Does a failure to serve notice of invitation to participate on the qualifying tenant invalidate the Right To Manage claim?
What is the right to manage (RTM)?
The RTM is the legal right that qualifying tenants of leasehold of flats have that enables them to collectively take over the management of their building from the freeholder through the formation of a company owned by tenants, known as an RTM company.
The RTM applies to premises which satisfy the criteria set out in section 72 of the Commonhold and Leasehold Reform Act 2002 (2002 Act) as amended by the Leasehold and Freehold Reform Act 2024 (2004 Act).
For a building to qualify for RTM, it must consist of a self-contained building or part of a building, with or without appurtenant property; it must contain two or more flats held by qualifying tenants; and the total number of flats held by such tenants must not be less than two-thirds of the total number of flats contained in the premises. Additionally, the non-residential area should not exceed 50% of the total internal floor area. This has increased from 3 March 2025 under 2004 Act from the original 25% limit.
The first step in the claim is to serve the notice of invitation to participate in the RTM claim on all relevant leaseholders. After the expiry of 14 days a notice of claim can be served on the landlord.
Avon Freeholds Ltd v Cresta Court E RTM Co Ltd
In a recent Court of Appeal decision in the case of Avon Freeholds Ltd v Cresta Court E RTM Co Ltd [2025] EWCA Civ 1016 it was considered whether the failure by the RTM Company to serve a notice of invitation to participate on the leasehold owner of the property whose lease was pending registration at the Land Registry invalidated the RTM claim.
The Upper Tribunal Decision
The Upper Tribunal held that the tenant was a qualifying tenant but concluded that the claim notice was still valid.
Court of Appeal Decision
The Court of Appeal has overturned the decision made by the Upper Tribunal. Two separate issues were considered.
The first issue was whether a tenant whose lease was pending registration was considered as a qualifying tenant. The Court of Appeal agreed with the Upper Tribunal decision that the tenant met the criteria for a qualifying tenant under 2002 Act, despite not being a registered legal owner of the property at the time the participation notice was served.
On the second issue whether a failure by the RTM Company to serve a participation notice on the qualifying tenant invalidated the RTM claim the Court of Appeal reversed the Upper Tribunal decision and held that section 79(2) of the 2002 Act clearly sets out the criteria whereby a failure to give a notice of invitation to participate to all qualifying tenants would invalidate the claim.
Conclusion
The case of Avon Freeholds Ltd v Cresta Court E RTM Co Ltd confirms that a leaseholder whose lease is not yet registered at the Land Registry would still be a qualifying tenant under 2002 Act. A failure to serve notice of invitation to participate on the qualifying tenant will invalidate the RTM claim, resulting in lost time and financial consequences for leaseholders.
The decision makes life difficult for those seeking to exercise the right as complete due diligence is needed on the title and it may be difficult to discover the details of completed but unregistered leases. As ever, expert advice is needed to ensure a successful outcome.
Contact our Litigation & Dispute Resolution Teams
Tatsiana Rao is an Associate Solicitor in the Litigation & Dispute Resolution team. Should you require any further advice or assistance, please contact us at litigation@bishopandsewell.co.uk or call her, on 0207 7079 2410.
The above is accurate as at 7 August 2025.
The information above may be subject to change. The content of this note should not be considered legal advice and each matter should be considered on a case by case basis.
The content of this note should not be considered legal advice and each matter should be considered on a case by case basis.
