‘Elim Court’ & Right to Manage – How wrong is right?


Mark Chick highlights a recent Right to Manage case which illustrates how wrong you can get it, but still get it right?

Serving notices has always been a tricky business. The emphasis in legal terms on getting it right is a balancing act between what ‘black letter’ compliance might demand and that which the reasonable layperson might expect common sense commerciality to dictate.

The case of Elim Court (Elim Court RTM Company Limited v Avon Freeholds Limited [2017] EWCA Civ 89) is very interesting, as it really does seem to push the envelope of how wrong you can get it, yet still get it right.

Elim Court concerns RTM and so you might argue that different policy considerations apply – this is a ‘no fault’ right to take over the management after all – any failure in the process can be corrected by serving another notice and here are no economic consequences for the landlord, as unlike in enfranchisement cases, no property interests are changing hands.

However, I think that this case may well be seized upon as a ‘get out of jail free’ card by those next affected by issues of validity in their notices.

The Issues

During the RTM process a notice must be given to the tenants as to where a copy of the articles of association of the company may be inspected. Three days for inspection must be nominated of which at least one must be a Saturday or Sunday. In Elim Court three days were specified, but none was a Saturday or Sunday.

The court held that the non-compliance with the requirements of the legislation was a trivial failure and would not of itself invalidate the RTM process.

Similarly, for RTM, the notice must be signed on behalf of the company. An issue arose as to whether it had been signed by an authorised member or officer. The notice was in fact signed by an individual (a member) but whose status was unclear as he had signed under a stamp that said ‘RTMF Secretarial’

The court held, nonetheless, despite the confusion the notice had been validly signed.

Lastly, the notice had not been served on an intermediate landlord – a strict requirement of the RTM legislation. The intermediate landlord in question owned a single ‘reversionary’ head lease over one flat only. This secured an equity release scheme. Accordingly, because the intermediate landlord had no direct management responsibilities the court decided that service could be dispensed with.

The Law

The previous case law (Mannai) has focused on the ‘reasonable recipient’ test and an emphasis on whether the notice complied or not with a mandatory obligation under statute.

However, this moved on in the 2014 Court of Appeal case of Natt v Osman. The test now is whether parliament would have intended that failure to comply would have invalidated the exercise of the right in question.

Comment

Elim may well be confined to its facts – as an RTM case and it is certainly true that RTM has ‘just got easier.’ Will it make a difference in enfranchisement? – We will have to wait and see.

Mark Chick is a Partner and Head of the Landlord & Tenant team here at Bishop & Sewell LLP. To discuss any of the issues raised in this article or leasehold matters generally, please email leasehold@bishopandsewell.co.uk or by telephoning 020 7631 4141 and asking to speak to a member of Landlord & Tenant team.


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