Supreme Court gives boost to right to manage claims

The Supreme Court today upheld a ruling that failure to serve a right to manage claim on all relevant landlords does not automatically invalidate the claim. The decision should prevent tenants from being thwarted in their efforts to assert the right to manage by certain technical defects. The court unanimously dismissed a “leapfrog” appeal from the Upper Tribunal (Lands Chamber) by A1 Properties (Sunderland) Ltd, the intermediate landlord of parts of Tudor Studios, a former factory in Leicester now converted into student accommodation. The investor tenants of the 237 “study studios” and three larger flats in the premises sought to exercise the right to manage through Tudor Studios RTM Company Ltd, which served the claim on the freeholder and the management company, but not to A1, which holds the common room, the laundry, the gym and the reception area, but has no management responsibilities. The Supreme Court rejected A1’s argument that this invalidated the RTM claim. Lauren Fraser, senior associate at Charles Russell Speechlys praised the court’s “common sense” approach. Fraser said: “Following a series of cases which appeared to move away from the doctrine of strict adherence to statutory requirements in notices in property cases, the Supreme Court has today confirmed the direction of travel and provided some helpful signposts for approaching non-compliance with statutory procedure.” Fraser added that the decision aligned with anticipated changes in the legal landscape. She said: “The government has indicated that it intends to adopt the proposals of the 2020 Law Commission reports which recommend a much more simplified approach to the statutory procedure for the acquisition of statutory rights, which will have a huge impact on property notices and their effects.” Stephen Burke, real estate disputes lawyer at law firm Taylor Wessing, said: “This judgment makes clear that the court is willing to take a flexible approach to RTM companies in circumstances where a procedural failing does not cause a party to suffer any particular detriment.” But he warned that, while the RTM company was able to exercise the right to take over management of the building in this case, RTM companies should seek legal advice at the outset to avoid becoming embroiled in costly disputes. Burke said: “We often see RTM companies taking steps without legal representation and this can lead to procedural flaws, as was the case here.” “Landlords on the receiving end of RTM claims should carefully consider verifying whether the RTM company both satisfies the eligibility criteria and has correctly followed the procedure. “However, if there is a procedural deficiency, landlords should analyse whether this causes any particular detriment before challenging the validity of the claim” Section 79(6)(a) of the Commonhold and Leasehold Reform Act 2002 explicitly states that an RTM notice is required to be served on an intermediate landlord. However, following the Court of Appeal’s decision in Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89; [2017] PLSCS 46, the position has been that certain defects in a claim notice will not automatically cause it to fail.  A1 had sought to challenge that position and argued that a failure to serve a claim notice on a landlord as required by section 79(6)(a) of the 2002 Act should always invalidate an RTM claim. However, in the Supreme Court’s judgment Lord Briggs and Lord Sales found that the correct position is that a failure of this kind renders the transfer of the right to manage “voidable” in the right circumstances, but not void – effectively, valid but liable to be set aside, rather than automatically invalid from the outset. In this case, A1 had been joined to the proceedings in the tribunal and had had its opportunity to make its objections heard, only for the RTM claim to have been sanctioned by the tribunal. A1 Properties (Sunderland) Ltd v Tudor Studios RTM Company Ltd Photo © Jeff Blackler/Rex Shutterstock