Right to Manage claims: Supreme Court curbs landlords’ ability to challenge procedural errors

The Supreme Court has handed down an important decision for leaseholders seeking to exercise the right to manage (RTM), confirming that minor procedural errors will not necessarily defeat an otherwise valid claim. In Avon Freeholds Limited v Cresta Court E RTM Company Limited, the Court held that a landlord could not block an RTM claim solely because one qualifying tenant had not been served with a notice inviting them to participate in the RTM company before the claim was made.

The decision will be welcomed by leaseholders and RTM companies. It reduces the risk of landlords successfully challenging RTM claims based on technical procedural defects that have caused no prejudice and do not affect the RTM company’s substantive entitlement to acquire the right to manage.

What is the right to manage?

The right to manage, introduced by the Commonhold and Leasehold Reform Act 2002, allows qualifying leaseholders to take over the management of their building without having to prove fault on the part of the landlord.

Before commencing an RTM claim, the RTM company must invite qualifying leaseholders who are not already members of the company to participate. This is done by serving a Notice Inviting Participation (NIP). The legislation also requires that the RTM claim notice is not served until at least 14 days after the relevant participation notices have been given.

The dispute

The dispute arose from an RTM claim relating to a block of 20 flats in west London. Before serving its claim notice, the RTM company issued NIPs to the qualifying tenants it had identified. However, one qualifying leaseholder was inadvertently missed because their lease registration had not yet been completed at HM Land Registry.

Following service of the claim notice, that leaseholder joined the RTM company and supported the claim. No objection was raised regarding the failure to receive a NIP.

The landlord nevertheless argued that the omission was fatal to the RTM claim. After succeeding before both the First-tier Tribunal and Upper Tribunal, the RTM company lost in the Court of Appeal, which held that the failure to serve the participation notice rendered the RTM claim invalid.

The matter was then appealed to the Supreme Court.

The Supreme Court’s decision

Allowing the appeal, the Supreme Court unanimously held that the failure to serve a participation notice on a qualifying tenant did not invalidate the RTM claim and could not be relied upon by the landlord as a basis for opposing the RTM application.

Giving the leading judgment, Lord Briggs drew a distinction between:

• substantive conditions that determine whether an RTM company is entitled to acquire the right to manage; and
• procedural requirements governing how an RTM claim is advanced.

The court concluded that the requirement to serve participation notices is procedural rather than a substantive condition of entitlement. As a result, a failure to comply with that requirement does not automatically invalidate the claim.

The court also emphasised that:

• the legislation does not expressly state that a failure to serve a participation notice invalidates a claim;
• the omitted leaseholder suffered no prejudice and ultimately joined the RTM company;
• the landlord suffered no prejudice whatsoever from the omission; and
• Parliament cannot have intended procedural requirements to become “traps for the unwary” or opportunities for landlords to obstruct RTM claims.

In a particularly noteworthy passage, the court observed that permitting landlords to rely on such errors would effectively give them a windfall power to defeat RTM claims based on procedural breaches that were not intended for their benefit.

Why is this decision important?

The judgment provides helpful clarification on the circumstances in which procedural defects may be used to challenge RTM claims.

Historically, landlords have sometimes sought to resist RTM applications by identifying technical defects in the claim process. The Supreme Court’s decision confirms that not every procedural error will be capable of defeating a claim. Instead, the focus should be on whether the RTM company satisfies the substantive statutory conditions required to acquire the right to manage.

The decision follows the Supreme Court’s earlier approach in A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd, where the court similarly adopted a practical approach to procedural defects in the RTM process.

What does this mean for landlords and leaseholders?

For leaseholders and RTM companies, the decision should provide greater confidence that an RTM claim will not automatically fail because of an administrative oversight which causes no real prejudice.

However, RTM companies should not view the judgment as a licence to disregard statutory procedures. Procedural requirements remain important and may still be enforceable through other mechanisms under the legislation.

For landlords, the scope for challenging RTM claims on purely technical grounds has narrowed. Future disputes are likely to focus on whether the RTM company genuinely satisfies the statutory qualification criteria, rather than whether every procedural step was completed perfectly.

How we can help

Our residential estates team regularly advises leaseholders, landlords and RTM companies on right to manage claims, collective enfranchisement and wider leasehold management issues. If you would like advice on exercising or responding to an RTM claim, please get in touch with a member of our team.