Category Archives: Right to Manage

Landlord Development permitted despite conflict with RTM Company’s Functions

Can a landlord develop an additional flat on an apartment block roof where the management of that roof has been transferred to a “right to manage company” (“RTM Company”)?

In a recent county court case the court found that the proposed development would conflict with the RTM Company’s management functions under Part II, Chapter I of the Commonhold and Leasehold Reform Act 2002 but said that the proposed development was permissible so long as the landlord took all reasonable steps to minimise that disturbance both during and after the development.

The RTM Company has been allowed to appeal to the Court of Appeal.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Right to manage: notice of invitation to participate invalid

The purpose of a notice of invitation to participate under section 78 of the Commonhold and Leasehold Reform Act 2002 is to afford to all qualifying tenants of flats in the premises the opportunity to become members of a right to manage (“RTM”) company. Qualifying tenants are entitle to membership (section 74(1)(a)) and in order to give effect to that entitlement the RTM company is required to inform all qualifying tenants who are not already members of its existence, present membership and intentions.

In the Upper Tribunal (Lands Chamber) case of Triplerose Ltd v Mill House RTM Company [2016] the RTM Company was formed in 2011 and gave notices of invitation to participate to each of the qualifying tenants of the 6 flats on 19 March 2013. The notices of invitation to participate wholly omitted the notes which should have been included as part of the prescribed form.

The Tribunal said that the inclusion of the notes in the prescribed form was essential to the validity of a notice of invitation to participate.

So the documents served on the qualifying tenants, having omitted the notes in their entirety were not notices of invitation to participate in accordance with section 78.

Therefore the RTM company could not under section 79(2) give a claim notice seeking to acquire the right to manage.

So the RTM Company had not acquired a right to manage.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Right to Manage Company Articles could only have been referring to the whole building

Where a document, including a company’s articles of association, is ambiguous or reasonably capable of more than one meaning, the document will be given the meaning which is more consistent with the parties’ presumed intention. Where a document contains a clear mistake, and it is obvious what the parties must have intended, the document will be interpreted so as to accord with that intention.

In the Upper Tribunal (Lands Chamber) case of Avon Ground Rents Ltd v 51 Earls Court Square RTM Company Ltd [2016], the Company’s articles of association were in the model form prescribed by the RTM Companies (Model Articles) Regulations 2009. Article 2 recorded that the Company’s name was “51 Earls Court Square, RTM Company Ltd.”

However in the Company’s articles “the Premises” were defined as “Flat 1-13, 51 Earls Court Square, London SW5 9DG”.

The tribunal said the informed reader, might construe the words “Flat 1-13, 51 Earls Court Square” to mean the 13 flats, numbered 1 to 13, in the building known as 51 Earls Court Square, or alternatively to mean the building at 51 Earls Court Square, which comprised those 13 flats.

But the reasonable person would have to ask themselves “whether the object of the Company could sensibly be the acquisition of the statutory right to manage thirteen individual flats (an object which is legally incapable of fulfilment), or whether the parties must have intended that the right would extend to the whole of the Building [which] comprises the thirteen flats.”

The articles could only be interpreted to mean that the parties intended to refer to the whole of the Building, as it was the only unit of property at 51 Earls Court Square which was “a self-contained building or part of a building, with or without appurtenant property” and thereby qualified to be the subject of an application for the acquisition of the right to manage.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Improvement notice relating to apartment block should have been served on tenants

Where an apartment block is managed by a Right to Manage (“RTM”) Company who can a local housing authority serve an improvement notice on requiring work? Can an improvement notice still be validly served on the landlord under paragraph 4(2) of Schedule 1 to the Housing Act 2004 (“the Housing Act”)?

In the Upper Tribunal (Lands Chamber)case of Hastings Borough Council v Braear Developments Ltd [2015] Hastings Borough Council served an improvement notice requiring work to the common parts on Braear Developments Limited, the freeholder, and on the RTM Company.

Previous freeholders had granted long leases of the five first, second and third floors flats in the building, for a term of 99 years. The leases of the flats granted rights over the only means of access. Four of the five flats in the building were sublet on assured tenancies by the lessees. The fifth flat was not let, but if it were, the recipient of the rack-rent would be the lessee.

The Tribunal said looking at the building as a whole, the “person in control”, in the statutory sense of the person(s) in receipt of the rack rents, were the lessees of the five flats.

It would be wrong to ascribe a notional rack-rent to the common parts of the building, when there is no realistic possibility of such a rent being received.

The persons in control of the building were the lessees of the five flats.

Collectively they received the rack-rent of the building. So they satisfied the description in section 263(1) of the Housing Act.

Neither the respondent, as freeholder, nor the RTM Company could be served with an improvement notice in relation to any part of the building.

The freeholder did not qualify to receive the notice as the “person in control” of a House in Multiple Occupation (“HMO”) because it did not receive the rack-rents of the premises and so did not match the description in section 263(1) of the Housing Act. The RTM Company was in the same position.

Nor were either of the freeholder or the RTM a “person managing the building” within section 263(3) of the Housing Act. The respondent received a ground rent from the lessees, but no rent from persons who were in occupation as tenants or licensees of parts of the premises. The RTM Company received no rent at all.

So, in relation to the building as a whole, paragraph 2 of Schedule 1 to the Housing Act required the improvement notice to be served on the lessees collectively, and, to the extent that work was required within any individual flats, it required each lessee of those flats to be served with the notice requiring that work.

Paragraph 2 of Schedule 1 to the Housing Act applies only to HMOs which are not licensed. So where a building is an HMO subject to licensing it would normally be expected that an improvement notice would be served on the person holding the licence.

This building was subject to licensing as an HMO but it was not licensed.

Had the RTM Company obtained an HMO licence under Part 2 of the Act, as it should, it would have been the appropriate person on whom an improvement notice ought to be served under paragraph 1 of Schedule 1. As it had failed to do so the notice was to be served on the lessees collectively under paragraph 2.

There may be circumstances where a local housing authority could, and might have to, serve an improvement notice in relation to common parts either on the freeholder or on some or all of the lessees of flats. Each case would turn on which of those owners “ought to take the actions specified in the notice” in the circumstances. For example, where an RTM company has the management the freeholder would have no power to undertake works and no entitlement to recoup the costs of works from lessees.

Here, the better course would be to direct any improvement notice at those lessees who are members of the RTM company and who are therefore collectively able to control the RTM company’s decisions. Usually the RTM company would be able to carry out the works and to recoup their costs under service charges.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Housing: Corresponding date rule validated Right to Manage Claim Notice

An application may be made for the appointment of a manager of leasehold housing under the Commonhold and Leasehold Reform Act 2002 (“2002 Act”).

Section 80 of the 2002 Act prescribes that the claim notice:

– must specify a date, at least one month after “the relevant date”, by which each person who was given the notice under section 79(6) may respond to it by giving a counter-notice under section 84 (Section 80(6)) and

– must specify a date, at least three months after that specified as above, on which the Right To Manage company (“RTM company”) intends to acquire the right to manage the premises (Section 80(7)).

In the Upper Tribunal Lands Chamber) case of Windermere Court Kenley RTM Company Ltd v Sinclair Gardens Investments (Kensington) Ltd [2014] “the relevant date” was the 29th August 2013, when the claim notice was given, and the 30th September 2013 was the date specified under section 80(6) and the 31st December 2013 was the date specified under section 80(7).

Issue: whether a specified date of 31st December 2013 satisfied the requirements of section 80(7) or whether the earliest date it could have been was 1st January 2014.

The Tribunal said:

– The corresponding date in the following month or months was to be used as the date of calculation particularly where, as here, there was one.

– The application of the corresponding date rule in this case required that the start time specified for the RTM company must be a date ‘after’ midnight on 30th-31st December 2013.

– The start-time the claim notice specified for the RTM company was 31st December 2013.

– 31st December was the day ‘after’ midnight on 30th-31st.

Accordingly specifying 31st December 2013 as being the first day three months “after” the 30th September 2013 satisfied the requirements of section 80(7). So the claim notice complied with the provisions of section 80 of the 2002 Act.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Scope of Tribunal’s Housing Management Order exceeded powers

Part II of the Landlord and Tenant Act 1987 provides for the appointment of managers by tribunals.

Subject to exceptions in subsection (3), section 21(2) provides that Part II of the Act applies to premises consisting of the whole or part of a building if the building or part contains two or more flats.

Section 21(7) says in Part II of the Act “tenant” does not include a tenant under a tenancy subject to Part II of the Landlord and Tenant Act 1954 so, tenants who occupy premises for the purposes of a business cannot make an application for an order for the appointment of a manager.

By section 21(1) the tenant of a flat in any premises to which Part II of the 1987 Act applies may apply to the tribunal for an order under section 24 appointing a manager in relation to those premises.

In the Upper Tribunal (Lands Chamber) case of Sennadine Properties Ltd v Heelis [2015] the building was configured so that the flats on the upper floors had their own communal entrance and did not share common parts with the commercial let premises on the ground floor.

The lessee of flat 2 made an application under section 24 of the 1987 Act. The application could have been limited to the upper floors on which the flats were situated, but the applicant chose to include the whole of the building. The Local Valuation Tribunal (“LVT”) could have made a more restricted order, under section 24(3), but it appointed a manager of the whole of the building.

A liquidator of a company or a trustee in bankruptcy in the course of a winding up or bankruptcy has power to disclaim leases under the Insolvency Act 1986. The Crown also has power to disclaim after the dissolution of a limited company where a lease has vested in the Crown as bona vacantia. The LVT had no power to confer the right to disclaim a lease on the manager because disclaimer was not a procedure otherwise available.

In fact it was unclear what the LVT had in mind by “disclaimer”. It may have intended the manager to end the lease of the commercial ground floor premises because the lessee had stopped paying rent. The LVT clearly wanted an income to be generated from the commercial premises so the manager could fund repairs. If it intended the manager to forfeit the existing lease to re-let it did not express itself properly.

The LVT could not confer on the manager a power to “disclaim” a commercial lease vested in a third party. So by directing the manager to “disclaim” the lease of the commercial unit on the ground floor, to market the commercial unit, to let it on commercial terms and to demand and receive rent and service charges under any new lease, the LVT had exceeded its jurisdiction.

More generally it was disproportionate in the circumstances for the LVT to have made an order directly intervening in the relationship between the freeholder landlord and a third party (the existing ground floor tenant). The circumstances in which it might be appropriate to make such an order were likely to be exceptional.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Landlord not bound by Right to Manage Company’s Claim Notice

Where a company (a “RTM Company”) applies to a residential landlord to acquire the right to manage conferred by Part 2 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”), section 78(5)(b) of the 2002 Act requires the service of “a notice inviting participation” to inform non-participating tenants that the RTM company’s articles of association are available for inspection on 3 days – at least one of which must be a Saturday or Sunday.

The claim notice must also be served on any landlord of the property under section 79(6) of the 2002 Act.

Would non-compliance with these requirements be fatal to the whole right to manage procedure or might it be overlooked?

In the recent case of Elim Court RTM Co Ltd v Avon Freeholds Ltd [2014] the first requirement was not complied with and as to the second requirement it was served not on the intermediate landlord but on one of the flats and not passed on to the intermediate landlord.

The Upper Tribunal (Lands Chamber) decided that the requirements were mandatory and that non compliance was fatal on both counts.

That disposed of the case in favour of the landlord but the case did raise an interesting signature issue.

The landlord argued that the disputed claim notice purported to be signed on behalf of the RTM Company by the secretarial company which was the company secretary of the RTM Company and that, accordingly, there being just the one unwitnessed signature on the claim notice, it was ineffective for failing to comply with section 44 of the Companies Act 2006.

The statement after the signature mentioned the signatory’s name and the words “RTMF Secretarial” which was the trading name of Federation Limited, the RTM Company’s company secretary, which suggested that he was signing as a representative of “RTMF Secretarial”, and not as the immediate agent of the RTM Company.

Had the signature been the purported signature of the secretarial company it would indeed have been ineffective for failure to comply with section 44.

However the Tribunal said the claim notice contained no indication as to who or what “RTMF Secretarial” was or indeed that it was a limited company. The provision of the additional information below his signature did not derogate from the fact that the signatory actually had separate authority to sign and give the notice in his individual capacity as authorised member or officer acting on behalf of the RTM Company.

The signatory’s signature neither purported to be that of a company to the intent that it was being given by the secretarial company on behalf of the RTM company, nor would Section 44 have allowed it to be. Had the secretarial company been pursuing that option a second company officer’s signature or a witness to his signature would have indeed have been required under Section 44 and their omission here would have been fatal to the validity of the notice.

We might disagree with the Tribunal and think the fact that someone acting in a particular way as a secretarial company’s signatory would have been legally ineffective has little probative value as a pointer to them having intended to act in their individual capacity as agent of the RTM Company (effective) especially when their signature was accompanied by a trading name which suggests they were actually signing, not in their individual capacity, but instead as the secretarial company’s signatory (ineffective).

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Tribunal kept power to hear case & award costs even after Company withdrew right to manage flats application

Where a right to manage (“RTM”) company withdraws an application made to acquire the right to manage a building containing self contained flats under the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”):

– is the applicant’s communication of its intention sufficient to effect the withdrawal and end the proceedings or

– does the withdrawal kick in only when the tribunal consents to the withdrawal so that, until then, the tribunal continues to have jurisdiction over the matter to enable it to determine the substantive dispute and order costs?

In O Twelve Baytree Limited, R (On the Application Of) v The Rent Assessment Panel [2014] Beckett House RTM Co. Ltd., (“the RTM”), served a claim notice seeking to acquire the right to manage the property with effect from 11 February 2013.

On 2 April 2013, the RTM wrote to the tribunal ” we … withdraw the Claim Notice, and therefore …the hearing listed for 4 April is cancelled and [the RTM] application is withdrawn.” The tribunal treated that communication as a withdrawal of the application and a cancellation of the hearing. The Claimant contended that the RTM could not unilaterally withdraw its application. It was concerned that the Claimant had incurred costs in preparation for the hearing. It wanted to ensure that the tribunal retained jurisdiction to deal with the application and make any orders including on costs.

The High Court said the legislation contemplated that an application may be withdrawn. That was implicit in section 87(1) of the 2002 Act which recognised that if an application is withdrawn, the claim notice is also deemed to be withdrawn. Section 87(2) of the 2002 Act also provided for “the date of the withdrawal of the application” to be the date upon which the claim notice is deemed to be withdrawn (section 87(2)(b) of the 2002 Act).

The provisions of the 2002 Act were, however, silent on the question of what steps or procedures must be followed in order to bring about a withdrawal of the application. The 2002 Act was also silent on the question of whether a withdrawal is effected solely by the RTM giving notice to the tribunal (or the other parties) of its wish to withdraw the application or whether the tribunal must agree to the withdrawal.

The 2002 Act contained indications that the RTM would not be able to bring about the end of the proceedings simply on giving notice of withdrawal especially in the provisions relating to costs i.e. that the RTM would be liable for the reasonable costs incurred by the giving of the claim notice. Also under section 88(3) of 2002 Act the RTM would be responsible for the costs incurred in proceedings before a tribunal.

However the RTM’s liability for costs incurred as a party to proceedings before the tribunal only arose, if the tribunal dismissed the application.

Since:

– section 89(2) of the 2002 Act said liability for costs continued down to the withdrawal of the application and

– such liability would only arise if the tribunal dismissed the application

the Court took this to indicate that the tribunal retained jurisdiction over an application even where the RTM had given notice that it intended to withdraw. So the withdrawal would only be effective when accepted by the tribunal and when the tribunal dismissed the application, e.g. by dismissing the application on withdrawal.

This sounds like an expedient to make good a deficiency in the legislation by artificially protracting proceedings beyond the RTM’s withdrawal to enable the tribunal to dismiss the application and trigger its own jurisdiction to award costs. The court acknowledged that the tribunal would have no duty to hear and determine the underlying merits of the case in those circumstances.

So the tribunal had been wrong to believe that the notice of withdrawal ended its jurisdiction including to award costs.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.