Application for Right to Manage Rejected Due to Non-Compliance with Statutory Requirements

OUTCOME: Dismissed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AM/LRM/2021/0016 HMCTS : P: PAPER REMOTE Property : 1-33 [ADDRESS] [POSTCODE] Applicant: [redacted]

1-33 [APPELLANT] : [NAME], [NAME] ([COUNSEL]) Respondent : [redacted] : [COUNSEL], Solicitors ([NAME]) Type of [NAME] : Right to manage Tribunal member :

Judge Robert Latham Trevor Sennett FCIEH

Date and Venue of paper determination

18 October 2021 at 10 [ADDRESS], [POSTCODE] Date of decision : 20 October 2021

DECISION

2 Covid-19 pandemic: description of hearing This has been a remote video hearing which has not been objected to by the parties. The form of remote hearing was P: PAPERREMOTE. A face-to-face hearing was not held because it was not practicable and all issues could be determined in a remote hearing. Neither party requested an oral hearing. The Respondent has provided a Bundle of Documents which extends to 421 pages. Decisions of the Tribunal The Tribunal determines that: (i) the Applicant has not complied with the statutory requirements of section 79(5), 78(1) and 79(8) of the Commonhold and Leasehold Reform Act 2002. (ii) By reason of the above, the Applicant was not entitled to acquire the right to manage the premises on 30 June 2021 pursuant to section 84(5)(a) of the Act. The [NAME]

1. By an [NAME] dated 15 April 2021, the Applicant applies under section 84(3) of the Commonhold and Leasehold Reform Act 2002 ("the Act") for a decision that, on the relevant date, the Applicant [COMPANY] was entitled to acquire the Right to Manage in relation to premises known as 1-33 [ADDRESS] [POSTCODE] (“the Premises”). The [NAME] form specified the documents that the Applicant was obliged to serve with the [NAME] form. The Applicant did not include the counter-notice which had been served. 2. [NAME], [NAME], have acted for the Applicant. The Applicant has not been well served by its representative 3. By a claim notice dated 17 February 2021, the Applicant gave notice that it intended to acquire the Right to Manage the Premises on 30 June 2021.

4. By a counter-notice, dated 19 March 2021 the Respondent freeholder disputed the claim, alleging that the Applicant had failed to establish compliance with sections 79(5), 78(1) and 79(2) of the Act. In particular: (i) The membership of the [COMPANY] on the relevant day was not less than one half of the 33 flats contained in the Premises (section 79(5));

3 (ii) [NAME] the RTM Claim, the Applicant had not given the requisite Notice Inviting Participation on each person who was a [NAME] and who neither was nor had agreed to become a member of the [COMPANY] (section 78(1)); (iii) Not every person who required to be given a Notice Inviting Participation had been given the requisite 14 days’ notice (section 79(2)).

5. On 26 March, there was an exchange of emails between [COUNSEL], an In-house solicitor with the [NAME], and [COUNSEL], of [NAME]. Ms [NAME] pointed out the defects to the [NAME] and invited the Applicant to withdraw it. Mr [APPELLANT] responded that the points taken were just nit picking.

6. On 18 June 2021, the tribunal gave Directions. The Procedural Judge identified the issue to be decided, namely whether on the date on which the notice of claim was given, the Applicant was entitled to acquire the Right to Manage (“RTM”) the premises. The Judge was satisfied that this matter could be determined on the papers. Neither party has requested an oral hearing.

7. Pursuant to the Directions, on 19 July, the Respondent filed their Statement of Case expanding on its grounds for contending that the Applicant had failed to comply with the statutory requirements of the Act. On 15 July, the Respondent’s Solicitor had written to the Applicant setting out in detail why the [NAME] was doomed and inviting the Applicant to withdraw its [NAME]. The Applicant did not respond to this letter.

8. By 9 August, the Applicant was directed to file its Reply to the Respondent’s Case. The Applicant failed to comply with this Direction. On 12 August, the Applicant purported to serve a Reply. The Reply purported to have 24 paragraphs. The document served only contained paragraphs 15, 16 and 17. On 20 August, the Respondent pointed out this defect. The Applicant took no step to remedy this error.

9. By 10 September, the Applicant was directed to file a Bundle of Documents. The Applicant failed to comply with this Direction and the bundle which it filed was wholly inadequate. On 17 September, the Respondent filed an Updated Bundle.

10. On 21 September, a Procedural Judge noted the inadequacies of the Bundle. She again highlighted that the Applicant’s Reply was incomplete. The Applicant was directed to coordinate with the Respondent to file a “Final Agreed Document”. On 7 October, the Respondent filed this document.

11. When this Tribunal considered the papers this morning, it was apparent that none of the bundles which had been filed included a full

4 copy of the Applicant’s Reply. At 10.06, the parties were asked to provide the missing pages. At 10.10, the Respondent (Ms [RESPONDENT]) replied that it had never been furnished with these pages. At 12.49, the Applicant (Mr [APPELLANT]) provided a further incomplete copy of the Applicant’s Reply. At 15.32, Ms [APPELLANT] again pointed out the Reply was incomplete. There was no further response from the Applicant. The Tribunal had no option but to determine the [NAME] on the papers before it.

The Law 12. The Act provides (emphasis added): Section 58 - [NAME] Tenants (1) This section specifies whether there is a [NAME] of a flat for the purposes of this Chapter and, if so, who it is. (2) Subject as follows, a person is the [NAME] of a flat if he is tenant of the flat under a long lease. (3) ………. (5) No flat has more than one [NAME] at any one time; and subsections (6) and (7) apply accordingly. (6) Where a flat is being let under two or more long leases, a tenant under any of those leases which is superior to that held by another is not the [NAME] of the flat. (7) Where a flat is being let to joint tenants under a long lease, the joint tenants shall (subject to subsection (6)) be regarded as jointly being the [NAME] of the flat. Section 78 - Notice inviting participation (1) [NAME] a claim to acquire the right to manage any premises, a [COMPANY] must give notice to each person who at the time when the notice is given— (a) is the [NAME] of a flat contained in the premises, but (b) neither is nor has agreed to become a member of the [COMPANY]. (2) A notice given under this section (referred to in this Chapter as a “notice of invitation to participate”) must— (a) state that the [COMPANY] intends to acquire the right to manage the premises,

5 (b) state the names of the members of the [COMPANY], (c) invite the recipients of the notice to become members of the company, and (d) contain such other particulars (if any) as may be required to be contained in notices of invitation to participate by regulations made by the appropriate national authority. (3) A notice of invitation to participate must also comply with such requirements (if any) about the form of notices of invitation to participate as may be prescribed by regulations so made. (4) A notice of invitation to participate must either— (a) be accompanied by a copy of the articles of association of the [COMPANY], or (b) include a statement about inspection and copying of the articles of association of the [COMPANY]. (5) A statement under subsection (4)(b) must— (a) specify a place (in England or Wales) at which the articles of association may be inspected, (b) specify as the times at which they may be inspected periods of at least two hours on each of at least three days (including a Saturday or Sunday or both) within the seven days beginning with the day following that on which the notice is given, (c) specify a place (in England or Wales) at which, at any time within those seven days, a copy of the articles of association may be ordered, and (d) specify a fee for the provision of an ordered copy, not exceeding the reasonable cost of providing it. Commonhold and Leasehold Reform Act 2002 Page 55 (6) Where a notice given to a person includes a statement under subsection (4)(b), the notice is to be treated as not having been given to him if he is not allowed to undertake an inspection, or is not provided with a copy, in accordance with the statement. (7) A notice of invitation to participate is not invalidated by any inaccuracy in any of the particulars required by or by virtue of this section. Section 79 - Notice of claim to acquire right (1) A claim to acquire the right to manage any premises is made by giving notice of the claim (referred to in this Chapter as a “claim notice”); and in this Chapter the “relevant date”, in relation to any

6 claim to acquire the right to manage, means the date on which notice of the claim is given. (2) The claim notice may not be given unless each person required to be given a notice of invitation to participate has been given such a notice at least 14 days before. (3) The claim notice must be given by a [COMPANY] which complies with subsection (4) or (5). (4) If on the relevant date there are only two [NAME] tenants of flats contained in the premises, both must be members of the [COMPANY]. (5) In any other case, the membership of the [COMPANY] must on the relevant date include a number of [NAME] tenants of flats contained in the premises which is not less than one-half of the total number of flats so contained. (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 (c. 31) (referred to in this Part as “the 1987 Act”) to act in relation to the premises, or any premises containing or contained in the premises. (7) Subsection (6) does not require the claim notice to be given to a person who cannot be found or whose identity cannot be ascertained; but if this subsection means that the claim notice is not required to be given to anyone at all, section 85 applies. (8) A copy of the claim notice must be given to each person who on the relevant date is the [NAME] of a flat contained in the premises. (9) Where a manager has been appointed under Part 2 of the 1987 Act to act in relation to the premises, or any premises containing or contained in the premises, a copy of the claim notice must also be given to the tribunal or court by which he was appointed. Section 112 – Definitions (5) Where two or more persons jointly constitute either the landlord or the [NAME] in relation to a lease of a flat, any reference in this Chapter to the landlord or to the [NAME] is (unless the context otherwise requires) a reference to both or

7 all of the persons who jointly constitute the landlord or the [NAME], as the case may require.

13. In [COMPANY] v [COMPANY]/124/2004, the Upper Tribunal (HHJ Reid QC) held at [9]: “In order for a person other than a subscriber to be a member that person must (a) have agreed to become a member and (b) had their name entered in [NAME] of members: see section 22(2) of the Companies Act 1985. Those two requirements are cumulative: see for example [NAME] case (1885) 29 Ch D 421, Re a Company [1986] BCLC 391 at 393 per Hoffmann J and [COMPANY] v [NAME] [1995] 1AC 119 at 127B per [NAME].” Our Determination 14. The first point taken by the Respondent is that on 17 February 2021, the date on which the Notice of Claim was given, the [COMPANY] did not have at least 17 members who were [NAME] tenants (see section 79(5) of the Act). On that date, a person other than a subscriber to be a member that person must (a) have agreed to become a member and (b) had their name entered in [NAME] of members. A copy of [NAME] of Members is at p.289. Whilst there purports to be 19 members, the Respondent takes issue with 7 of these. (i) Flat 33: [NAME] records the member as “[NAME]”. The Official Copy of [NAME] (at p.292), records the leaseholder to be “[COMPANY]”. The member should therefore have been “[APPELLANT]”. The Applicant states that the company is registered in Cyprus and that Mr [COUNSEL] is its representative. This is irrelevant. It is the company that should have been recorded as the member as the relevant [NAME]. (ii) Flats 7 and 28: [NAME] records the member as “[NAME]”. The Official Copy of [NAME] (at p.292), records the leaseholder to be “[NAME] [NAME] and [NAME] [NAME]”. [APPELLANT] and [APPELLANT] were jointly the [NAME] who should have been recorded as members. Even if “[APPELLANT]” is “[APPELLANT] [NAME]”, as the Applicant suggests, this could not be excused as a trivial error. We accept the Respondent’s argument that if only one of two joint tenants have joined the company, the [COMPANY] must give the non- member an Invitation to Participate. Whilst one joint tenant may become a member of the Company, that member alone would not constitute a “[NAME]”. The [NAME]” would only be a member of the Company, when both joint tenants are members. Joint tenants must act together in order to validly participate in the Right to Manage.

8 (iii) Flat 4: [NAME] records the member as “O Dixon”. The Official Copy of [NAME] (at p.303), records the leaseholder to be “[NAME] [NAME] and [NAME]”. [NAME] [NAME] and [APPELLANT] were jointly the [NAME] who should have been recorded as members. (iv) Flat 5: [NAME] records the member as “[NAME]”. The Official Copy of [NAME] (at p.307), records the leaseholder to be “[NAME] [NAME] and [NAME]”. [APPELLANT] [NAME] and [APPELLANT] were the [NAME] who should have been recorded as members. (v) Flat 30: [NAME] records the member as “[NAME]”. The Official Copy of [NAME] (at p.311), records the leaseholder to be “[NAME] and [NAME]”. [NAME] and [APPELLANT] were jointly the [NAME] who should have been recorded as members. (vi) Flat 32: [NAME] records the member as “[NAME]”. The Official Copy of [NAME] (at p.315), records the leaseholder to be “[NAME] and [NAME] [NAME]”. [APPELLANT] and [APPELLANT] [NAME] were jointly the [NAME] who should have been recorded as members.

15. We therefore accept the Respondent’s argument that the membership of the [COMPANY] on the relevant day was not less than one half of the 33 flats contained in the Premises (section 79(5)): (i) Those recorded as members for Flats 33, 7 and 28 were not tenants of the relevant flats. (ii) In respect of Flats 4, 5, 30 and 32, 7 and 28, only one of the joint tenants is recorded as being a member.

16. The second point taken by the Respondent is that before [NAME] the RTM Claim, the Applicant had not given the requisite Notice Inviting Participation on each person who was a [NAME] and who neither was nor had agreed to become a member of the [COMPANY] (section 78(1) of the Act). The relevant Notices are at p.317- 334.

17. The Respondent raises the following issues: (i) Flat 33: No notice was given to [COMPANY].

9 (ii) Flats 7 and 28: No Notice was given to [NAME] [NAME] and [NAME] [NAME]. (iii) Flat 4: No Notice was given to [NAME] [NAME]. (iv) Flat 5: No Notice was given to [NAME]. (v) Flat 30: No Notice was given to [NAME] and [NAME]. (vi) Flat 32: No Notice was given to [NAME] [NAME]. (vii) Flat 6: No Notice was given to [NAME]. The Official Copy of [NAME] is at p.337. (viii) Flat 19: No Notice was given to [NAME] [NAME]. The Official Copy of [NAME] is at p.340.

18. The Respondent relies on [RESPONDENT] v [NAME]) [COMPANY] [2020] UKUT 358 (LC) in which Fancourt J, the Chamber President, held that a purported claim was invalidated by section 79(2) of the Act where Notices of Invitation to participate had not been given to each person required to be given one. This was not a trivial error that would be saved by [NAME] of the decision in [ADDRESS] Co [COMPANY] v [COMPANY] [2017] EWCA Civ 89.

19. The purpose of a Notice of Invitation is not only to invite non-members to become members. It is also to provide them with important information about the claim. The importance of this was emphasised by Martin Rodger QC, the Deputy President, in [COMPANY] v [COMPANY] [2016] UKUT 80 (LC) at [44]: “It is apparent from reading the notes to the prescribed form of notice of invitation to participate that they are intended to inform the recipient of the notice 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. For example, the notice of invitation to participate informs the recipient (at paragraph 10) that if the [COMPANY] gives a claim notice any person who is or has been a member of the company will be liable for costs incurred by the landlord and others in consequence of that notice. The recipient is then referred to note 6 which explains that if a claim notice is withdrawn each member is liable for reasonable costs incurred in consequence of the claim notice by three specified categories of recipient (landlords, parties to leases of the whole or part of the premises other 15 than landlords or tenants, and tribunal- appointed managers). The note also explains the circumstances

10 in which a former member will cease to be liable. All of that is important information which might influence the mind of a person considering whether to become a member of an [COMPANY]. Without the notes a reader of the notice would have an incomplete understanding of the statutory scheme and, more importantly, would be less well informed when deciding whether to become a member than [NAME] intended they should be.” 20. The Tribunal accepts the Respondent’s argument that the Applicant has not given the requisite Notices Inviting Participation required by section 78(1) of the Act.

21. The final point taken by the Respondent is that the Applicant is that the Applicant has not given a copy of the Claim Notice on all the [NAME] tenants as required by section 79(8) of the Act. The copies of the relevant Notices which were served at p.342-378. It is apparent that the Notice was not given to (i) Flat 6: [NAME]. (ii) Flat 19: [NAME] [NAME]. Conclusion 22. The Tribunal determines that the Applicant has not complied with the statutory requirements of section 79(5), 78(1) and 79(8) of the Commonhold and Leasehold Reform Act 2002. The manifest errors which the Respondent has identified cannot be described as trivial. We therefore conclude that the Applicant was not entitled to acquire the right to manage the premises on 30 June 2021 pursuant to section 84(5)(a) of the Act. Judge Robert Latham 20 October 2021

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case.

11 The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28 day time limit; the tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).