Right to manage: effect of failure to include prescribed notes

NOTE: THIS DECISION HAS NOW BEEN THE SUBJECT OF AN APPEAL. FOR DETAILS OF THE COURT OF APPEAL’S DECISION, CLICK HERE

 

What’s the impact on the acquisition of the right to manage by an RTM company where there’s a failure to include prescribed notes in the notices of invitation to participate?

 

The statutory framework

Chapter 1 of Part 2 of the Commonhold & Leasehold Reform Act 2002 gives qualifying tenants the right to acquire the management of their building.  It’s envisaged that the opportunity to participate in the right to manage will be available to each and every qualifying tenant.  So, on that basis, the RTM company is required to give a notice (commonly referred to as a “notice of invitation to participate”) to all qualifying tenants who aren’t already members of the RTM company.  The notice invites them to become members of the RTM company before any claim notice is served.

The form and content of notices of invitation to participate is regulated by the 2002 Act, and further provisions for notices are found in the Right to Manage (Prescribed Particulars and Forms) (England) Regulations 2010.

The Regulations prescribe the form of the notice that must be used, which includes a ‘notes’ section at the end of the notice.

 

Triplerose Ltd v Mill House RTM Company Ltd

But what happens where the notice of invitation to participate doesn’t include the notes section?

This was considered by the Upper Tribunal in Triplerose Ltd v Mill House RTM Co Ltd [2016] UKUT 0080 (LC).  

The RTM company in this case gave notices of invitation to participate to each of the qualifying tenants, but those notices wholly omitted the notes section which should have been included as part of the prescribed form.

The landlord disputed the entitlement of the RTM company to acquire the right to manage.

At first instance, the First Tier Tribunal (Property Chamber) found that the RTM company was entitled to acquire the right to manage, notwithstanding that the notice of invitation to participate was not in the prescribed form.

The landlord appealed to the Upper Tribunal (Lands Chamber).

The landlord argued that the notes were an essential component of the prescribed form.  The acquisition of the right to manage is the acquisition of a property right and where there’s been a failure to comply with a procedure, then that failure should prove fatal.

Decision of the Upper Tribunal

The Upper Tribunal recognised that First Tier Tribunals are often naturally sympathetic to RTM companies whose claims are met  by highly technical points, but made clear that tribunals should be slow to relax the need for full compliance, as “the statutory procedures are not difficult to comply with, and can easily be repeated if not properly implemented”.

The critical importance of the notice of invitation to participate is to afford all qualifying tenants the opportunity to become members of the RTM company.  The importance of the notice is emphasised by the bar on the RTM company on serving a claim notice until at least 14 days have passed after the notice of invitation to participate has been given.  The giving of a valid notice of invitation to participate is therefore an essential pre-condition to any further progress in the right to manage process.

The notes are intended to inform the recipient of the notice of invitation to participate of the basic structure of the statutory scheme.  Many of the notes provide an explanation or further elaboration of information contained in the body of the notice itself.

As such, the Upper Tribunal agreed with the landlord; the inclusion of the notes was essential to the validity of the notice of invitation to participate.  The notices served were not valid notices because they omitted the notes, and as such the RTM company was prohibited from giving a claim notice.

 

Commentary

Although “small and apparently insignificant defects of notices, or failures of strict compliance, are relied on time and time again by landlords seeking to stave off claims to acquire the right to manage and avoid the resulting losses of control and of other benefits” this case is a reminder that RTM companies must get the paperwork right.  The prescribed forms are set out in the Regulations.  There should be no departure from what’s prescribed.  And of course if there have been errors in the procedure, then those errors can be corrected or the procedure repeated.

 

 

23 May 2017

Cassandra Zanelli

Widely recognised for her expertise in the industry, and listed among the 100 most influential people in residential leasehold management, Cass heads the team at PM Legal Services. Passionate about education and sharing knowledge, she's a regular speaker at conferences, events and seminars, having worked with leading organisations in the property management industry.