Appeal Court offers insight into leasehold law on right to manage

The Court of Appeal has provided a helpful insight into how to deal with failures to comply with the right to manage procedure set out in the Commonhold and Leasehold Reform Act 2002.

The issue arose in a case involving Eastern Pyramid Group Corp SA v Spire House RTM Co Ltd.

The RTM company had served a claim notice seeking to exercise the right to manage one of Eastern’s buildings.

Eastern served a counter-notice asserting that the first notice did not comply with the 2002 Act.

The RTM company withdrew the first notice under s.86 and served a second claim notice correcting the defects. It notified the qualifying tenants about the withdrawal of the first claim notice, and served a copy of the second claim notice a day after serving those documents on the landlord.

However, by virtue of s.86, the notice of withdrawal was to be given to the landlord and qualifying tenants at the same time. The landlord maintained that the withdrawal of the first claim notice was therefore ineffective, meaning that the second claim notice was invalid under s.81 because the first was still in force.

The Upper Tribunal found that the failure to serve the qualifying tenants with the notice of withdrawal on the same date as the landlord was a breach of the Act but was not fatal.

The Court of Appeal upheld that decision and in doing so summarised the law in such cases. These are the key points.

• The fundamental question was the role and importance of the relevant step in the context of the procedure. Thus, if the scheme required information, there was a difference between missing information of critical importance, and missing ancillary information. There might also be a distinction between jurisdictional requirements on the one hand and purely procedural requirements on the other.

• Useful pointers were whether: (a) the step was provided for in particular terms in the statute or only in general terms; (b) the requirement was in the primary legislation or in subordinate legislation; (c) the person taking the step could immediately do it again if the impugned attempt was invalid.

• While there was force in the point that landlords needed certainty, that could not be carried too far because that would mean any deviation from what was prescribed would invalidate the whole procedure, and that was not the law.

• The legislator could be taken to have assumed that the courts would take a realistic and pragmatic approach in determining the significance of different steps in a procedural scheme laid down by statute. A result that was impractical or unrealistic was unlikely to be what was intended.

Please contact us if you would like more information about the issues raised in this article or any aspect of commercial property law.

Eastern Pyramid Group Corp SA v Spire House RTM Co Ltd
Court of Appeal (Civil Division)
9 November 2021
[2021] EWCA Civ 1658
Peter Jackson LJ;
Coulson LJ;
Birss LJ