Avon Freeholds Limited v Cresta Court E RTM Company Ltd

Under Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002, an equitable lessee can be a qualifying tenant where no legal lease exists and the statutory long-lease conditions are met. Where legal and equitable long leases coexist, the legal lessee has priority. Section 79(2) expressly makes timely participation notices a condition precedent to serving a claim notice. Failure to comply invalidates a claim notice served before the defect is remedied. The court must apply that clear statutory consequence. The Soneji analysis is relevant only where Parliament has not specified the consequence of non-compliance.

The respondent RTM company sought to acquire management of part of Cresta Court. Ms O’Connor held a 150-year lease of Flat 17, but her lease was not registered when the claim notice was served. The respondent did not give her a participation notice.

The First-tier Tribunal held that Ms O’Connor was a qualifying tenant but that the omission did not invalidate the claim notice. The Upper Tribunal upheld that result: [2024] UKUT 335 (LC). The appeal concerned whether an equitable lessee was a qualifying tenant and whether failure to serve the required participation notice invalidated the claim notice.

1. Issue 1. Sir Launcelot Henderson held that an equitable lessee is a qualifying tenant where the flat has no legal lease and the statutory definition of a long lease is satisfied. Section 112(2) of the Commonhold and Leasehold Reform Act 2002 includes an agreement for a lease. It would therefore be irrational to exclude a newly granted long lease which operates in equity during the registration gap. Where legal and equitable leases coexist, however, the statutory context and the one-qualifying-tenant rule give priority to the legal lessee.
2. Issue 2. Section 78(1) imposed a mandatory obligation to give Ms O’Connor a participation notice. Section 79(2) expressly prohibited service of a claim notice unless every required participation notice had been served at least 14 days earlier. The consequence was that the claim notice served in breach was invalid and could not found acquisition of the right to manage.
3. The court held that the first part of A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd [2024] UKSC 27, [69], formed part of the ratio and confirmed the clear consequence of section 79(2). The later passage reserving the voidable-or-void question was obiter and did not justify treating the claim notice as merely voidable.
4. The Soneji analysis applies only where Parliament has not stated the consequence of non-compliance. Clear, unambiguous statutory language which produces no absurdity must be applied, even if a more flexible result might appear reasonable on the facts.
5. The appeal was allowed. A declaration was made that Ms O’Connor was a qualifying tenant, and the claim notice dated 21 January 2022 was invalidated.

• Court of Appeal (Civil Division): [2025] EWCA Civ 1016. Appeal allowed. Ms O’Connor was declared to be a qualifying tenant and the claim notice was held invalid.
• Upper Tribunal (Lands Chamber): [2024] UKUT 335 (LC). Ms O’Connor was held to be a qualifying tenant, but the failure to serve a participation notice was held not to invalidate the claim notice.
• First-tier Tribunal (Property Chamber): The FTT dismissed the challenges to the claim notices and upheld their validity.