commented that the FTT failed to take into account relevant information about the reality of EIDL’s responsibilities to the lessees of the flats. The evidence pointed to the fact that EIDL simply would not be affected by Lexham’s assumption of the right to manage the premises.
Key points:
In right to manage claims a tribunal must consider the reality of the situation when determining whether a failure to serve a claim notice on an intermediate landlord invalidates the notice.
Elizabeth Dwomoh is a barrister at Lamb Chambers
