Supreme Court gives guidance on errors in statutory notices concerning property

The Supreme Court has adopted an analytical approach to errors in statutory notices which firstly requires consideration of the purpose of the requirement in the relevant statute and secondly consideration of whether any prejudice would be caused by affirming the validity of a notice, which would otherwise be invalid for breaching a procedural or statutory requirement.

Facts

The decision in A1 Properties (Sunderland) Limited v. Tudor Studios RTM Company Limited [2024] UKSC 27 concerned service of a notice of claim to acquire the right to manage under the Commonhold and Leasehold Reform Act 2002 (“CLARA 2002”) by Tudor Studios RTM Company Limited (“Tudor Studios”). Under the legislation, Tudor Studios were required to serve a notice of claim on each person who is a landlord under a lease of the whole or part of the premises. However, Tudor Studios did not serve the notice of claim on A1 Properties (Sunderland) Limited (“A1 Properties”) who held 4 leases of the common parts.  One of the reasons that they were not served is because they did not have any management responsibilities in relation to those leases because they had underlet the areas to the Management Company which was responsible for the whole estate.

The Management Company served a Counter-Notice objecting to Tudor Studios acquiring the right to manage because it had not served the claim notice on A1 Properties. The RTM Company applied to the FTT to obtain a determination that it was entitled to acquire the right to manage and the FTT joined A1 Properties to the proceedings. The FTT considered it was bound by a Court of Appeal decision in Elim Court RTM Co Limited v. Avon Freeholders Limited [2017] EWCA Civ 89 which had decided that trivial defects should not invalidate a claim and determined that the failure to serve A1 Properties did not invalidate the claim notice. A1 Properties appealed to the Upper Tribunal (Lands Chamber), but their appeal failed. The UT considered it made no difference whether the failure to serve A1 Properties was accidental or deliberate and upheld the FTT decision that the notice of claim was not invalid.

Decision

The matter was then leapfrogged to the Supreme Court, which unanimously upheld the acquisition of the right to manage by Tudor Studios. They considered that the failure to serve the claim notice on A1 Properties did not invalidate the transfer of the right to manage.

Approach

The Supreme Court considered that the first question to review was whether Parliament intended that an act done in breach of the provision should invalidate the notice, with an emphasis on the consequences of non-compliance.

It was necessary in each case to focus on:

1. The purpose served by the statutory requirement as assessed in light of a detailed analysis of the particular piece of legislation;
2. The specific facts of the case having regard to whether any prejudice might be caused if the validity of the statutory process is affirmed even though there has been a breach of a procedural requirement.

 Applying these tests to the current facts, the Supreme Court noted the absence of an express statement in CLARA 2002 as to the consequences of not serving the claim notice on the intermediate landlord. There was a separate mechanism for dealing with a situation where a landlord could not be identified but that did not apply here because the RTM Company could and should have identified A1 Properties as the intermediate landlord of 4 leases of the common parts and served the notice of claim on them.

The Supreme Court decided that the failure to give the claim notice to A1 Properties, as a landlord who could be identified, made the transfer of the right to manage voidable but not automatically invalid from the outset. The transfer of the right to manage was therefore voidable unless and until the Tribunal approved it.

In this case, the Supreme Court gave particular weight to the fact that A1 Properties had been joined to the proceedings by the FTT and had already had an opportunity to object to the acquisition of the right to manage notwithstanding they were not served with the notice of claim. Therefore, A1 Properties had not suffered any prejudice as they’d had the opportunity to participate and there was no substantive objection which they could have raised.

Implications

At first sight the decision is helpful in providing a test to be applied where there are errors in a statutory notice concerning property.  The decision is a move away from the “trivial defects” approach in Elim Court. However, further decisions are likely to be needed to clarify how a notice which is voidable is approved by the Court or Tribunal as otherwise this may lead to more litigation where parties require “sign-off” for any incident of non-compliance.  It also highlights the importance of complying with all statutory requirements when serving property notices to avoid issues arising in the first place. However, if a notice contains errors, the fact that the recipient will not suffer prejudice if the notice was considered to be valid, assuming that the statute does not specify the consequence of making an error or strongly indicate strict compliance is required, is likely to lead to a conclusion that the notice is not invalidated by the error.