First-tier Tribunal Allows Right to Manage Claim Despite Procedural Issues

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CAM/00KA/LRM/2023/0013 Property : [NAME], 17-21 [NAME], Luton, [POSTCODE] Applicant : [redacted] : [RESPONDENT] Respondent : [redacted] : [COUNSEL] Solicitors Type of [NAME] : [NAME] in relation to the denial of the right to manage Tribunal :

Judge Katie Gray Judge David Wyatt Date of decision : 10 December 2024

DECISION

Decision The Tribunal:

(1) determines that the Applicant was on the relevant date entitled to acquire the right to manage the Property; and

(2) orders the Respondent to pay £100 to the Applicant to reimburse the tribunal [NAME] fee paid by it.

Reasons

2 [NAME]

1. By an [NAME] dated 6 November 2023, the Applicant [COMPANY] (registration number 14957005) applied to the tribunal under section 84(3) of the Commonhold and Leasehold Reform Act 2002 (the “Act”) for a determination that, on the relevant date, it was entitled to acquire the right to manage the Property. Background 2. The Property is a residential block, freehold title to which is registered at HM Land Registry under title number BD46428. It contains 26 flats.

3. By a claim notice dated 6 September 2023, said to have been given on the same date, the Applicant gave notice that it intended to acquire the right to manage the Property on 20 January 2024.

4. By counter notice dated 4 October 2023 signed by [RESPONDENT], the Respondent disputed the claim on various grounds. Procedural history 5. Directions were given on 4 September 2024. The Respondent was directed to produce a fully detailed statement of case together with any relevant supporting evidence, setting out the basis of its objection in full. The Applicant was directed to file a statement of case in response. The Respondent was given permission to file a reply and did so.

6. On 29 October 2024, the Applicant sought permission to file and serve further submissions addressing the recent decisions in [COMPANY] (Sunderland) [COMPANY] v [NAME] Company [COMPANY] [2024] UKSC 27 and [COMPANY] v [ADDRESS] E [COMPANY] [COMPANY] [2024] UKUT 335 (LC). By further directions given on 30 October 2024, both parties were given permission to sequentially file and serve concise written submissions.

7. The parties complied with the directions and both prepared detailed and helpful statements of case, as well as a 342-page hearing bundle which the tribunal considered in detail.

8. The directions as varied on 30 October 2024 provided that the tribunal would determine this matter on or after 3 December 2024 based on the documents provided unless either party requested a hearing.

9. Neither party requested a hearing.

Accordingly, by Rule 31(3) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (the “Rules”), the parties are taken to have consented to this matter being decided without a hearing. We are satisfied that a hearing is not necessary to determine the issues in this case. Issues

3 10. It was apparent that the following issues remain in dispute and require resolution namely: a) whether the Applicant was required to serve notice under section 78(1) of the Act on the [NAME] of Flats 1, 10, 22 and 29 inviting them to participate and, if so, whether its failure to do so meant that no notice of claim to acquire the right to manage could be served by the Applicant. b) whether the Applicant failed to serve the claim notice on a person who was at the relevant date the landlord under a lease of the whole or any part of the Property in accordance with section 79(6)(a) of the Act and if so, whether failure to do so prevented the Applicant from acquiring the right to manage. c) whether the membership of the Applicant on the relevant date included a number of [NAME] of flats contained in the Property which was not less than one-half of the total number of flats therein, as required by sections 79(3) and (5) of the Act. d) whether the notices served on the [NAME] inviting them to participate accurately stated the names of the members of the [COMPANY] as required by section 78(2) of the Act.

11. The Respondent’s assertion made in its statement of case dated 26 September 2024 that there is already a [COMPANY] in relation to the Property was withdrawn in the Respondent’s reply dated 24 October 2024. Failure to serve notice on the [NAME] of Flats 1, 10, 22 and 29 – section 78(1), (2) and (3) and section 79(2)

12. It is not in dispute that the following leases of flats in the Property had been granted but had not been registered at HM Land Registry at the time that the [NAME] of the Property were served with notice of invitation to participate under section 78(1) of the Act: a) Lease dated 14 February 2019 for a term of 250 years between [COMPANY] and [COMPANY] relating to Flat 1; b) Lease dated 15 October 2019 for a term of 250 years between [COMPANY] and [NAME] and [NAME] relating to Flat 10; c) Lease dated 6 December 2018 for a term of 250 years between [COMPANY] and [COMPANY] relating to Flat 22; and d) Lease dated 20 December 2018 for a term of 250 years between [COMPANY] and [NAME] relating to Flat 29, (“the Leases”).

4 13. Nor was it disputed that, as the Leases were not yet registered, they were effective in equity but not at law until such time as they were registered. It was not suggested that there were any legal leases of the flats referred to above in existence at the date that notice under section 78(1) of the Act was served on the [NAME]. It was also not in dispute that the Applicant did not serve any notice under section 78(1) of the Act on the lessees under the Leases.

14. The Respondent’s case is that the Applicant was required to serve notice under section 78(1) of the Act on these lessees as they were [NAME] and that failure to do so invalidated the claim notice later served by the Applicant. It argued that A1 applies only where the Act does not specify the consequences of non-compliance, and section 79(2) specifies that the claim notice may not be given unless each person required to be given notice of invitation to participate has been given such a notice at least 14 days before.

15. Both parties referred the tribunal to the decision in [ADDRESS] E, in which the Upper Tribunal held that: a) The meaning of a "long lease" in section 75(2) is capable of including both legal and equitable leases. b) Where there is an equitable lease and no legal lease, the equitable lessee is the [NAME] for the purposes of the Act. c) The failure to serve a notice under section 78(1) of the Act on a [NAME] did not render a claim notice served later wholly invalid, but voidable at the instance of the [NAME], who may ask the court for a declaration that the notice is invalid, be joined in proceedings before the FTT, or seek judicial review of any decision made by the FTT. d) Unless the [NAME] takes one of these courses of action, no- one else can take advantage of the procedural failure; only the tenant directly affected by it can do so [139]. e) There was no need to decide whether the difference between section 79(6) (the focus of A1) and 79(2) is that in the latter case there is no room for argument as to whether substantial compliance is sufficient in the absence of prejudice because the Act has set out the consequences of non-compliance (noting paragraph [69] of A1). Again, that point is only available to the relevant tenant(s), not anyone else [140].

16. It was not suggested that any of the lessees under the Leases have objected, let alone sought any declaration that the claim notice was invalid, and none have asked to be joined in these proceedings.

17. It was not the Respondent’s case that the facts of the present matter would permit us to depart from the reasoning in [ADDRESS] E. Though the

5 Respondent maintained that the decision is wrong and liable to appeal, it recognised that this tribunal would “likely” be bound by it.

18. We find, in accordance with the decision in [ADDRESS] E, that the Applicant was required to serve notice under section 78(1) of the Act on the lessees of the Leases as [NAME], but its failure to do so does not render the claim notice invalid because those [NAME] have not sought to avoid the notice.

19. The Respondent proposed that our decision be stayed pending the final determination of any appeal against the decision in [ADDRESS] E. We are not satisfied that it would be in accordance with the overriding objective to do so, particularly in view of the time taken so far in these proceedings and the first sentence of paragraph [143] in that decision. Failure to serve the claim notice on a landlord – section 79(6)

20. It appears that, by a transfer dated 6 May 2021, the freehold interest in the Property was transferred to the Respondent by [RESPONDENT]. However, we were shown an Official Copy of the register of title for the Property which showed that as at 11 June 2024, the freehold title to the Property had yet to be registered in the Respondent’s name.

21. The delay in registration has not prevented the Respondent from assuming the role of the landlord from the point of view of the lessees. Indeed, we were shown a service charge demand sent by the [NAME] to the lessee of Flat 4 in the Property (on 31 May 2023, several months before the claim notice was given) in which the agent demanded service charges and stated under the heading “section 47 & 48 Landlord and Tenant Act 1987” that the landlord is the Respondent.

22. The Respondent’s case is that a search at the Land Registry would have revealed that [COMPANY] remained the registered freehold owner of the Property and that failure to serve notice on [COMPANY] invalidates the acquisition of the right to manage under the Act.

23. In their answering statement of case, the Applicant relies on the decision of the Supreme Court in A1. In that case, it was held that a failure to give a claim notice to a visible [NAME] under section 79(6) of the Act renders the transfer of the right to manage voidable, at the instance of the relevant [NAME] who was entitled to, but not given, a claim notice. It does not render the transfer of the right void. The omission does not give [NAME] persons who are not so affected (for example, [NAME] landlords who have been properly served with a claim notice) a right to object if the party who is so affected has not sought to complain.

24. The Respondent gave no answer to this in its reply. It was not suggested that [COMPANY] has taken any issue with the claim notice and nor did it ask to be joined in this [NAME]. In the circumstances, following A1, the Respondent is not in our judgment entitled to dispute entitlement under the Act on this ground.

6 Membership - section 79(5)

25. By s.79(3), a claim notice must be given by a [COMPANY] which complies with subsection (4) (which does not apply here) or (5). By subsection (5), the membership of the [COMPANY] must on the relevant date include a number of [NAME] of flats contained in the premises which is not less than one half of the total number of flats so contained.

26. The Respondent asserts that the Applicant has not provided sufficient evidence that the [NAME] of 18 of the Flats (Nos. 2, 3, 5, 8, 9, 12, 14, 17, 18, 19, 20, 21, 24, 25, 26, 27, 28, and 30) were members of the [COMPANY] on the relevant date. The Respondent had requested disclosure of the applications for membership of the company made by these tenants. It accepted there was no “formal obligation” to supply these but noted that the articles of association expect such applications and suggested that not providing them after two requests indicated that the register of members was “questionable”. It referred to [COMPANY] & Ors v [COMPANY] and Ors (LRX/124/2007), but in that case there was no register.

27. The Applicant provided the tribunal with a certified true copy of its register of members as at 28 June 2023, signed by the Company Secretary. The [NAME] of the flats referred to above (and the [NAME] of Flats 4 and 23) were listed in the register. The Applicant said, and it was not disputed by the Respondent, that the same copy of the register was provided to the Respondent on 12 September 2023. The Applicant also provided the tribunal with a statement of case, signed with a statement of truth, which stated at paragraph 14 that “on the relevant date the membership of the company included sufficient [NAME]”.

28. We do not consider that non-production of the requested applications for membership is sufficient to call this into question, let alone outweigh it. The Respondent has produced no competing factual evidence or [NAME] argument in relation to membership of the [COMPANY] on the relevant date.

29. Having considered the register of members and the Applicant’s statement of case, we find that the Applicant has discharged the burden of proving that the membership of the [COMPANY] on the relevant date included a number of [NAME] of flats contained in the premises which was not less than one half of the total number of flats so contained.

30. It follows that for the purposes of section 79(3) we are satisfied that the claim notice was given by a [COMPANY] which complied with section 79(5) of the Act. Membership - section 78(2)

31. Linked to the above ground of objection is whether the notices served on the [NAME] inviting them to participate in the acquisition of the right to manage accurately stated the names of the members of the Applicant as required by section 78(2) of the Act.

7 32. The Respondent asserts that the [NAME] of Flats 2, 3, 5, 8, 9, 12, 14, 17, 18, 19, 20, 21, 24, 25, 26, 27, 28, and 30 were “not correctly entered as members of the Company” and that therefore the notice overstated the membership of the Applicant.

33. As set out above, we have seen a true copy of the Applicant’s register of members as at 28 June 2023 which includes the [NAME] of these flats. We have also seen the Applicant’s statement of case, signed with a statement of truth, which states at paragraph 19 that “the s.78 notices of invitation to participate contain the names of twenty members of the company who at the time the notice was given were [NAME] of flats contained in the premises. The names of the twenty members stated in the notice are consistent with the register of members supplied to the Respondent on 12 September 2023”. The Respondent has produced no competing factual evidence or [NAME] argument to the contrary.

34. Having considered the register of members and the Applicant’s statement of case, we find that the Applicant has discharged the burden of proving that the notices of invitation to participate accurately stated the names of the members of the [COMPANY] in accordance with section 78(2) and (3) of the Act. Conclusion 35. We are satisfied for the reasons set out above that the Applicant was on the relevant date entitled to acquire the right to manage the Property. Costs 36. Under Rule 13, the tribunal has discretion to order reimbursement of tribunal fees. The Applicant is the successful party in this [NAME]. We order the Respondent to pay £100 to the Applicant to reimburse the tribunal [NAME] fee paid by them. Name: Judge Katie Gray

Date: 12 December 2024

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. 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].

8 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).

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CAM/00KA/LRM/2023/0013 Property : [NAME], 17-21 [NAME], Luton, [POSTCODE] Applicant : [redacted] : [RESPONDENT] Respondent : [redacted] : [COUNSEL] Solicitors Type of [NAME] : [NAME] for permission to appeal Tribunal member(s) : Judge Katie Gray Judge David Wyatt Date of decision : 21 January 2025

DECISION GRANTING PERMISSION TO APPEAL

DECISION OF THE TRIBUNAL 1. The tribunal has considered the respondent’s [NAME] for permission to appeal dated 8 January 2025 and determines that: (a) it will not review its decision; (b) it refuses permission to appeal on ground 1; but (c) it grants permission to appeal on ground 2. 2. [NAME] for permission to appeal on any ground for which the tribunal has refused permission must be made to the Upper Tribunal (Lands Chamber) no later than 14 days after the date that the tribunal sent notice of this refusal to the party applying for permission.

2 3. You must provide a notice of appeal to the Upper Tribunal (Lands Chamber) so that it is received within one month after the date that the First-tier Tribunal sent notice of this grant of permission to the party applying for permission.

4. Where possible, you should submit any such [NAME] and/or your notice of appeal on-line using the Upper Tribunal’s on-line document filing system, called CE-File. This will enable the Upper Tribunal to deal with it more efficiently and will enable you to follow the progress of your appeal and submit any additional documents quickly and easily. Information about how to register to use CE-File can be found by going to this web address: https://www.judiciary.uk/wp- content/uploads/2023/09/20230927-PD-UT-Lands-Chamber-CE- File.pdf 5. Alternatively, you can submit any such [NAME] and/or your notice of appeal by email to: [EMAIL].

6. The Upper Tribunal can also be contacted by post or by telephone at: Upper Tribunal (Lands Chamber), 5th [ADDRESS] [POSTCODE] (Tel: [PHONE]).

REASONS FOR THE

DECISION 7. The substantive decision was sent to the parties on 12 December 2024. The [NAME] for permission to appeal does not contain numbered grounds of appeal. However, it is apparent from the document entitled “grounds of appeal” that the respondent asks the tribunal to review its decision and/or seeks permission to appeal on two grounds, namely: (a) Ground 1 - that the decision in 159-167 [NAME] of [COMPANY] v [COMPANY] [2024] EWCA Civ 1544 ([NAME]), handed down after the tribunal’s determination, establishes that the landlord entitled to service of a claim notice under section 79(6) of the Commonhold and Leasehold Reform Act 2002 (“the Act”) is the [NAME] not the equitable landlord. This ground of appeal goes to issue “(b)” identified at paragraph 10 of the tribunal’s decision of 10 December 2024. (b) Ground 2 – that the decision of the Upper Tribunal in [COMPANY] v [ADDRESS] E RTM Co [COMPANY] [2024] UKUT 335 (LC) ([ADDRESS] E) was wrongly decided and permission to appeal to the Court of Appeal has been granted. As this tribunal was bound by the decision in [ADDRESS] E it should grant permission to appeal pending the outcome of the proceedings in the Court of Appeal. This ground of appeal goes to issue “(a)” identified at paragraph 10 of the tribunal’s decision of 10 December 2024.

3 8. The test for whether to grant permission to appeal is whether there is a realistic prospect of success. For the benefit of the parties and of the Upper Tribunal (Lands Chamber), the tribunal records below its comments on the grounds of appeal, adopting where appropriate the paragraph numbering of the original [NAME] for permission. References in square brackets are to those paragraphs in the main body of the original tribunal decision. Ground 1 9. The respondent’s case on this ground is advanced in paragraphs 1 – 5 of the grounds of appeal. The respondent relies on the recent decision in [NAME] in which the Court of Appeal held, in the context of a claim to recover legal costs, that an equitable owner could not be a "landlord" for the purposes of s.79(6) and s.88 of the Act.

10. The respondent asserts that the claim notice should have been served on [RESPONDENT]. Service of the notice on the equitable landlord was not sufficient. The respondent asserts that [RESPONDENT] was excluded from the proceedings.

11. As noted above, the decision in [NAME] was handed down after we made our decision. Moreover, the respondent’s submissions do not engage with the substance of the tribunal’s decision at [23] – [24]. The tribunal held, following [COMPANY] (Sunderland) [COMPANY] v [NAME] Company [COMPANY] [2024] UKSC 27, that the failure to give a claim notice to [COMPANY] rendered the transfer of the right to manage voidable at the instance of [RESPONDENT], not the respondent. There was no suggestion that [RESPONDENT] wished to raise any objection to the acquisition of the right to manage and nor did it ask to be joined to the [NAME]. It was not excluded from the proceedings as the respondent asserts. Even apart from the lack of objection from [RESPONDENT], there is no indication of any prejudice. The respondent was given a claim notice, gave a counter notice and disputed entitlement vigorously. As a result, the validity of the right to manage scheme has been tested through the tribunal as envisaged in A1.

12. In the tribunal’s judgment, nothing in the recent decision in [NAME] undermines its conclusions at [23] – [24] of the decision.

13.

For these reasons, the tribunal does not consider that ground 1 has a realistic prospect of success and accordingly declines to review its decision and further declines to grant permission to appeal on this ground. Ground 2 14. The respondent’s case on this ground is advanced in paragraphs 6 – 11 of the grounds of appeal. Its case is that the decision in [ADDRESS] E was wrongly decided because section 79(2) of the Act specifies a consequence which precludes the approach in A1 and that permission to

4 appeal the decision to the Court of Appeal has been granted. If the appeal is successful on the grounds advanced in the Court of Appeal, the respondent asserts that it would follow that no notice of claim to acquire the right to manage could have been served by the applicant.

15. We do not review our decision because we are bound by the current decision in [ADDRESS] E, so we cannot be satisfied that this ground is likely to be successful.

16. We recognise that it appears the effect of giving permission to appeal will be to delay acquisition of the right to manage under section 90 of the Act, and the observations made in [ADDRESS] E as noted at [19]. However, the tribunal notes that, when granting permission to appeal to the Court of Appeal in [ADDRESS] E, the Upper Tribunal commented that it had “no hesitation in granting permission to appeal”. In those circumstances, the tribunal considers that the appeal on ground 2 has a realistic prospect of success and grants permission to appeal on this ground only.

Name: Judge Katie Gray Date: 21 January 2025