Right to manage – Commonhold and Leasehold Reform Act 2002 – Leaseholders of two blocks of flats forming two RTM companies to acquire right to manage blocks – Blocks treated for that purpose as single building capable of division into two self-contained parts – Landlords serving counternotices disputing right to manage – Whether counternotice in respect of one block invalidated by reference to wrong RTM company – Whether other block ineligible for right to manage due to inability to provide water services independently to that part of the building – Appeals allowed
The leaseholders of flats in two modern apartment blocks in Cardiff set up two RTM companies with a view to claiming the right to manage those blocks under Part 2 of the Commonhold and Leasehold Reform Act 2002. The RTM companies were each named after the block that they were to manage, respectively St Stephens and St James. The two blocks abutted each other in an inverted L-shape and shared certain services, including common water tanks, pumps and pipes; for the purposes of the RTM claims, they were assumed to form a single self-contained building that was capable of division into two parts.
The RTM companies served notice of their claims on the freeholder of the blocks and its management company, both of which served counternotices, under section 84(2) of the 2002 Act, disputing the RTM companies’ entitlement to acquire the right to manage. The RTM companies then applied to the leasehold valuation tribunal (LVT) to determine that issue.
The LVT held that the right to manage could be acquired in respect of the St James block since no valid counternotice, fulfilling the requirements of section 84(2) of the Act, had been served in respect of it. In that regard, the LVT noted that, while the counternotices for the St James block were correctly addressed to the St James RTM company, they wrongly gave the name of the St Stephens RTM company in para 1.2 of the notice when stating that the company was not entitled to acquire the right to manage the block. As a result, the St James counternotices did not, in terms, say that the St James RTM company’s was not entitled to acquire the right to manage those premises.
In relation to the St Stephens block, the LVT held that the shared water system disqualified the block from the right to manage; it found that it would not be possible to provide the water services independently to the St Stephens block and that, consequently, it was not a self-contained part of a building satisfying the description in section 72(3) of the 2002 Act.
The management company and the St Stephens RTM company appealed against the respective decisions against them.
Held: The appeals were allowed.
(1) A notice would not achieve its purposes if some precondition was not satisfied or some mandatory piece of information was not provided. However, section 84 of the 2002 Act contained no requirement that the name of the RTM company be stated in a counternotice. In order to comply with section 84(2)(b), a counternotice had to contain a statement alleging that, by reason of specified provisions of the Act, “the RTM company” was not entitled to acquire the right to manage. In the context of the statutory scheme, the purpose of that statement was not to inform the RTM company of its own identity, but to inform it of the grounds on which the recipient of its claim notice intended to challenge its entitlement to acquire the right to manage. Provided that the counternotice communicated that information, in whatever form, it would have complied with the requirement of section 84(2)(b).
It was therefore relevant to ask what meaning the counternotices would have conveyed to a reasonable recipient with the knowledge possessed by the actual recipient. The St James counternotices clearly disputed the entitlement to exercise the right. The only question in the mind of the reasonable recipient would have been over the identity of the RTM company whose right was being disputed. It would have been obvious to the recipient, applying a common-sense approach, that there had been a mistake. In all the circumstances, and in light of the express references to the St James block in the documents themselves and in the covering letters, the reasonable recipient would have concluded that the mistake lay in the reference to the St Stephens RTM company when the St James RTM company was intended, and not the other way around. Accordingly, the only reasonable conclusion that the recipient could arrive at was that the counternotices were intended to allege that the St James RTM company, as the company claiming the right to manage the St James block, was not entitled to acquire that right. Where the required statement contains such an obvious error, and where the meaning intended to be conveyed would be understood by a reasonable recipient, that was sufficient to comply with section 84(2)(b) and the error did not invalidate the counternotice: Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; [1997] 1 EGLR 57 applied; Assethold Ltd v 15 Yonge Park RTM Co Ltd [2011] UKUT 379 (LC); [2011] PLSCS 251 and Assethold Ltd v 14 Stansfield Road RTM Co Ltd [2012] UKUT 262 (LC); [2012] PLSCS 205 distinguished.
A counternotice was also required by section 84(2) to comply with the regulations made by the appropriate national authority so far as they prescribed additional particulars to be supplied or the form of the document. The relevant regulations in the instant case were the Right to Manage (Prescribed Particulars and Forms) (Wales) Regulations 2011, which, by regulation 8(3), required a counternotice to be in the prescribed form “or a form to the like effect provided that it contains all of the prescribed particulars as set out in regulation 5”. Those words did not appear in the English equivalent in the Right to Manage (Prescribed Particulars and Forms) (England) Regulations 2010. The fact that the Welsh version had some flexibility suggested that errors which did not compromise the effect of the document were not intended to be fatal to the validity of a counternotice. The proper conclusion was that the St James counternotices were “to the like effect” of the form of counternotice set out in Schedule 3 to the 2011 Regulations. It followed that the St James counternotices were valid and the grounds of opposition identified in them should have been considered on their merits, as they were in relation to the St Stephens block.
(2) The St Stephens block was a self-contained part of a building eligible for the right to manage under the 2002 Act. While the installation of new water meters would not be sufficient to render the water services to each part of the building independent of each other, but would simply permit independent measuring and billing of what would remain a shared supply, it was possible to produce an independent supply by the installation of additional pipes, tanks and pumps. The LVT had erred so far as it had concluded that such a course would result in the provision of new services, rather than the provision of the services independently. Section 72(4)(b) contemplated “the carrying out of works” to render the supply of services independently to the different parts of the building and was not restricted to situations in which a separation of service provision could be achieved simply by closing isolation valves or flicking switches. It was a question of degree as to what extent of adaptation or addition to an existing system would be permissible before the line was crossed and premises ceased to be a self-contained part of a building. The provision of new components or installations could not be ruled out; the only scale of measurement that the Act provided for deciding whether work was too substantial was by reference to the degree of interruption that it would inflict on occupiers of the remainder of the building. The LVT had therefore been wrong to regard the provision of additional components as fatal. The provision of the same service, namely the supply of water, through adapted service installations, including new components, was equally capable of passing the test. In the instant case, it was sufficient that, after the provision of new pumps and tanks, the same service would continue to be supplied by substantially the same method, and without significant interruption of supply: Oakwood Court (Holland Park) Ltd v Daejan Properties Ltd [2007] 1 EGLR 121 applied.
It was not significant that the two parts of the building would use a shared pipe from the water main to the pump house serving the building. It was in the nature of many services provided by means of pipes, cables or fixed installations that mains conduits were subdivided at a point close to the point of delivery to the consumer; until that point was reached, the supply to any individual customer or group of customers was not independent of the supply to any other group. That fact could not prevent the relevant service from being supplied independently for the purpose of section 72(4). A sensible line had to be drawn. It was consistent with the statutory scheme to examine the supply from the point at which it first emerged above ground in the pump house, since that was the point where equipment under the control of the parties first began to operate on it.
Moreover, it was irrelevant whether the leaseholders or the RTM company already possessed the necessary legal rights to effect alternations to service installations. That would rarely be the case. In order to give the statute a sensible effect, it was necessary to disregard the question of entitlement to carry out the necessary work. The purpose of section 72 was to identify premises to which the Act applied, and, for that purpose, the question had to be considered on a purely practical level, focusing on the construction and configuration of the premises, rather than on the rights of their occupiers. Accordingly, the LVT had erred in concluding that the St Stephens block was not a self-contained part of a building.
Per curiam: The decisions of the LVT had produced a paradoxical result in that the LVT had found the St James RTM company eligible to acquire the right to manage premises which, on the reasoning it had adopted its St Stephens decision, would have been premises to which the 2002 Act did not apply. The better view was that, unless the premises in question were premises to which Part 2 of the Act applied by reason of satisfying the conditions in section 72, then none of the right to manage provisions had effect in relation to those premises. With regard to jurisdiction, it should not have mattered whether the counternotices were valid or invalid. Where proceedings were brought before a tribunal, the tribunal had power to consider whether it had jurisdiction to hear those proceedings. If it was satisfied that it did not have jurisdiction because, for example, the premises in question were not premises to which Part 2 of the 2002 Act applied, then it should say so and should not make any other unqualified determination.
Christian J Howells (instructed by Rees Wood Terry, of Cardiff) appeared for the RTM companies; Justin Bates (instructed by Peverel Property Management) appeared for the landlords.
Sally Dobson, barrister
Read the transcript of St Stephens Mansions RTM Co Ltd v Fairhold NW Ltd and another
