Property Law uk

Maintained by Gary Webber

Right to manage

Introduction

A right to manage was given to long leaseholders by ss71 to 113 of the Commonhold and Leasehold Reform Act 2002. The basic concept is that if half or more the qualifying tenants want to take over the management of the property they are able to do so without the need to show any fault on the part of the landlord. The property will be managed by the tenants through the vehicle of a Right to Manage Company (RTM). So long as the procedural requirements are complied with the landlord cannot object and is not entitled to any compensation. However, it is only the right to manage that is acquired; not the property itself.

This page contains cases dealing with:
  • The procedure relating to acquiring the right to manage, and
  • The requirement of the manager tto notify the lessor where there is a request by a lessee to assign.
Procedure

Substantial compliance

Elim Court RTM v Avon Freeholds Ltd
[2017] EWCA Civ 89

Summary

In five conjoined appeals the Court of Appeal considered whether there had been a failure to comply with the statutory procedural provisions and the consequences that followed. It held that the principle of substantial compliance had no relevance in the context of the RTM legislation.

Issues

The facts of each case were slightly different but together they raised the following issues:
  • Whether a notice inviting participation is required by s78(5)(b) of the 2002 Act to inform non-participating tenants that the RTM company's articles of association are available for inspection on 3 days at least one of which must be a Saturday or Sunday. If so, whether the consequence of non-compliance with the requirement is fatal.
  • Whether the disputed claim notices purported to be signed by a company and, if they did, whether that signature was ineffective for failing to comply with s44 of the Companies Act 2006. If so, whether the notice was nonetheless a good notice.
  • Whether the claim notice (at Elim Court) was served on the intermediate landlord. If not, whether service on the intermediate landlord was required. If it was, whether the failure to serve the intermediate landlord was fatal.
Decision of the Upper Tribunal
  • The notice failed to comply with the statutory provisions and this was fatal. It was an important part of the statutory scheme that the articles of the RTM should be available for inspection on at least one weekend day.
  • The notices were validly signed.
  • The claim notice had not been served on the intermediate landlord, which was fatal to the claim. The case was appealed to the Court of Appeal.
Decision on appeal

The Court of Appeal allowed the appeal. The Court applied the principles set out in Natt v Osman [2014] EWCA 1520 Civ. The principle of substantial compliance had no relevance in the context of the RTM legislation. The question was one of statutory construction and what can fairly be supposed by Parliament to be the consequence of non-compliance.

It could not be supposed that Parliament had intended that a failure to specify a Saturday or Sunday for inspection of the company’s articles would invalidate the claim.

In relation to the signature issue the Court of Appeal upheld the reasoning of the Upper Tribunal.

In relation to the intermediate landlord issue the Court of Appeal held that failure to serve a single intermediate landlord, in circumstances where that landlord had no management responsibilities, did not invalidate the notice. It was not part of the purpose of the legislation that a mistake of that kind should invalidate the claim.


Service of claim notice by email

On the qualifying tenant

Assethold Ltd v 110 Boulevard RTM Co Ltd
[2017] UKUT 316 (LC)

Summary

A copy of a claim notice in respect of the right to manage procedure under the Commonhold and Leasehold Reform Act 2002 could be served validly by email on the qualifying tenants by the RTM company.

More detail

Section 79 of the Commonhold and Leasehold Reform Act 2002 contains the following provisions:

“(6) The claim notice must be given to each person who on the relevant date is--
(a) landlord under a lease of the whole or any part of the premises, …
(8) A copy of the claim notice must be given to each person who on the relevant date is the qualifying tenant of a flat contained in the premises.…”

The Upper Tribunal upheld the FTT’s decision that service by email complied with s79(8). It was held that the requirements of s.79(6) and s.79(8) are distinct. The RTM Company must give the actual claim notice to the landlord but only a copy of the claim notice to the qualifying tenants.


Request for consent to assignment

Notice requirement to lessor

Reiner v Triplark Ltd
[2018] EWCA Civ 2151

Summary

A long lessee of a flat had breached a covenant against alienation where consent had not been granted by the lessor, irrespective of the fact that the registration of the assignment had not taken place.

The failure of the RTM company to give consent did not amount to an unreasonable withholding of consent where it had not complied with its obligation to give the lessor notice, thereby enabling the latter to object.

Facts

The First Appellant’s lease contained a covenant that she was not to sublet or part with possession of the flat except with the Lessor’s consent. The management of the property had been taken over by an RTM company, and under the Commonhold and Leasehold Reform Act 2002, s98 and s99, responsibility for giving or withholding consent was vested in the company. However, the company was not permitted to give consent without first giving 30 days’ notice to the landlord, thereby enabling the landlord to object.

The First Appellant exchanged contracts with the Second Appellant for the sale of the flat to him. At the relevant time, the Second Appellant was the sole director of the RTM company. The contract required the company to give notice to the lessor, however no such notice was given because the Second Appellant was concerned that the lessor would object. Further, the RTM company neither consented no expressly refused consent.

The First Appellant purported to complete the assignment in return for the purchase price and moved out of the property with all her possessions. Subsequently, the lessor objected to the assignment and applied to the Land Registry to enter a restriction preventing registration of the assignment.

Issues
  • Had the First Appellant breached the covenant in her lease where there had been no “assignment” unless and until the assignment was registered;
  • If yes, was the RTM company’s failure to give consent an unreasonable withholding of consent within the meaning of the s1 Landlord and Tenant Act 1988?
First instance

The lessor successfully applied to the FTT under s168(4) for a determination that the First Appellant had acted in breach of covenant. The matter proceeded in the UT by way of rehearing, but the same conclusion was reached.

Decision on appeal

It was an inescapable conclusion that the First Appellant had parted with possession to the Second Appellant on completion of the sale. She comprehensively gave up physical possession and control to him by removing all her belongings and delivering the keys to him. The flat had been sold with vacant possession. She had also ceded all legal right to possession by completing her right to assign her interest as lessee. It was irrelevant that, unless and until the transfer was registered, the appellant remained in law the lessee. The assignment was complete in equity and as such the First Appellant was bare trustee on behalf of the Second Appellant.

Furthermore, there had been no unreasonable withholding of consent. Once there were no grounds for reasonably refusing consent, there was a positive statutory duty on the company to give consent. An RTM company was, however, expressly prohibited by s98(4) of the 2002 Act from giving consent until 30 days’ notice had been given to the landlord. It followed that, until such notice had been given, the company could not be under any positive duty to give consent. That position did not prejudice the position of a lessee who could apply under s107 of the 2002 Act for an order that an RTM company fulfil its duty of giving notice to the lessor. It would also be surprising if a conveyancing solicitor / representative for a lessee did not require evidence that the necessary notice had been given.

Comment

Whilst the majority of the decision is uncontroversial, the second point of appeal reinforces the need for lessees and their representatives to ensure that any RTM company complies with their notice requirements to the lessor.



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