Avon Freeholds Limited v Cresta Court E RTM Company Ltd

The Court of Appeal considered two linked questions under the Commonhold and Leasehold Reform Act 2002 (CLRA): whether a lessee who holds an equitable lease because the legal lease has not yet been registered is a "qualifying tenant", and whether failure to serve a participation notice under section 78(1) (within the timeframe imposed by section 79(2)) invalidates a subsequent claim notice to acquire the right to manage. The court held that where there is no legal lease in existence the holder of an equitable long lease (including a completed but unregistered lease) can be a qualifying tenant for the purposes of the CLRA, but that where both a legal and an equitable lease coexist the legal lessee is the qualifying tenant. Applying A1 Properties [2024] UKSC 27 and the clear wording of section 79(2), the court held that a claim notice served before the statutory 14-day participation notice period has run is invalid and therefore of no effect.

Background and parties:

• The respondent is an RTM company formed to acquire the right to manage flats 7–26 at Cresta Court. Avon Freeholds Ltd is the registered freehold owner.
• Flat 17 had been granted on a long lease in April 2020 but the lease had not been registered at the Land Registry at the date the RTM claim notice was served; the lease registration was subsequently backdated to an earlier application date.

Procedural posture:

• The RTM company served a claim notice on 21 January 2022. Avon gave a counter-notice and the matter proceeded to the First-tier Tribunal, which upheld the validity of the claim notices. Avon appealed to the Upper Tribunal (Lands Chamber), which held that the unregistered lessee was a qualifying tenant but that the failure to serve a participation notice did not invalidate the claim notice. Avon obtained permission to bring a second appeal to the Court of Appeal on the second issue; the respondent cross-appealed on the first issue.

Nature of the application and issues:

• (i) Whether a lessee who holds only an equitable long lease (because registration has not occurred) is a qualifying tenant under sections 75 and 76 of the CLRA.
• (ii) Whether failure to serve a participation notice required by section 78(1) (and the 14-day rule in section 79(2)) invalidates a claim notice served before the participation period had elapsed.

Court's reasoning and disposition:

• On issue (i) the court endorsed the Upper Tribunal: where no legal lease exists, an equitable lessee meeting the statutory definition of a long lease is a qualifying tenant; but where both legal and equitable leases coexist the legal lessee is the qualifying tenant. The court relied on the statutory definitions in section 112(2) (which includes agreements for lease) and on practical considerations about the statutory purpose.
• On issue (ii) the court held that Parliament had expressly stipulated the consequence of non-compliance in section 79(2): "The claim notice may not be given unless each person required to be given a notice of invitation to participate has been given such a notice at least 14 days before." Applying the Supreme Court's analysis in A1 Properties, where Parliament has plainly declared the consequence of non-compliance, that stated consequence must be applied. The consequence is that a claim notice served before the statutory participation period has run is invalid and of no effect. Accordingly the claim notice of 21 January 2022 was invalid because no participation notice had been served on the qualifying tenant of Flat 17 within the prescribed time.

Subsidiary findings and wider context:

• The court explained the distinction between cases where Parliament has specified a consequence of non-compliance and those where it has not (invoking the Soneji approach for the latter), and emphasised that strict observance of an express statutory consequence is required. The decision also noted practical factors such as the "registration gap" at the Land Registry and referred to related authorities illustrating those issues.

Appeal allowed. The court held that (i) where no legal lease exists the holder of an equitable long lease is a qualifying tenant for the purposes of the CLRA (but where both legal and equitable leases exist the legal lessee is the qualifying tenant); and (ii) the failure to give a participation notice within the period prescribed by section 79(2) invalidated the claim notice served on 21 January 2022, because Parliament has expressly provided that consequence in section 79(2).

First-tier Tribunal (Property Chamber) decision dated 11 May 2023 (FTT Decision) upheld validity of RTM claim notices; Upper Tribunal (Lands Chamber) judgment [2024] UKUT 335 (LC) (28 October 2024) answered two issues (held equitable lessee was qualifying tenant but that failure to give participation notice did not invalidate claim notice); Court of Appeal [2025] EWCA Civ 1016 allowed Avon's appeal on the second issue and declared the 21 January 2022 claim notice invalid.