The Supreme Court has just handed down its ruling in A1 Properties (Sunderland) Ltd v Tudor Studios RTM Company Ltd [2024] UKSC 27 (full ruling here) confirming the correct approach of the Court or Tribunal when considering a procedural failing by a party where the relevant statute is silent as to the consequences of that error - in this case the failure to serve one of several landlords with the Notice of Claim of the right to manage.

The Right to Manage Process

Under the Commonhold and Leasehold Reform Act 2002 (“CLRA”) a group of tenants, who fulfil the qualifying criteria set down by CLRA, who wish to acquire the right to manage their block of flats must first form an RTM company and then, by s.79 CLRA, serve a Notice of Claim to all landlord[s] under a lease of…part of the premises.  The service of the Notice of Claim triggers the acquisition process placing the burden on the landlord to oppose the right of the tenant to take over management (by service of a counter notice within a limited period of time).  In default of opposition, the right to manage applies by default enabling the tenants to take over management.

It is wise for any group of leaseholders who wish to exercise any right, to seek advice at an early stage on the process as complications can arise with the drafting of the notices and, commonly, where the trail of the respective owners of the superior titles (the "landlords" of which there can often be significantly more than one) is not clear such as will make it difficult to identify all of those “landlord” parties who should be served with the relevant notices under the statutory process.

The circumstances at Tudor Studios

Tudor Studios was a converted building in Leicester made up of 277 student accommodation studio flats and thee other flats, all let on long leases. These flats were served by the common parts (hallways etc) but also a gym, laundry room, common room and reception area. 

A1 Properties (“A1”) had been granted four separate leases for each of the gym, laundry room, common room and reception area making A1 the landlord of those areas and thus a “landlord” under CLRA. Accordingly, a Notice of Claim should have been served by the RTM Company on A1 in exercising its right to manage claim.  Sadly, the RTM company did not spot this point and so no Notice of Claim was served upon A1.

A1 sought to oppose the right to manage claim on the basis that a failure by the RTM to serve upon them the Notice of Claim was fatal and the claim must be dismissed.

CLRA does not explicitly set out consequences of failing to serve a Notice of Claim on all landlords, raising the question of whether such a failure would invalidate the RTM company’s acquisition of management rights.  This is particularly significant given the sometimes complexity of, and potential for procedural oversights in, the process of identifying potential “landlords” upon whom notice should be served.

A1's objections were rejected by both the First Tier Tribunal and, on appeal, the Upper Tribunal but A1 persisted and, given the importance of the points in issue, the matter leapfrogged the Court of Appeal straight to the Supreme Court for a final judgment.

The Appeal

The appeal centered on two primary issues:

1. Invalidation of Right to Manage: Whether failing to serve a claim notice on a landlord, as required by section 79(6)(a), always and automatically invalidates the RTM company's acquisition of management rights.

2. Specific Case Context: Whether the failure to serve a claim notice on all relevant landlords, in the specific circumstances of this case, invalidated the acquisition of right to manage powers by the RTM company.

These questions are crucial as the answer to each could affect numerous cases where procedural errors had been made by the party seeking to exercise a statutory right.

The Court of Appeal had previously addressed a similar issue in Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017], where it ruled that such a failure does not necessarily invalidate the acquisition process. A1, in this current case, challenged the correctness of that ruling.   A1 also contended that the failure of the RTM Company to serve upon it the Notice of Claim was deliberate and thus should invalidate the RTM company's right to manage.  On this "deliberate omission" point both the FTT and the Upper Tribunal had found no solid evidence to support the claim of deliberate omission, focusing instead on the procedural nature of the error.

Outcome of the appeal

The Supreme Court agreed with the Tribunals dismissing the appeal by A1 and finding that the failure to serve the Notice of Claim on one landlord (A1) did not invalidate the claim process under its interpretation of CLRA. 

They confirmed that whilst an intermediate landlord, or one who lacks any management responsibilities (as was the case for A1), cannot be disregarded under the RTM Claim process, the court must consider, where statute does not provide a specific consequence for non compliance, the effect of that failure from the perspective of the prejudice or loss of opportunity caused to the affected party by the non compliance.  In this case it was considered that even if A1 had been served with the Notice of Claim its objections to the RTM claim would have failed in any event (as indeed they had in the earlier FTT ruling in this matter).

Importantly, the Supreme Court found that the failure to fully comply procedurally would not automatically make the claim void but voidable until such time as the Court/Tribunal was happy to approve it notwithstanding the error.

Implications of the Appeal

The case is a useful insight in to how the Courts and Tribunals view the consequences of procedural oversights.  A decision in favour of A1 would have led to onerous requirements for serving claim notices and potentially invalidate RTM claims where landlords are inadvertently missed.

The valuable point to also take from this ruling though is that whist the outcome was in favour of the RTM, and so one might argue that sense ruled the day, the case underscores the importance of meticulous adherence to statutory requirements in the RTM process. Notwithstanding this ruling it is the case that errors in procedural compliance give rise to disputes and that just result in significant costs for those who are simply trying to take over the management of their block, likely incentivised, in part at least, by the prospect of saving money!

In short, get good quality advice before you start and get it right first time as, ultimately, it works out cheaper in the long run.

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