“Right to Manage” case heard at the Supreme Court

On Friday 16^th August 2024, the Supreme Court handed down its judgment in the case of A1 Properties Ltd v Tudor Studios.  The case centred on the “Right to Manage” process under the Commonhold and Leasehold Reform Act 2002.

That law allows leaseholders of qualifying buildings to take over the management of their building, subject to meeting certain qualifying criteria and subject to following the procedure set out in the law.  Part of that procedure is that the participating leaseholders must set up a Right to Manage Company, and the company must serve a claim notice on every person who is a “landlord under a lease of the whole or any part of the premises”.

In this case, the building was a converted factory, now used as student accommodation. It consisted mostly of small bedit “study studios,” with some communal areas, including a common room, gym, and laundry.

The Right to Manage Company served the claim notice on the freeholder and management company under the “study studio” leases but failed to serve it on A1 Properties (Sunderland) Ltd, a landlord under four leases of the common areas.

Although the law said that all landlords must be served with the claim notice, it did not expressly say what happened if they were not.  A question for the court was whether failure to serve all landlords would invalidate the whole process and mean that the Right to Manage Company had not, in fact, acquired the Right to Manage.

A1 Properties argued that the fact it was not served with the claim notice meant the claim as a whole was invalid and that the Right to Manage Company would need to re-serve the notices again in order to re-start the process.  The Right to Manage Company argued that the failure to serve A1 Properties did not invalidate the whole process, particularly because A1 Properties had no actual management responsibilities under their leases.

The court considered various points, including that the law was brought in in order to give power to leaseholders to take control of the management of their building.  In circumstances where the law had not specifically stipulated that a particular failure or breach would invalidate the process, they felt there was no reason to conclude that parliament intended that to be the case.  They were also mindful that this would provide an avenue for landlords to take advantage of procedural omissions, even those of which the landlord has not actually suffered as a result.

To that end, the court considered the question of whether the procedural failure to serve A1 Properties had deprived them of an opportunity to have their opposition to the process heard.  Given that the Right to Manage process is not one that a landlord can actually oppose other than on technical grounds, the court was swayed by the fact that, had A1 Properties been served with the notice, unless they had a substantive objection, they could have raised, there is nothing they could have done to stop the process going ahead.  The court, therefore, concluded that in not being served, they had “lost nothing of significance”.

The court concluded that the Right to Manage claim was not invalidated due to the failure to serve A1 Properties and that the Right to Manage Company had acquired the right to manage the building.

It’s rare for a case like this to go all the way to the Supreme Court.  The easier and quicker route would have been for the Right to Manage Company to simply re-serve the claim notice on all landlords; however, in taking the question all the way to the Supreme Court, it has set an important precedent, both for Right to Manage claims, and indeed for other legal processes.  Other cases will of course be decided on their own facts, but this is now a strong authority for the position that a procedural omission, where no loss is caused, does not necessarily invalidate the whole process.

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