Take notice of these decisions

The Supreme Court decision in A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd [2024] UKSC 27 may be one of the most significant property law decisions of this year. In summary, the Supreme Court held that the failure to serve a claim notice on an intermediate landlord of communal areas did not invalidate an RTM claim in circumstances where that party could still present its arguments opposing the right to manage.

In doing so, the Supreme Court held that, where a statute does not impose a clear sanction for failure to comply with part of a statutory process, the correct approach is to consider whether Parliament would have intended such non-compliance to invalidate the process.

The potential scope and application of this decision have now been considered by two cases in the Upper Tribunal (Lands Chamber), Zdravka Ivanova Atesheva v Halifax Management Limited [2024] UKUT 314 (LC) and Avon Freeholds Limited v Cresta Court E Rtm Company Ltd [2024] UKUT 335 (LC)

Atesheva v Halifax Management Ltd [2024] UKUT 314 (LC)

The case concerned a tenant’s challenge to a rent increase under s.13 of the Housing Act 1988 (“the 1988 Act”). The landlord served a s.13 notice on the tenant on 20 December 2023, increasing the rent from £1,900 per month to £2,400 from 1 February 2024. The landlord’s notice was in the prescribed form and the required guidance notes setting out the tenant’s rights. On 31 December 2023, the tenant emailed the First Tier Tribunal seeking to challenge the rent increase. The email did not attach a tenant’s s.13 notice in the required form and did not include key information required by such a notice. The tenant received an automated reply telling the tenant not to chase a response before 22 January 2024. Due to the delays in the Tribunal, a Case Officer did not contact the tenant until 7 February 2024, when the Case Officer told the tenant of the need for the correct form.

Whilst the tenant provided the form on the same day, this was now out of time. The FTT therefore held it did not have jurisdiction to consider the challenge to the rent increase.

On appeal, Martin Roger KC first held that the email sent by the tenant was not “substantially to the same effect” as that required by s.13 and the associated Regulations. However, he went on to consider the effect of A1 Properties. Whilst recognising the s.13 procedure relates to the landlord’s property rights, Martin Roger KC also noted that the requirement for the tenant’s notice related to access to justice. He held that whilst Parliament may well have intended for the timing of the application to be strictly applied, he also held that it was much more difficult “to imagine that Parliament intended that any departure from the prescribed form would be fatal to an application made in good time” or to make it too difficult for a tenant to challenge a unilateral rent increase. The Upper Tribunal therefore held that the FTT should have considered the challenge to the rent increase based on the tenant’s email of 31 December, notwithstanding that the prescribed notice was not served until after the deadline imposed by s.13.

Comment

It is not hard to sympathise with the tenant in this case: had the Tribunal responded in accordance with the timeline set out in its automated email, the tenant would have been told to complete the required form within time.

However, the decision appears to significantly relax the procedural requirements for tenants wishing to challenge rent increases under s.13. Further, the fact-specific nature of the test in A1 Properties will reduce certainty for landlords and may lead to satellite litigation in each case on whether the Tribunal can consider the rent challenge.

The promised abolition of ‘no fault evictions’ will likely increase the use of s.13 in the coming years, making the precise scope of Atesheva and the ability to save procedural non-compliance by tenants all the more important.

Avon Freeholds Limited v Cresta Court E Rtm Company Ltd [2024] UKUT 335 (LC)

This case related to the right to manage scheme under the Commonhold and Leasehold Reform Act 2002. The RTM company had served Notices Inviting Participation on all registered leaseholders. However, a Ms O’Connor had not been served with such a notice. Ms O’Connor held an equitable lease in her flat, having purchased a new long lease, but such lease not having been registered. The freeholders challenged the validity of the RTM Company’s subsequent Claim Notice on the grounds that Ms O’Connor was a ‘qualifying tenant’ and therefore not all qualifying tenants had been served with Notices Inviting Participation.

The FTT held (i) Ms O’Connor was a qualifying tenant but (ii) the failure to serve her did not invalidate the Claim Notice.

Judge Cooke upheld the FTT’s decision on point (i), finding that Ms O’Connor was a qualifying tenant. However, in between the oral hearing and judgment, the Supreme Court decision in A1 Properties was handed down. Following written submissions, the Judge held that the failure to serve Ms O’Connor did not prevent the claim from continuing. The judge held that s.79(2) provides a clear sanction for failure to serve all qualifying tenants: the subsequent Claim Notice is not valid. However, Judge Cooke also held that it cannot have been Parliament’s intention to allow freeholders to take advantage of such technical non-compliance where it has not prejudiced the interest of the person affected (the tenant).

The Tribunal therefore found that the Claim Notice was only voidable, not void, and that only Ms O’Connor, not the freeholder, could challenge the validity. As Ms O’Connor had not done so, the Claim Notice remained valid.

Comment

This decision represents a seemingly significant extension to A1 Properties as the Tribunal stated that Parliament did impose a clear sanction, but departed from that sanction in any event.

It is understood that the Upper Tribunal granted permission to appeal Avon Freeholds on the A1 Properties point shortly before the publication of this article. We can therefore expect further consideration of the scope and effect of A1 Properties at some point in the New Year.

Article by Philip Marriott