[2023] UKUT 220 (LC)

Part 2, chapter 1 of the Commonhold and Leasehold Reform Act 2002 provides for the acquisition of the right to manage leasehold premises, by a nominee company representing leaseholders, on a no-fault basis; the right is acquired if procedural steps are correctly taken, without any need for there to be anything wrong with the management carried out to date by the landlord. Among the procedural steps is the requirement to serve a claim notice, in section 79(6):

“(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,

(b)

party to such a lease otherwise than as landlord or tenant, or

(c)

a manager appointed under Part 2 of the Landlord and Tenant Act 1987 in relation to the premises....”

The property in question in the present appeal is 159-167 Prince of Wales Road, London NW5 3PY, which comprises several long leasehold flats. The respondent, 159-167 Prince of Wales RTM Company Limited, is a right to manage company formed by the leaseholders of some of these flats. The appellant, Assethold Limited purchased the freehold of the property from Millcastle Limited on 10 October 2019. It also purchased the headlease of the Property from Millcastle on 10 October 2019.

On 10 June 2021 the RTM company served a notice addressed both to Millcastle and to the appellant claiming the right to manage the property pursuant to section 79 of the 2002 Act. On 14 July 2021 the appellant served a negative counter-notice dated 14 July 2021, pursuant to s.84 of the 2002 Act, contending that the notice of invitation to participate had not been given to the correct persons, and that the claim notice had not been served on each of the persons specified in section 79(6) and (8) of the Act. On 23 September 2021 the RTM Company applied to the FTT, under section 84(3) of the 2002 Act, for a determination that it was entitled to the right to manage the property, naming the appellant as landlord. The FTT gave directions and the application was listed for a hearing on 26 May 2022. On 25 May the RTM Company filed and served notice of withdrawal.

Section 88 of the 2002 Act says this:

“(1)

A RTM company is liable for reasonable costs incurred by a person who is—

(a)

landlord under a lease of the whole or any part of any premises,

(b)

party to such a lease otherwise than as landlord or tenant, or

(c)

a manager appointed under Part 2 of the 1987 Act to act in relation to the premises, …

 in consequence of a claim notice given by the company in relation to the premises.

(2)

Any costs incurred by such a person in respect of professional services rendered to him by another are to be regarded as reasonable only if and to the extent that costs in respect of such services might reasonably be expected to have been incurred by him if the circumstances had been such that he was personally liable for all such costs.

(3)

A RTM company is liable for any costs which such a person incurs as party to any proceedings under this Chapter before the FTT only if the tribunal dismisses an application by the company for a determination that it is entitled to acquire the right to manage the premises.

(4)

Any question arising in relation to the amount of any costs payable by a RTM company shall, in default of agreement, be determined by [the FTT].”

Section 89 adds:

“(1)

This section applies where a claim notice given by a RTM company—

(a)

is at any time withdrawn or deemed to be withdrawn by virtue of any provision of this Chapter, or

(b)

at any time ceases to have effect by reason of any other provision of this Chapter.

(2)

The liability of the RTM company under section 88 for costs incurred by any person is a liability for costs incurred by him down to that time.”

So the combined effect of those provisions is that the RTM company is liable for the costs incurred by a landlord (and others not relevant to the present appeal) as a result of his being given a claim notice if the application to the FTT for a determination about the right to manage is dismissed or withdrawn.

On 30^th September 2022 the appellant made an application to the FTT for costs pursuant to section 88(4). The respondent resisted the application on the basis that the appellant was not the “landlord under a lease of the whole or any part of any premises,” as required by section 88(1)(a) because it was not the registered proprietor of the freehold or of the head-lease of the property. The appellant in response said that it had purchased the freehold and headlease on 20 October 2019 (as it had said in its Statement of Case), and that its application to HM Land Registry for registration was still pending. It argued that the RTM company having issued proceedings against it under section 88(4) was estopped from denying that it was the landlord.

“Estopped” is a technical term which roughly means “prevented”; I say more about its technical meaning below.

On the appellant’s account of the facts (and the FTT has made no findings about the date of purchase) it was throughout the relevant period the equitable owner of the freehold and headlease but not yet the legal owner. The FTT agreed that only legal ownership was relevant for the purposes of sections 79(6)(a) and section 88(1)(a). It rejected the estoppel argument, saying that the provisions of the statute could not be overridden by any misunderstanding of the law by the RTM company. It refused to make an order for costs.