Elim Court RTM Co Ltd v Avon Freeholds Ltd

This appeal concerned whether procedural defects in the two-stage statutory process for exercising the no-fault right to manage under the Commonhold and Leasehold Reform Act 2002 defeated an RTM company’s claim. The principal issues were: (i) whether a notice of invitation to participate must offer inspection of the RTM company’s articles on at least one weekend day as required by section 78(5); (ii) whether the claim notice was validly signed in the form prescribed and compliant with Companies Act 2006 s.44; and (iii) whether failure to serve the claim notice on an intermediate landlord deprived the RTM company of its right to acquire the right to manage. The court held that, read literally, section 78(5) does require the inclusion of a Saturday or Sunday in the inspection days but that the omission in this case was a trivial procedural defect and not fatal to the right to manage. The claim form was validly signed and the Companies Act issue did not invalidate it. Failure to serve the intermediate landlord of a single flat that did not have management functions (as defined) was also not fatal. The court applied the principles from Natt v Osman on strict interpretation of procedures that affect property or similar rights but emphasised that not every procedural lapse will nullify the statutory process.

Background and procedural posture. Elim Court RTM Company Ltd (the RTM company) sought to acquire the statutory right to manage a block of flats under Part 2, Chapter 1 of the Commonhold and Leasehold Reform Act 2002. The Leasehold Valuation Tribunal (LVT) held the claim invalid on the ground that the notice of invitation to participate failed to comply with the requirement in section 78(5)(b) to include a Saturday or Sunday among the inspection days. The Upper Tribunal (Lands Chamber) upheld that decision and also held that the claim notice had not been served on an intermediate landlord and that those defects were fatal. The RTM company appealed to the Court of Appeal.

The nature of the claim. The RTM company sought to acquire the right to manage by serving the statutorily prescribed notice of invitation to participate and a claim notice under sections 78–90 of the 2002 Act and the subordinate 2010 Forms Regulations.

Issues framed by the court. The Court of Appeal identified three issues: (i) the "Saturday/Sunday" inspection requirement under section 78(5) and whether non-compliance is fatal to the statutory scheme; (ii) the validity of the signature on the claim notice and any interaction with Companies Act 2006 s.44; and (iii) whether failure to serve an intermediate landlord (here ReAssure) was fatal.

Court’s reasoning and decision. The court accepted the statutory text required the inclusion of a Saturday or Sunday when prescribing inspection days under section 78(5) but held that failure to comply in that respect was a trivial procedural defect in the particular circumstances and did not automatically invalidate the entire RTM acquisition process. On signature, the court found the claim notice had been validly signed by an authorised officer and the purported irregularity did not invalidate the notice. On service, the court held that although some landlords are entitled to receive a claim notice and to serve a counter-notice, omission to serve a single intermediate landlord who did not possess management functions (as defined by section 96(5)) was not fatal to the claim. In reaching these conclusions the court applied the analytical framework from Natt v Osman distinguishing procedural challenges to public decisions from statutory schemes conferring property-like rights, but it emphasised that not every minor defect must nullify a right to manage claim. The Court of Appeal allowed the appeal and remitted the position in favour of the RTM company.

Wider context. The court observed that Parliament intended the right to manage procedure to be simple, but the detailed statutory and regulatory provisions still afford opportunities for technical objections; the court suggested consideration be given to simplification or a discretionary power to relieve against technical non-compliance.

Appeal allowed. The Court of Appeal held that although section 78(5) of the Commonhold and Leasehold Reform Act 2002, read literally, requires inclusion of a Saturday or Sunday among inspection days, the omission in the notice was a trivial procedural defect which did not invalidate the RTM procedure; the claim notice was validly signed; and failure to serve the intermediate landlord who had no management functions was not fatal. The court applied the Natt v Osman framework but found the defects did not, on these facts, defeat the right to manage.

This is an appeal from the Upper Tribunal (Lands Chamber) decision LRX252013; reported as [2014] UKUT 397 (LC). The claim had previously been considered by a Leasehold Valuation Tribunal on 19 September 2012 (decision of the LVT of the Southern Rent Assessment Panel). The Court of Appeal judgment is reported at [2017] EWCA Civ 89.