Right to Manage: Valid service of notices of invitation and whether parties were qualifying tenants (Avon Ground Rents Ltd v Canary Gateway (Block A) RTM Company Ltd and another company – 2020)

Where notice of invitation to participate in a Right to Manage company was not given to all qualifying tenants, does this invalidate all claim notices?

The background

In Avon Ground Rents Ltd v Canary Gateway (Block A) RTM Company Ltd and another company [2020], seven blocks of flats at a development in London had been let under a number of different arrangements. The blocks were agreed by the parties to be two self-contained buildings:

• Some let on long leases by Avon’s predecessors in title to qualifying tenants
• 17 flats let to Metropolitan Housing Trust (MHT) under a headlease, which were then sublet by MHT on shared ownership leases
• Some let to MHT on 2 further headleases, with those flats sublet by MHT to a social rent tenant

The RTM companies served notices of invitation to join into the action, but notices were not served on MHT. 2 of MHT’s subleases had staircased to full tenant ownership, meaning that those tenants were the beneficial owners of those long leases. The beneficial interest in 15 other flats was shared between MHT and the tenant.

The RTM companies gained the support from at least 50% of the qualifying tenants and served 2 claim notices on Avon to acquire the rights to manage the 2 self-contained buildings. Avon served counternotices, stating that the claim notices had not been served in line with the CLRA 2002, in particular because, as no notice had been served on MHT, the notice of invitation to participate had not been served on each person required to receive such notice under the Act.

At the First-tier Tribunal, the FTT found in favour of the RTM companies, deciding that they were entitled to acquire rights to manage. MHT was not a qualifying tenant because it was a landlord, rather than a qualifying tenant; even if MHT could be found to be a qualifying tenant, a failure to serve notice of invitation on MHT did not invalidate the claim. Avon appealed to the Upper Tribunal.

The decision

The Upper Tribunal allowed the appeal, finding in favour of Avon. The Court considered a number of key issues.

1. Whether a tenant under a long shared-ownership lease with less than 100% share could be a qualifying tenant. The tenants under shared ownership leases were qualifying tenants, as their interests were granted for over 21 years. MHT was not therefore the qualifying tenant of these flats, and claim notices were not invalidated by failure to serve notice of invitation on MHT.

2. Whether MHT was a qualifying tenant in respect of social rent flats. Occupiers were not long leaseholders of these flats. MHT was the qualifying tenant under long leases and should have received notice of invitation.

3. Whether failure to serve notice of invitation to participate on MHT invalidated the RTM claim. The UT asked whether the interpretation of the legislation meant that non-compliance with a provision then resulted in service of invalid claim notices, finding that failure to give notice of invitation did invalidate the claim notice; the legislation was not limited to only stipulating when claim notices could be served.

Advice and action

Although this case considers the more technical aspects of interpretation of legislation, the crucial practical advisory point for parties is, as ever, to ensure that legislative procedures are closely followed when pursuing an RTM claim or defence. The RTM companies’ failure to serve notice of invitation to participate on MHT in this instance meant that the entire claim was invalidated.

Further, the qualifying tenant point is of note; MHT was found to be a qualifying tenant which should have received a notice of invitation in respect of the social rent leases, even though it was not itself in occupation and held a headlease, out of which subleases were granted. Because the subleases did not confer sufficient beneficial interest on the lessees, MHT was the relevant qualifying tenant of these flats.