Procedural Failure Means Court of Appeal Hearing for RTM Company

July 13, 2017

Procedural Failure Means Court of Appeal Hearing for RTM Company

The Commonhold and Leasehold Reform Act 2002 gives tenants of qualifying premises the right to have the landlord's management functions transferred to a right to manage (RTM) company so that they can take responsibility for managing their premises.

The Act sets up a mechanism for an RTM company to be formed and the management of the premises to be transferred from the existing manager to the RTM company.

However, failure to follow the procedures as laid down can cause significant problems, as a recent decision shows.

The tenants had set up an RTM company and served the required notices of invitation to participate on the qualifying tenants and then issued the claim notice on the freeholder.

The freeholder, who did not wish to have an RTM company established, served a counter-notice objecting to the RTM company's application, alleging that the appropriate procedures had not been complied with.

The grounds for the objection were that the invitations to participate were not supplied with a copy of the RTM company's articles of association, nor did they comply with the law when specifying a place at which they could be inspected. Inspection was offered on Monday, Tuesday or Wednesday only, but the legislation requires that inspection must be offered on at least one day over the weekend.

The legislation also requires that a copy of the claim notice has to be served on anyone who is a landlord under a lease for the whole or any part of the building. There was an intermediate landlord of one of the flats who did not receive a copy.

The argument ended up in the Court of Appeal, which essentially took the view that the statutory right to acquire the RTM overrode minor failures to comply with the procedures laid down under the Act.