Right to Manage: Costs order following withdrawal of application for determination of RTM Company’s rights to manage (Assethold Ltd v 159-167 Prince of Wales Road RTM Company Ltd – 2023)

Following the withdrawal of an application by an RTM Company for determination as to its entitlement to manage a property, was the First-tier Tribunal right to refuse to make an order for costs in favour of the landlord?

The background

In Assethold Ltd v 159-167 Prince of Wales Road RTM Company Ltd [2023], the respondent RTM Company was owned by leaseholders of several long leasehold flats contained in the subject property.

The appellant landlord acquired the freehold and headlease of the property in October 2019. The RTM Company served notice of its claim to acquire rights to manage in June 2021, addressing its claim to the seller of the freehold and headlease, and the appellant.

The following month, the appellant served a counter-notice which stated that notice of invitation to participate in the RTM process had not been served correctly, arguing that the claim notice had not been served on the parties set out in Commonhold and Leasehold Reform Act 2002 s.79(6) and (8).

The RTM Company made an application in the First-tier Tribunal in September 2021 for determination that it was entitled to acquire rights to manage. The appellant was named in the application as the landlord. Subsequently, in May 2022, the RTM Company served notice of withdrawal of its application, following which the landlord applied to the FTT under CLRA 2002 s.88(4) for a costs order.

Under ss.88 and 89 of the CLRA 2002, if a landlord incurs costs as a result of an RTM Company’s application, but the application is dismissed or withdrawn, the RTM Company is liable for the landlord’s costs. In this case, the RTM Company defended the application stated that the appellant was not “the landlord under a lease of the whole or any part of the premises” on the basis that it was not the registered proprietor of either the freehold or the headlease.

The appellant contended that its purchase had been completed and its application for registration was pending with the Land Registry. It stated that, because the RTM Company had named the appellant in its application, the RTM Company was estopped from later denying that the appellant was the landlord. This argument was dismissed by the FTT, which refused to make an order for costs in favour of the landlord. The landlord appealed.

The decision

The Upper Tribunal allowed the appeal, permitting a costs order in favour of the landlord to be made. The RTM Company was estopped from denying that the appellant was the landlord.

The appellant relied on Benedictus v Jalaram Ltd [1989], arguing that by issuing its claim which stated that the appellant was the landlord, the RTM Company could not later deny the appellant’s status as landlord in a costs application. The RTM Company argued that estoppel could not be used to override a statute.

If the RTM Company was estopped from denying that the appellant was the landlord, then it was estopped from denying a fact essential to establishing the appellant’s right to a costs order. An award of costs by the FTT would not be an enlargement of the FTT’s jurisdiction, and the Upper Tribunal found no bar to the operation of the convention of estoppel in this case.

Allowing estoppel to be established would not repeal the statutory scheme; the RTM Company had asserted that the appellant was the landlord in its application, and later denying the appellant’s landlord status was inconsistent. There was clearly a detriment to the landlord. The RTM Company had brought an application in the FTT on the basis that the appellant was the landlord, but then later denied its liability for the appellant’s costs on the basis that the appellant was not the landlord.

Advice and action for landlords

This decision will be welcomed by landlords seeking reimbursement of costs incurred by failed RTM applications.

The RTM Company in this case could not change its view of the landlord’s status in order to suit its own defence; it had established by way of its earlier application that it believed the appellant to be the landlord, and this status must remain later following withdrawal of the claim, the landlord having incurred costs in the RTM Company’s failed application.