RTM Company's Notice Validly Served on Previous Owner

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AG?LRM/2022/0014 HMCTS code : P: PAPERREMOTE Property : 46 [ADDRESS] [POSTCODE] Applicant : [redacted] : [NAME] (REF DMF) Respondent : [redacted] : [COUNSEL] [NAME] [NAME] : Right to Manage Tribunal member : Judge H Carr

Date of decision : 22nd August 2022

DECISION

Covid-19 pandemic: description of hearing This has been a remote hearing on the papers which has been 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 on paper. The documents that I was referred to are in a bundle of 108 pages, the contents of which I have noted. The order made is described at the end of these reasons.

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Decisions of the Tribunal

(1) The Tribunal determines the notice of invitation to participate was validly served upon [APPELLANT]. (2) The Tribunal determines that the Applicant was on the relevant date entitled to acquire the right to manage the premises pursuant to section 84(5)(a) of the Act, and the Applicant will acquire such right within three months after this determination becomes final. The [NAME]

1. This was an [NAME] to acquire the right to manage 46 [ADDRESS] [POSTCODE] (“the premises”) under Part 2 of Chapter 1 of the Commonhold and Leasehold Reform Act 2002 ("the Act"). The Respondent freeholder has served a counter-notice asserting that the Applicant [COMPANY] was not on the relevant date entitled to acquire the right to manage. The law 2. The relevant provisions of the Act are referred to in the decision below. The counter-notice 3. In its counter-notice, the Respondent alleged that the Applicant failed to serve notices inviting participation to all qualifying tenants as required by s.78(1) and ss79(2). Having considered the documents in the bundle, the tribunal has made the following decision. The argument.

4. The chronology of events, taken from the Applicant’s response to the Respondent’s statement of case is as follows: (i) 23rd April 2021 – Mr [NAME] completes his purchase of the first floor flat (the flat) . (ii) 23rd April 2021 – Mr [NAME] solicitors, [NAME[NAME] [COMPANY], apply to the Land Registry to register the transfer of the flat to him.

3 (iii) End of January /early February – Land Registry cancel [NAME] for registration. (iv) 7th February 2022 – notice of invitation to participate given to [NAME] who was the previous owner of the flat who sold it to Mr [NAME] (v) 9th February 2022 – Mr [NAME] solicitors [COMPANY] apply again to the Land Registry to register the transfer of the flat to him. (vi) 22nd February 2022 – Land Registry registers transfer to Mr [NAME] (vii) 24th February 2022 – [NAME]’ [NAME] to become a member of the [COMPANY]. (viii) 24th February 2022 – register entries showing Mr [APPELLANT] title obtained by Applicant’s solicitors. (ix) 24th February 2022 – notice of claim to acquire right to manage sent by post to the Respondent. The Respondent’s solicitors confirmed in correspondence annexed to the [NAME] that this letter was received the following date, 25th February 2022. (x) 30th March 2022 – Applicant’s solicitors email to the Respondent solicitors explaining why notice of invitation did not have to be given to Mr [RESPONDENT]. The Respondent’s argument 5. In its statement of case the Respondent argues that the Applicant failed to serve Notice Inviting Participation on [APPELLANT], who acquired the leasehold interest on 16th April 2021 and whose interest was registered on 9th February 2022, before it served the claim notice on 24th February 2022. This is required by s.78(1) and 79(2). This failure, the Respondent argues, invalidates the notice of claim.

6. On the claim notice dated 24th February 2022 served upon the Respondent [NAME] is not noted as a member of the [COMPANY] and as such the Respondent argues that Mr [RESPONDENT] ought to have been served Notice Inviting Participation prior to the claim.

7. The Respondent says that the Applicant has instead served the previous leaseholder, [APPELLANT], with a notice inviting participation.

4 8. The Respondent refers the Tribunal to section 78(1) of the Act which requires that before [NAME] a claim to acquire the right to manage any premises, a [COMPANY] ‘must’ give a NIP to each qualifying tenant who is not, or has not agreed to be, a member of the company. By section 79(2) a failure to do so prevents the giving of a claim notice.

9. The Respondent also refers the Tribunal to the recent Upper Tribunal case, [COMPANY] v [NAME]) [COMPANY] and another [2020] UKUT 358 which found that filaulre to give notice of invitation to a qualifying tenant who was not already a member, or who had not agreed to become a member, of the [COMPANY] invalidated the claim notice. As well as stimulating the timescale for service of a claim notice, s.79(2) sets out the consequences of failing to serve a notice of invitation to participate in accordance with the statutory requirements.

10.

For these reasons the Respondent denies that the Applicant had acquired the right to manage on the relevant date. The Applicant’s argument 11. The Applicant explains that it was always the intention that the owners of all 3 flats (Ms [NAME] and Mr [NAME] of 46A, Mr [NAME] of Second Floor Flat and [NAME] of the First Floor Flat) would participate in the acquisition of the right to manage and be members of the company.

12. The difficulty for the Applicant and the leaseholders was the delay in Mr [APPELLANT] being registered at the Land Registry as the owner of the first floor flat.

13. The Applicants argue that the Respondent’s interpretation of s.78(1) is not clear.

14. Section 78(1) provides that [NAME] a claim to acquire the right to manage of any premises, a [COMPANY] must give notice to each person who at the time when the notice is given- (a) Is the qualifying tenant of a flat contained in the premises: but (b) Neither is nor has agreed to become a member of the RTM 15. The Applicant argues that the referent to ‘at the time the notice is given’ can only refer to the date when the notice of invitation to participate was

5 given and not the date of the claim notice. The Applicant says that this is the obvious reading of the section.

16. It says the relevant question is: who was the qualifying tenant of the Flat at the date the notice of invitation to participate was given to Mr [NAME]? The notice was posted to him on 7th February 2022 and accordingly, under the Interpretation Act 1979, would be deemed to have been served when it would have been delivered in the normal course of post. That would either be the next day, 8th February 2022, or possibly 9th February 2022, the following day.

17. The Applicant says that on either of those dates Mr [APPELLANT] was the qualifying tenant of the Flat. It refers the Tribunal to the case of [NAME] in which the current Respondent was also the Respondent. In that case the Respondent successfully argued that although they had purchased the freehold of the property on 2nd March 2020, at the time when the notice of claim of the right to manage was served on them, they had not been registered at the Land Registry. At paragraph 10 of the decision it was said ‘this meant that there was a registration gap with the legal estate registered in the name of the old owner and the equitable estate vested in the new owner, the Respondent.’ The Tribunal determined that the claim for the right to manage had to be served on the legal owner and not the equitable owner. The Applicant argues that that decision must apply here. Mr [APPELLANT] was not the legal owner of the flat on the date that Mr [NAME] was served the notice, he was the equitable owner.

18. If the notice served on Mr [NAME] is deemed to have been served on 8th February 2022 there is no problem since at that date the [NAME] to register Mr [NAME] as the owner of the flat had not been made. It was submitted the following date, 9th February. However, the issue is the registration gap. So although Mr [NAME] is now to be considered as the legal owner of the Flat since the date of the [NAME] for registration, 9th February, this is essentially a backdating exercise. Up until the time that the registration was actually completed on 22nd February 2022, he was not the legal owner and therefore not the qualifying tenant. Therefore the notice of invitation to participate was correctly served on Mr [NAME] who remained the legal owner until the registration was actually completed.

19. The Applicant notes the Respondent’s reference to [NAME]. However it points out that it has never been disputed that if Mr [NAME] should have been served with a notice of invitation to participate, the failure to do so would have invalidated the notice.

20. The Applicant points out in support of its own argument a following point from [NAME] – ‘It is therefore very easy for the [COMPANY] to serve each qualifying tenant and to identify them. Since, in

6 virtually all case, the qualifying tenants will be long lessees , their interests will be identifiable at the Land Registry.

21. The Applicants make the point that at the time the claim notice was prepared the Applicant had no idea how long it would take for Mr [APPELLANT] to be registered. Given that some 9 months passed between the [NAME] for the registration originally being made in April 2021 and ebing cancelled in January or early February 2022, it was quite likely that the subsequent [NAME] Mr [NAME] solicitors made would take many months to be completed. The Applicant could not have know that a new [NAME] having been lodged for registration on 9th February 2022, the Land Registry would complete it within 2 weeks.

22. The Applicant also deals with the possible interpretation of the Respondent’s argument that the reference to ‘the time when the notice is given’ in s.78(1) is the time when the claim notice is given rather than the notice of invitation to participate. The Applicant does not consider this a correct interpretation but even it is, it argues it does not assist the Respondent. [NAME] applied to become a member of the [COMPANY] on 24th February 2022 and accordingly the date of service of the claim note (the 25th February) he had ‘agreed to become a member of the [COMPANY]’. Therefore under s.78(1) (b) not notice of invitation ahd to be served don him.

The Tribunal's decision 23. Section 78 (1) requires that before [NAME] a claim to acquire the right to manage, the [COMPANY] must give notice to a qualifying tenant who neither is nor has agreed to become a member of the RTM.

24. The Tribunal reads the requirement as the Applicant does, that ‘at the time the notice is given’ is the date when the notice of invitation to participate was given. This must be the common sense interpretation.

25. The Tribunal determines that on that date, either 8th or 9th February 2022, the qualifying tenant who had to be given notice in this case is Mr [APPELLANT] because he was the legal owner of the flat at the time of the service of the notice of intention to participate. This is despite the fact that the flat was transferred to [NAME] on 23rd April 2021.

26. The Tribunal is persuaded by the arguments of the Applicant and relies upon the decision of Judge Professor Robert Abbey in [NAME] case reference LON/00AM/LRM/2020/001 in reaching this decision. Judge Abbey points out that the effect of s.27(1) of the Land Registration Act 2002 is that a disposition of a registered estate, such as a transfer ,is

7 required to be completed by registration and it does not operate at law until the relevant registration requirements are met. 27. [NAME] was not the legal owner but the equitable owner and therefore not entitled to participate on the relevant date. [NAME] did not become the legal owner until 22nd February 2022 when the registration requirements were met. The fact that the Land Register shows that [NAME] interest was registered on 9th February 2022 is a consequence of the Land Registry backdating registration to the time of the receipt of the [NAME]. It does not change the legal position that at the time the notice of intention to participate was given the legal owner was [NAME].

28. The Tribunal therefore determines the notice of invitation to participate is valid. Summary 29. Overall, the Tribunal determines that the Applicant was on the relevant date entitled to acquire the right to manage the premises pursuant to section 84(5)(a) of the Act.

30. Therefore, in accordance with section 90(4), within three months after this determination becomes final the Applicant will acquire the right to manage these premises. According to section 84(7): “(7) A determination on an [NAME] under subsection (3) becomes final— (a) if not appealed against, at the end of the period for bringing an appeal, or (b) if appealed against, at the time when the appeal (or any further appeal) is disposed of.” Costs 31. Section 88(3) of the Act states: “(3) A [COMPANY] is liable for any costs which such a person incurs as party to any proceedings under this Chapter before the appropriate tribunal only if the tribunal dismisses an [NAME] by the company for a determination that it is entitled to acquire the right to manage the premises.” 32. In the light of the Tribunal’s decision, there is no question of awarding any costs of the proceedings to the Respondent because the [NAME] for the right to acquire has not been dismissed.

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Name: Judge H Carr Date: 22nd August 2022

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]. 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).