Flat owners fighting to replace expensive or unresponsive management companies in their blocks have won a case in the UK’s highest court that strips freeholders of a powerful tool to derail resident-led takeovers.
The Supreme Court on Thursday ruled in favour of a group of London leaseholders who were prevented from taking control of their building’s management due to a minor technicality.
Property lawyers said the precedent-setting decision, which overturns an earlier judgment from the Court of Appeal, should facilitate other “right to manage” attempts by residents unhappy with how their blocks are run.
The case is part of a wider legal and policy battleground over the feudal-era leasehold system, which affects most flats in England and Wales. The regime has been criticised for exposing flat owners to high service charges and shoddy repairs.
The right to manage, introduced in 2003, gives leaseholders powers to remove the freeholders’ management company, but lawyers said the process could be costly and onerous for flat owners.
In the case before the Supreme Court, an attempt by leaseholders at Cresta Court in west London to seize management control was thwarted because they failed to send “invitation to participate” paperwork to one resident, who had recently purchased the flat.
Formal records of the property transfer were unavailable due to Land Registry backlogs.
Even though the resident supported the takeover, the freeholder claimed the missed paperwork meant the entire process was legally void.
Its lawyers argued that residents seizing control of a building amounted to a forced transfer of property rights, so strict compliance was required.
Property tribunals heard the dispute initially and sided with the leaseholders, but the Court of Appeal last year agreed with the freeholder that the right to manage claim was invalid.
A panel of five Supreme Court judges, including president Lord Reed, on Thursday overturned that decision, ruling that minor technicalities should not invalidate takeover attempts.
“There is no reason to assume that the [right to manage] scheme was intended to provide for the draconian sanction of invalidity of the claim notice for every procedural breach,” they said in a summary of the judgment.
Mark Foxcroft, partner at law firm Devonshires, said the Court of Appeal’s decision had “created a powerful tool for landlords” to invalidate residents’ attempts to gain control of their building management.
He said: “Technical challenges to right to manage claims by landlords — especially in larger blocks — have been on the rise. This clarity from the Supreme Court, without doubt, makes such challenges much less likely in the future.”
Harry Scoffin, founder of campaign group Free Leaseholders, said: “The Supreme Court has delivered a victory for common sense by siding with captive leaseholders seeking to exercise their statutory right to manage so they can gain rightful control of their homes, money and lives.”
But he said there was more to be done, including lowering the threshold to 20 per cent for the proportion of residents needed to successfully mount a takeover.
“Right to manage still requires leaseholders to perform somersaults, most absurdly through the requirement for 50 per cent upfront membership of an RTM company, which punishes those in big blocks, retirement homes, buildings where freeholders own flats, or where there are many uncontactable or overseas owners.”
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