Right to manage – Commonhold and Leasehold Reform Act 2002 – Right to Manage (Prescribed Particulars and Forms) (England) Regulations 2010 – Procedure – Respondent claiming right to manage residential building – Whether claim invalid for defects in procedure – Whether notice of invitation to participate given to qualifying tenants invalid for failure to include the notes in Schedule 1 to the 2010 Regulations – Whether claim notice complying with requirements of Act – Appeal allowed
The appellant owned the headlease of a residential building in Newcastle which contained six flats let on long underleases. The respondent was an RTM company formed for the purpose of acquiring the right to manage the premises pursuant to Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002. In 2013, the respondent gave a notice of invitation to participate to the qualifying tenants of each flat, pursuant to section 78 of the 2002 Act, inviting them to become members of the company. In July 2014, the respondent gave a claim notice to the appellant under section 79 of the 2002 Act seeking to acquire the right to manage.
By a counternotice, the appellant disputed the respondent’s entitlement to acquire the right to manage, arguing that its claim was defective in several respects. Its primary arguments were that: (i) the notice of invitation to participate given to qualifying tenants was invalid since, contrary to section 78(2) of the 2002 Act and regulation 3 of the Right to Manage (Prescribed Particulars and Forms) (England) Regulations 2010, it omitted all the notes in Schedule 1 to the regulations; (ii) the claim notice departed from the form prescribed by Schedule 2 to the regulations by inviting service of a counternotice at the address of the respondent’s solicitor rather than at its registered office, with the effect that it was not a valid claim notice for the purposes of section 80 of the 2002 Act and regulation 4 of the 2010 Regulations.
The first-tier tribunal (FTT) rejected those points and determined that the respondent was entitled to acquire the right to manage. While it found that the notice of invitation to participate and claim form did not comply in all respects with the prescribed forms, it held that the provisions relating to the content of notices were directory rather than mandatory and that the defects did not invalidate the notices where none of the parties had been prejudiced by them. The appellant appealed.
Held: The appeal was allowed.
(1) The FTT should be slow to relax the need for full compliance with the procedural requirements laid down by the 2002 Act. The acquisition of the right to manage affected not only the members of the RTM company but also qualifying tenants who were not members, their immediate and superior landlords, managing agents and contractors engaged to undertake management of the premises or to provide other services. On the acquisition of the right to manage, each of those categories of interested party lost the benefit of contractual rights without compensation and, in the case of tenants, agents and contractors, without the right to be inform of or joined as a party to the RTM company’s claim for a determination of its entitlement by a tribunal. The statutory procedures were not difficult to comply with and could easily be repeated if not properly implemented the first time. It was preferable to reject defective claims at an early stage rather than see them rejected on an appeal or for some interested third party later to dispute that the right to manage had been successfully acquired: Avon Ground Rents Ltd v 51 Earls Court Square RTM Co Ltd [2016] UKUT 22 (LC); [2016] PLSCS 18 applied.
(2) In the case of statutory schemes for the acquisition of property or similar rights by private persons, the correct approach was to ascertain the intention of parliament concerning the consequences of non-compliance in the light of the statutory scheme as a whole. That was a question of construction of the statute which did not depend on the circumstances of the individual case. In some schemes, certain defects might be inconsequential, while in others the failure to give a certain notice or provide certain information might be of critical importance to the integrity of the statutory scheme, with the result that non-compliance would mean that the statutory procedure had been invalidly invoked. The statutory scheme for the acquisition of the right to manage under the 2002 Act was a scheme of that kind. While no interest in land was created or transferred by the acquisition of the right to manage, the same policy of providing certainty in relation to the existence, acquisition and transfer of property interests was fully engaged: Newbold v Coal Authority [2013] EWCA Civ 584; [2013] PLSCS 115 and Osman v Natt [2014] EWCA Civ 1520; [2015] EGLR 11 applied.
(3) The requirements regarding notices of invitation to participate were designed to ensure that every qualifying tenant had the opportunity to participate in the right to manage claim. Compliance was an essential pre-condition to any further progress towards the acquisition of the right to manage and its importance was apparent from section 79(2) of the 2002 Act, so far as it prohibited the service of a claim notice unless a notice of invitation to participate had been given to each qualifying tenant at least 14 days before. In the instant case, while each of the qualifying tenants had received a notice, there had been a failure to comply with the requirements as to its form. The omitted notes were intended to inform the recipient of the notice of the basic structure of the statutory scheme and contained important information that might influence the mind of a person considering whether to become a member of an RTM company. Without the notes, recipients would have an incomplete understanding of the statutory scheme and would be less well informed in making their decision that parliament had intended them to be. Parliament had intended that a notice should be in the prescribed form, including all the notes, and it was not the tribunal to categorise some as more important than others. As a matter of construction of the statutory scheme, the inclusion of the notes was essential to the validity of a notice of invitation to participate.
It followed hat the documents served on the qualifying tenants were not notices of invitation to participate compliant with section 78 and, as a result, the respondent was prohibited by section 79(2) from giving a claim notice seeking to acquire the right to manage. The FTT had erred in finding the contrary based on its view that the requirements were directory rather than mandatory; that was now regarded as an unsatisfactory approach to such cases: Osman applied.
(4) Had the claim notice been preceded by valid notices of invitation to participate, the inconsequential modification of the claim notice in relation to the address for the giving of a counternotice would not have been sufficient to disentitle the respondent from acquiring the right to manage. While the 2002 Act required a claim notice to state the name and registered office of the RTM company, it did not require that address to be specified as the address for the giving of a counternotice; nor was there any requirement that a counternotice be served at the registered office of the RTM company: see sections 80 and 84 of the 2002 Act. The only basis for any such requirement was para 5 of the prescribed form of claim notice, stating that a counternotice had to be given to the company at the address in para 1, which was the address of its registered office. While it was essential that the recipient of a claim notice should know the address of the RTM company’s registered office, there was nothing in the statutory scheme to prohibit an RTM company from specifying an alternative address for service of the counternotice. The matter was one of machinery and was of ancillary importance.
The appeal was determined on the written representations of the parties.
Sally Dobson, barrister
Click here to read transcript: Triplerose Ltd v Mill House RTM Co Ltd
