In its 16 August 2024 judgment in A1 Properties (Sunderland) Ltd v Tudor Studios RTM Company Ltd, the Supreme Court examined the Commonhold and Leasehold Reform Act 2002 regime for tenants to acquire the right to manage their rental premises and found that the failure to serve a required notice on a single landlord did not invalidate the procedure. Lord Briggs and Lord Sales wrote the judgment, which was joined by Lord Hamblen, Lord Leggatt, and Lord Stephens.

Chapter 1 of Part 2 of the Act sets out a regime under which qualifying tenants in a block of flats can form a company (a RTM company) to acquire the right to manage the properties. One of the steps required is to serve a claim to acquire the right to manage (a claim notice) on each person who is a “landlord under a lease of the whole or any part of the premises”, together with certain other stakeholders. It is not always possible to identify and locate all stakeholders. The Act provides that a claim notice does not need to be served on a stakeholder where that person “cannot be found or [their] identity cannot be ascertained”, but unless at least one stakeholder is served, the RTM company will be required to apply to a tribunal to progress the acquisition of rights.

The parties at the Supreme Court agreed that the appellant was an intermediate landlord required to be served under the Act. They disagreed about the consequences of the respondent RTM company’s failure to serve the landlord. The Court dealt with both an abstract question and an applied one – first, does a failure to serve a stakeholder always invalidate the acquisition of the right to manage when other stakeholders are served; and second, did the failure of the respondent to serve the appellant in this case invalidate the acquisition of the right to manage.

These issues previously arose in Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89, which has been the highest authority on this question. In Elim Court, the RTM company served the freeholder but not an intermediate landlord. The Court of Appeal found the procedure was not invalidated, answering the abstract question in the negative, and finding that on those facts the intermediate landlord held no management responsibilities so the failure to serve had no impact on the procedure.

Lord Briggs and Lord Sales did not endorse Elim Court in full. They began with the premise that the correct approach is to ask whether Parliament intended that a failure to comply with a statutory provision prescribing some action to be taken would invalidate the underlying process. Contrary to the Court of Appeal’s decision in Osman v Natt [2014] EWCA Civ 1520 and relied on in Elim Court, that question is not answered by trying to fit the statutory requirement into a fixed category, but by looking “carefully at the whole of the structure within which the requirement arises and ask[ing] what consequence of non-compliance best fits the structure as a whole”. Here, the Act sets out a complex and comprehensive regime for the transfer of management rights that involves a significant disruption and change to existing contractual rights. Contrary to Elim Court, it is not sufficient to say that an intermediate landlord can be ignored simply because they do not have any management rights.

Examining the regime, the Court said that the Act makes provision for circumstances where it might be difficult or impossible to identify all stakeholders otherwise required to be served. In general, a stakeholder that cannot be known, identified, or located will have its interests protected by other stakeholders (where one is served) or the tribunal (where no one can be served), including because there are a limited number of objections that can be taken to a RTM company’s proposal to acquire the management rights. That, the Court said, is the “statutory price of invisibility”. But the justices considered two other scenarios that complicated the issue:

• Two landlords are required to be served, and can be identified/located, but only one is served. The served landlord does not object to the transfer of management rights, but valid objections exist that the non-served landlord would have wanted to raise.
• Three stakeholders are required to be served, all can be identified/located, but only two are served. The served stakeholders make objections that are determined to be invalid by the tribunal, and the non-served stakeholder has no additional valid objections that it could make.

In the first scenario, it appears unfair that the non-served landlord’s rights are lost without the opportunity to be heard by the tribunal. But in the second scenario, it appears unfair that non-compliance should result in invalidity when any objections the non-served stakeholder could have made have been determined to be bad.

The Supreme Court resolved this tension by finding a Parliamentary intention that “the failure [to serve] renders the transfer of the right to manage voidable, at the instance of the relevant landlord or other stakeholder who was entitled to, but not given, a claim notice, but not void”. The voidability exists unless and until a tribunal approves the transfer scheme under one of the statutory routes for a RTM company to access the tribunal. If a non-served landlord wants to challenge a transfer, it would have to commence proceedings in the High Court for declaratory relief or seek judicial review of the tribunal’s decision, if there is one. In addition, delay or other unconscionable conduct by the non-served landlord could lead to the right to avoid being lost or refused.

In this case, the only objection made to the RTM company’s claim notice was that the appellant had not been served. But the appellant was joined as a party at the First-tier Tribunal, and had the opportunity to participate in that process. There was no unfairness, and all allowable objections that any party wished to make were fully ventilated. Accordingly, the Court agreed that the RTM company’s acquisition process was not invalidated by the failure to serve the appellant, and dismissed the appeal.

The Court’s judgment includes several broader points both under this specific statutory context and more widely:

• The test as to whether a stakeholder required to be served under the Act is “a person who cannot be found or whose identity cannot be ascertained” is an objective one.
• A party not impacted by a procedural omission in the Act regime is not entitled to rely on that omission as an objection to the transfer proposal.
• Both Elim Court and Osman v Natt must now be read subject to the Supreme Court’s judgment here, although neither was fully overruled or disapproved.
• The wider principle is a confirmation that where a statute does not specifically address the consequences of non-compliance with its requirements, the court should apply the analysis in R v Soneji [2005] UKHL 49; that is, it should determine what Parliament would have intended the consequences to be by examining the context of the statutory regime as a whole.

At the Supreme Court, the appellant was represented by Justin Bates KC and Harley Ronan, both of Landmark Chambers, and Brethertons LLP in Rugby. The respondent was represented by Winston Jacob of Lamb Chambers. The intervenor, the Association of Leasehold Enfranchisement Practitioners Ltd, was represented by Philip Rainey KC and Mark Loveday, both of Tanfield Chambers, and Bishop & Sewell LLP in London. The neutral citation is [2024] UKSC 27.