CA-2024-002828 - [2025] EWCA Civ 1016

In the Commonhold and Leasehold Reform Act 2002 (“the CLRA” or “the 2002 Act”) Parliament enacted a new and self-contained regime under which qualifying tenants may acquire the right to take over the management of their block of flats on a no-fault basis (that is to say, without needing to prove any mismanagement by the landlord) and without payment of any compensation. The right is exercisable through the formation of a right to manage (“RTM”) company which gives a notice of its claim to acquire the right to manage the relevant premises (a “claim notice”) to the landlord and other specified recipients. The detailed provisions which govern the procedure are set out in Chapter 1 of Part 2 of the CLRA, running from sections 71 to 113.

The respondent to this appeal is an RTM company which was formed to acquire the right to manage a self-contained part of a block of flats at Cresta Court, Hanger Lane, London W5, consisting of flats 7 to 26 (“the Property”). Five separate RTM companies were formed at the same time to acquire the right to manage other self-contained parts of Cresta Court and a neighbouring block of flats at Hill Court.

The appellant, Avon Freeholds Ltd (“Avon”), is the registered freehold owner of the Property.

Under section 79(2) of the CLRA, the claim notice “may not be given” by the RTM company “unless each person required to be given a notice of invitation to participate has been given such a notice at least 14 days before”. It is convenient to refer to such a notice as a “participation notice”.

By virtue of section 78(1):

“Before making a claim to acquire the right to manage any premises, a RTM company must give notice to each person who at the time when the notice is given –

(a)

is the qualifying tenant of a flat contained in the premises, but

(b)

neither is nor has agreed to become a member of the RTM company.”

A participation notice given under section 78 must

“(a)

state that the RTM company intends to acquire the right to manage the premises, (b) state the names of the members of the RTM company, [and] (c) invite the recipients of the notice to become members of the company …”:

see subsection (2).

The question of who is the qualifying tenant of a flat, and therefore is a person to whom a participation notice must be given, is answered by reference to section 75 which in subsection (2) states the general rule that:

“Subject as follows, a person is the qualifying tenant of a flat if he is tenant of the flat under a long lease”.

The basic definition of a “long lease” in section 76(2)(a) is that

“it is granted for a term of years certain exceeding 21 years, whether or not it is (or may become) terminable before the end of that term by notice given by or to the tenant, by re-entry or forfeiture or otherwise.”

In the present case, the tenant of Flat 17 Cresta Court at the time when the respondent RTM company gave notice of its claim to the freeholder by a claim notice dated 21 January 2022 was Ms Beverley O’Connor. She held Flat 17 under a lease granted to her directly by Avon on 17 April 2020 for a term of 150 years from 1 January 2015. Her lease was undoubtedly a “long lease” as defined in section 76(2)(a) of the 2002 Act, but her leasehold title was not registered at HM Land Registry until after the claim notice was served. The registration of her title was then backdated to 15 July 2021, that being the date when her application for registration was evidently made. But at the date when the claim notice was given, Ms O’Connor’s legal title had not yet been registered, and a search of the register would have revealed no more than a note on the freehold title of a pending application. Such notes do not say what is the application to which they refer, and it is common ground that the respondent did not make any enquiries about it.

It is also common ground that the respondent did not give a participation notice to Ms O’Connor at Flat 17, either within the period ending 14 days before the notice was given stipulated by section 79(2) or at any time thereafter. On the other hand, there can be no doubt what her reaction would have been had a participation notice been given to her. On 26 January 2022 she gave a written consent to become a member of the respondent, and if she had given that consent at least 14 days before the claim notice was served, there would then have been no requirement to give her a participation notice at all: see section 78(1)(b), quoted at [5] above.

The circumstances which I have briefly recounted explain the background to the present litigation, which began with an application by the respondent to the First-tier Tribunal (Property Chamber) (“the FTT”) under section 84(3) of the 2002 Act, after Avon had given a counter-notice to the notice of claim alleging that the claim notice was invalid because the respondent had not given a participation notice to Ms O’Connor who was a qualifying tenant of Flat 17. In accordance with section 84(3), the respondent sought a “determination that it was on the relevant date entitled to acquire the right to manage the premises”. The FTT also had before it five related applications, raising different points, brought by the other Cresta Court and Hill Court RTM companies.

The FTT (Judge P Korn and Mrs A Flynn MRICS) gave its written decision (“the FTT Decision”) on 11 May 2023, following an oral hearing on 24 April 2023. At the hearing, the RTM companies (including the respondent) were represented by Mr D Joiner, who was the sole director of RTMF Services Ltd, the company secretary of the RTM companies. Avon was represented, as it has been throughout, by Mr Justin Bates of counsel (now KC). The FTT dismissed all the challenges to the claim notices and upheld their validity.

In relation to Flat 17 of Cresta Court, the FTT began by rejecting any argument that the respondent could rely on Ms O’Connor’s subsequent written consent to become a member of the respondent, on the (clearly correct) basis that the consent was given too late to satisfy the requirements of section 78: see para 30 of the FTT Decision. The FTT then recorded (at paragraph 31) that the main argument advanced by the respondent was that Ms O’Connor was not a qualifying tenant when the claim was made because her lease was not registered. The FTT considered this argument at paragraphs 32 to 37, and began by saying:

“However, as noted by [Avon], section 112(2) of the Act defines ‘lease’ as including an agreement for lease and section 112(3) of the Act directs that the expression ‘tenant’ be construed accordingly. As a lease which has been completed but not yet registered takes effect as an agreement for lease (or an “equitable” lease) it follows that a qualifying tenant for the purposes of the right to manage legislation can include the holder of a completed but as yet unregistered lease.”

In the view of the FTT, however, this was not the end of the matter, as part of the RTM companies’ argument was that they were not on notice as to the existence of the lease of Flat 17. Avon countered, in turn, that they were on notice because of the note on the freehold title that there were pending applications for registration against the freehold title, in answer to which the respondent submitted that the legislative scheme would not be workable if whenever an RTM company became aware of a pending application for registration it could not give the claim notice until it had ascertained whether that pending application related to a newly completed lease: see paragraph 33.

This argument was in substance accepted by the FTT, for the reasons which it gave at paragraphs 34 to 36, but which I will not repeat as no argument based on absence of notice is now advanced on the respondent’s behalf. It also emerged before the Upper Tribunal that the factual basis upon which the argument had been advanced before the FTT may have been unreliable: see [33] to [35] below. For present purposes, therefore, it is enough to record the FTT’s conclusion at paragraph 37:

“In conclusion … we do not accept that a failure by a RTM company to give a [participation notice] to a tenant whose lease is not registered will invalidate the claim notice if the RTM company has no actual knowledge of the existence of the lease and where the only way in which it would know about the lease – in the absence of its having been informed about the existence of the lease – is by following up a note on the freehold title about pending applications. Therefore, on the basis of the facts before us, the failure to give a [participation notice] to the tenant of Flat 17 Cresta Court did not invalidate the claim notice.”