Right to Manage: Whether an RTM claim can succeed where there has been a failure to follow procedure (Lexham House RTM Company Ltd v European Investments & Development Properties Ltd – 2019)

Where an RTM Company serves notice of its intention to acquire rights to manage, will its claim survive a failure to follow specific elements of procedure?

The background

In Lexham House RTM Company Ltd v European Investments & Development (Properties) Ltd [2019], the RTM Company served notice to acquire the right to manage a block comprising 24 flats, each of which is held under a long lease. Three flats on the top floor also grant to the leaseholders the exclusive right to use the roof space above their flat; this was granted as an easement and roof space was not included in the demise of each flat.

The freeholder granted a 999-year lease of the roof to an associated company which comprised the same directors as the freeholder. The RTM Company served notice to acquire rights to manage only on the freeholder and not on its associated company. At the First-tier Tribunal, it was determined that the RTM Company’s claim could not succeed because it had not served notices correctly. The FTT held that the associated company was a landlord of part of the premises, and the RTM Company had not complied with the procedure laid down by the Commonhold and Leasehold Reform Act 2002.

The decision

On appeal in the Upper Tribunal, the Court decided that the FTT had not considered the real circumstances of fact in the case and held that the RTM Company had complied substantially and sufficiently with the CLRA 2002 procedure, despite the fact that no notice was served on the associated company.

The UT did find that the associated company should, given its position as a landlord of the premises, have received the claim notice. However, on consideration of the circumstances, the UT decided that the associated company had no involvement in the day-to-day management of the property and had received the demise of the roof space to allow for potential future development. The respondent was responsible for the roof space until such time as development took place. The associated company was not impacted by the RTM Company’s proposed management of the property and, being in common control and ownership as the freeholder, did not need to be informed.

Advice and action

Lexham House provides guidance in circumstances that, where a landlord will not be affected by the right to manage being granted to an RTM Company, a failure to serve notice on such landlord will not necessarily invalidate the RTM Company’s claim.

This is very much a case where a Court will look at the real circumstances of the case rather than purely following statutory procedure. Where a landlord has very little involvement, or holds an insignificant demise, a Court may be minded to find in favour of an RTM Company held by individuals with day-to-day interest in the property where there has been a failure to follow statute to the letter.