The ability to manage your own property is an attractive option for some leaseholders, whether that be as a result of difficulties directly with the freeholder or the managing agents or when there is no fault at all. However, care needs to be taken to follow the correct procedure.
In the recent case of Avon Freeholds Ltd v Cresta Court E RTM Company Ltd [2025] EWCA Civ 1016, the Right to Manage company (“RTM Company”) ran into difficulties due to an invalid claim notice.
Background
The Commonhold and Leasehold Reform Act 2002 (CLRA 2002), enables qualifying leaseholders of residential flats to take control of the management of their building. To proceed with this process, the RTM Company is set up.
The issue that arose in this case, related to the fact that one of the leaseholders had purchased their flat, but was not at the time the registered legal owner. The formal transfer had taken place, but until the transfer was registered at the Land Registry, that leaseholder was only an equitable leaseholder. This period of time is referred to as the “Registration Gap”.
The procedure for the RTM Company under the CLRA 2002 requires service of a notice of invitation on each individual who at that relevant time is a qualifying tenant. This will also include individuals who are not at the time members of the RTM Company. Until that element of the procedure is completed, it is not possible for the RTM Company to give the claim notice.
Decision
The Court of Appeal was required to decide if firstly the equitable tenant was a qualifying tenant pursuant to CLRA 2002 and secondly, whether the failure by the RTM Company to serve the invitation to participate would result in the claim notice being invalid.
The court held that even though the equitable leaseholder was not the registered legal owner, they were the owner for most practical and economic purposes. The court also ruled that the equitable leaseholder held the interest of a long lease, and as such, was intended to benefit from the CLRA 2002. The length of time it can take to complete registration would potentially frustrate the process.
The notice of claim was therefore held to be invalid for failure of the RTM Company to serve the initial notice on the equitable leaseholder.
Points to note
Care will need to be taken by those involved in the Right to Manage process to ensure that checks are taken to identify all qualifying tenants. The registration gap timing is unlikely to reduce in the immediate future, so full investigations need to be undertaken early in the process.
If you are a residential landlord or tenant and require assistance and advice on the Right to Manage process, please contact us on 0345 646 0406.