In A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co. Ltd [2024] the Court considered the effects of a failure to serve a notice of claim on all landlords under a lease of the whole or any part of the building, as required by the Commonhold and Leasehold Reform Act 2002 (CLRA) when qualifying tenants exercise their right to take over the management of their building.
A previous Court of Appeal case in 2017 (Elim Court) had held that failure to serve a claim notice on a landlord does not always invalidate the acquisition of the right to manage and it fell to the Supreme Court to look at whether that case had been correctly decided.
The Supreme Court considered the background to the CLRA and its detailed provisions to attempt to understand the policy behind it together with previous case law and the reasoning set out in Elim.
The Court decided that the correct approach to a failure to comply with a provision prescribing the doing of some act before a power was exercised was to ask whether Parliament intended that an act done in breach of that provision should be invalid and that the Court should look at (i) the purposes served by the requirement, and (ii) the facts of the case and any prejudice caused.
It acknowledged that it is generally inferred that Parliament intends to provide a reasonable degree of certainty to parties in relation to the existence, acquisition and transfer of property rights, and that a person should not be deprived of those rights without being afforded a fair opportunity to object. These inferences are reinforced in the requirement of service of a claim notice on all landlords as per section 79(6) of the CLRA. However, it held that the correct approach is to look at the whole of the structure within which the requirement arises and ask what consequences of non-compliance best fits the structure as a whole.
Ultimately the Court decided that, in the context of the right to manage regime, if there was no substantive objection that could have been raised and a party had had its objections considered as part of the process in any event, (as was the case here), then there was no reason to infer that Parliament had intended the transfer process to be ineffective.
It also noted that a landlord's right to become a member of the RTM company is not dependent upon being given a claim notice, it was clearly a purpose of the legislative scheme that opportunities for obstructive landlords to thwart the transfer of rights should be kept to a minimum and there is no guarantee that an RTM company could afford to make multiple applications.
The Supreme Court dismissed the landlord's appeal and in so doing has clarified the correct approach to a failure to comply with statutory obligations when the statute itself is silent on the consequences of that non-compliance.
