Legal notes James Driscoll reviews the procedure for withdrawing a right-to-manage application
Key points
• The RTM procedure is governed by the 2002 Act. Most leaseholders who qualify for the right to enfranchise will also qualify for the RTM as an alternative.
• The RTM is a no-fault based right, but landlords can still challenge an application on certain grounds.
• The tribunal’s consent is needed to withdraw a RTM claim, meaning the tribunal retains jurisdiction to dismiss an application or deal with the substance of the landlord’s challenge and to deal with costs.
• Under the Tribunal Procedure (First-tier) (Property Chamber) Rules 2013 the tribunal’s consent must be obtained ?before a party can withdraw an application.
One of the reforms to residential leasehold law made by Part 2 of the Commonhold and Leasehold Reform Act 2002 (the “2002 Act”) was the introduction of a new no-fault-based right to manage (“RTM”). Under the RTM, groups of qualifying leaseholders of flats can take over the management of their block. The procedures look simple enough: the leaseholders have to incorporate a company with a prescribed constitution (a “RTM company”) which must give a notice to any leaseholder who is not already a member inviting them to join. The company must then serve a notice on the landlord exercising the RTM and unless the landlord gives a counter-notice, the RTM company takes over the management of the block. The entitlement rules for the RTM are, broadly speaking, the same as they are for enfranchisement and it is likely that the leaseholders of most blocks of flats qualify for both the RTM and for enfranchisement.
Challenging the RTM
Despite the RTM being a no-fault-based right, landlords do challenge the applications, commonly on the grounds that:
? the leaseholders have not followed the correct procedures;
? the RTM company has not been properly constituted; or
? the RTM company has failed to comply with the invitation notice procedures.
A landlord may also challenge the claim on the grounds that the building is excluded by the 2002 Act, for example by claiming that the internal floor area of any non-residential part or parts (excluding any common parts) exceeds 25% of the internal area of the premises as a whole (schedule 6 to the 2002 Act).
If the landlord challenges a claim by serving a counter-notice, the RTM company must apply to the First-tier Tribunal (Property Chamber) for a determination as to whether it is entitled to acquire the RTM (section 84(3) of the 2002 Act). There is the right to appeal a decision if permission to appeal is granted by the First-tier Tribunal or the Upper Tribunal.
O Twelve Baytree
Recently a leasehold valuation tribunal decision was challenged in R (on the application of O Twelve Baytree Ltd v Rent Assessment Panel [2014] EWHC 1229 (Admin); [2014] PLSCS 126. In October 2012, a RTM claim was served on the landlord, who served a counter-notice contending that the premises were not a self-contained building or part of a building as required by section 72 of the 2002 Act. The RTM company applied to the tribunal for a determination that it was, in October 2012, entitled to acquire the RTM. A hearing date was fixed but two days before the hearing the tribunal received a letter stating that the hearing “is cancelled and our client’s application is withdrawn”. The landlord responded by claiming that the RTM company could not unilaterally withdraw its application and expressed concern that having incurred costs in preparing for the hearing, it wished to preserve the right to have a costs order granted under section 88 of the 2002 Act. The tribunal decided that as the application had been withdrawn it no longer had jurisdiction to make any orders.
The landlord challenged this decision by applying for a judicial review, arguing that the tribunal retained jurisdiction to make a determination on the challenge and to deal with costs under section 88 of the 2002 Act. It is to be noted at this point that a landlord is entitled to recover its reasonable costs in dealing with an RTM claim but, once an application is made to the tribunal, the landlord can only recover its costs incurred in connection with the proceedings if the tribunal dismisses the application for a determination that the applicant was entitled to acquire the RTM.
Restrictions
What are the restrictions, if any, on a party unilaterally withdrawing a RTM application? The High Court noted that a RTM claim can be withdrawn at any time by giving notice under section 86 of the 2002 Act up the point where an application is made to the tribunal. It will be liable for the landlord’s reasonable costs up to that point. However, on the court’s reading of the 2002 Act, the tribunal retains jurisdiction even if, before a hearing, the RTM company states that it wishes to withdraw.
This conclusion was reinforced by a consideration of Hanson v Church Commissioners for England [1978] 1 QB 823, where the Court of Appeal decided that a rent assessment committee retained jurisdiction where a tenant had withdrawn his objection to the fair rent that was set by a rent officer. That court held that both the public interests in having fair rents registered and the protections needed for the other party meant that jurisdiction has to be retained. Also in Silkstone v Tatnall [2011] EWCA Civ 801; [2011] 3 EGLR 47, it was decided that neither party to an application to the Chief Land Registrar could unilaterally withdraw. If either party wants to withdraw “…it is then for the adjudicator to rule in his discretion as to how to deal with any such withdrawal” [48].
The High Court concluded that the 2002 Act should be interpreted as requiring the consent of the tribunal before withdrawing an application. In making its decision, the tribunal “may, and usually will” be satisfied that this will be sufficient to dismiss the application and will ensure that the landlord will be paid its costs. However, there may be “rare occasions” where a tribunal will consider it appropriate to deal with the substance of the landlord’s challenge to the validity of the claim.
Almost as a postscript, the court noted that under the Tribunal Procedure (First-tier) (Property Chamber) Rules 2013 the tribunal’s consent must be obtained before a party can withdraw an application.
Professor James Driscoll is a solicitor and an author
