Kaleidoscope Apartments, 265-267 Lordship Lane, London SE22 8JG LON/00BE/LRM/2021/0026

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case No LON/00BE/LRM/2021/0026

Between

Kaleidoscope Apartments RTM Company LimitedApplicant

Assethold LimitedRespondent

Before

Judge Robert Latham

Ian Holdsworth FRICS

The Leasehold Advice Centre (Ref2916) for the Applicant

Scott Cohen Solicitors for the Respondent

Date 7 January 2022

Property: Lordship Lane, London SE22 8JG

Type of application: Right to manage

DECISION

Covid-19 pandemic: description of hearing This has been a remote video hearing which has not been objected to by the parties. The form of remote hearing was P: PAPERREMOTE. A face-to-face hearing was not held because it was not practicable and all issues could be determined in a remote hearing. Neither party requested an oral hearing. The Applicant has provided a Bundle of Documents which extends to 266 pages. Decisions of the Tribunal(1) The Tribunal determines that the Applicant complied with the statutory requirement to serve a Notice to Claim a Right to Acquire the Right to Manage as required by section 78 of the Commonhold and Leasehold Reform Act 2002.

(2) The Tribunal determines that on 5 September 2021, the Applicant was entitled to acquire the right to manage the premises pursuant to section 84(5)(a) of the Act, and the Applicant will acquire such right within three months after this determination becomes final.

(3) The Tribunal determines that the Respondent shall pay the Applicant £100 within 28 days of this Decision, in respect of the reimbursement of the tribunal fees paid by the Applicant. The Application

[1]On 22 July 2021, the Applicant issued this application under section 84(3) of the Commonhold and Leasehold Reform Act 2002 ("the Act") for a decision that, on the relevant date, the Applicant RTM company was entitled to acquire the Right to Manage in relation to premises known as Kaleidoscope Apartments, 265-267 Lordship Lane, London SE22 8JG (“the Premises”). Kaleidoscope Mansions is a three storey building with 9 self-contained flats.

[2]By a Claim Notice dated 21 April 2021, the Applicant gave notice that it intended to acquire the Right to Manage the Premises on 5 September 2021.

[3]By a Counter Notice dated 2 June 2021 the Respondent freeholder disputed the claim, alleging that the Applicant had failed to establish compliance with section 79(5) of the Act.

[4]The Application was accompanied by a Statement of Facts and Further Particulars (at p.14). The Applicant asserted that the Respondent had acted frivolously and vexatiously in opposing the application. Upon receipt of claim notice, on 28 April (at p.136), the Respondent had requested extensive documentation. On 5 May, the Applicant had provided this (at p.137-240).

[5]On 23 June 2021, the Tribunal gave Directions. The Procedural Judge identified the issue to be decided, namely whether on the date on which the notice of claim was given, the Applicant was entitled to acquire the Right to Manage (“RTM”) of the premises. The Judge was satisfied that this matter could be determined on the papers. Neither party has requested an oral hearing. The Judge directed that the application form and the supporting documentation should stand as the Applicant’s Statement of Case. Pursuant to the Directions, the parties have filed the following:(i) The Respondent’s Statement of Case (at p.20-47).

(ii) The Applicant’s Reply (at p.57-266). This has been drafted by Mr Stan Gallagher (Counsel).

(iii) A Bundle of Documents (266 pages).

[6]The Respondent resists this RTM application under section 79(5) of the Act on the ground that on 21 April 2021, when the Claim Notice was served, the RTM Company did not include the requisite number of qualifying tenants, namely at least half of the flats in the premises. This is a surprising submission, given that the Applicant contends that the tenants of all nine flats were members of the RTM Company. The Law

[7]Chapter 1 of Part 2 of the 2002 Act provides for an RTM company to acquire the right to manage premises to which the Chapter applies if the following conditions are satisfied:(i) The premises must be a self-contained building or part of a building, with or without appurtenant property which contains two or more flats held by qualifying tenants (section 72).

(ii) The RTM company must be a company limited by guarantee whose objects include the acquisition and exercise of the right to manage the premises in question (section 73(2)).

(iii) At the date of service of the claim notice the members of the RTM company must be at least two in number and must be qualifying tenants of at least half of the flats in the premises (section 79(4)-(5)).

(iv) At least 14 days before serving the claim notice the RTM company must have served a notice of invitation to participate on all qualifying tenants who are not members of the RTM company and have not agreed to become a member (section 78(1)).

(v) A claim notice must be served on the landlord under a lease of the whole or part of the premises, any third party to such a lease, and any appointed manager (section 79(6)).

(vi) By section 84(1) a person who receives a claim notice may give a counter notice disputing the RTM company's entitlement to acquire the right to manage the premises.

[8]The Respondent relies on one ground in opposing this application, namely that the Applicant has failed to comply with section 79(5) of the Act. Section 79 provides (emphasis added): “(1) A claim to acquire the right to manage any premises is made by giving notice of the claim (referred to in this Chapter as a “claim notice”); and in this Chapter the “relevant date”, in relation to any claim to acquire the right to manage, means the date on which notice of the claim is given. (2) The claim notice may not be given unless each person required to be given a notice of invitation to participate has been given such a notice at least 14 days before. (3) The claim notice must be given by a RTM company which complies with subsection (4) or (5). (4) If on the relevant date there are only two qualifying tenants of flats contained in the premises, both must be members of the RTM company. (5) In any other case, the membership of the RTM company must on the relevant date include a number of qualifying tenants of flats contained in the premises which is not less than one-half of the total number of flats so contained. (6) The claim notice must be given to each person who on the relevant date is—(a) landlord under a lease of the whole or any part of the premises,

(b) party to such a lease otherwise than as landlord or tenant, or

(c) a manager appointed under Part 2 of the Landlord and Tenant Act 1987 (c. 31) (referred to in this Part as “the 1987 Act”) to act in relation to the premises, or any premises containing or contained in the premises. (7) Subsection (6) does not require the claim notice to be given to a person who cannot be found or whose identity cannot be ascertained; but if this subsection means that the claim notice is not required to be given to anyone at all, section 85 applies. (8) A copy of the claim notice must be given to each person who on the relevant date is the qualifying tenant of a flat contained in the premises. (9) Where a manager has been appointed under Part 2 of the 1987 Act to act in relation to the premises, or any premises containing or contained in the premises, a copy of the claim notice must also be given to the tribunal or court by which he was appointed.”

[9]In Elim Court RTM Co Ltd v Avon Freeholds Ltd

[2017] EWCA Civ 89

;

[2018] QB 571

, the Court of Appeal noted that the Government’s policy was that the RTM procedures should be as simple as possible to reduce the potential for challenge by obstructive landlords on purely technical grounds and that the legislation should be construed having regard to this legislative intent.

[10]The Respondent has referred us to the Upper Tribunal decision in Southall Court Residents Ltd v Buy Your Own Freehold Ltd LRX/124/2004. We highlight the following passage of the judgement of HHJ Reid QC at [9]: “In order for a person other than a subscriber to be a member that person must(a) have agreed to become a member and

(b) had their name entered in the register of members: see section 22(2) of the Companies Act 1985. Those two requirements are cumulative: see for example Nicol’s case

(1885) 29 Ch D 421

, Re a Company

[1986] BCLC 391

at 393 per Hoffmann J and National Westminster Bank v IRC

[1995] 1AC 119

at 127B per Lord Templeman.”

[11]The Applicant has referred the Tribunal to the following provisions of the Companies Act 2006. Section 112 provides for “the Members of a Company”: “(1) The subscribers of a company’s memorandum are deemed to have agreed to become members of the company, and on its registration become members and must be entered as such in its register of members. (2) Every other person who agrees to become a member of a company, and whose name is entered in its register of members, is a member of the company.”

[12]Section 113 provides for the “Register of members”: “(1) Every company must keep a register of its members. (2) There must be entered in the register:(a) the names and addresses of the members;

(b) the date on which each person was registered as a member, and

(c) the date at which any person ceased to be a member. …. (7) If a company makes default in complying with this section an offence is committed by (a) the company, and (b) every officer of the company who is in default. (8) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.”

[13]Section 114 provides for that “the Register to be kept available for inspection”: “(1) A company's register of members must be kept available for inspection–(a) at its registered office, or

(b) at a place specified in regulations under section 1136”. The Facts

[14]On 18 September 2020, the Applicant RTM Company was incorporated (p.248). Five of the qualifying tenants were subscribers of the RTM Company, including Mr Lewis Thorn, the tenant of Flat 3. The Memorandum and Articles of Association are at p.82-100. Article 26 (at p.92) provides for qualifying tenants to become members of the RTM Company. The directors may specify how an application may be made. Article 26(6) provided that upon being satisfied as to a person’s application and entitlement to membership, the directors shall register such person as a member of the RTM Company.

[15]Mr Thorn decided to sell his flat. On 13 October 2020, he resigned as a member of the Company. On 27 November, Wai Leong Chak and Yun Lun Cheng bought the flat. On 2 December (at p.253) their interest was registered. On 1 April 2021 (p.43), they applied to be members of the RTM Company. On the same day (p.30), their names were recorded on the Register of Members.

[16]On 21 April 2021 (at p.104), the Leasehold Advice Centre, acting for the Applicant served its Claim Notice on the Respondent. The Claim Form, in the prescribed form, specified that the nine tenants were all both qualifying tenants and members of the RTM Company. Particulars of their leases were provided. It is common ground that they were all qualifying tenants.

[17]On 28 April 2021 (p.136), Scott Cohen, the Respondent’s Solicitor, asked the Applicant to provide information to enable them to make a full assessment of the claim. The information sought comprised the following documents:(a) up-to-date Land Registry office copy entries for each of the qualifying tenants;

(b) a copy of the register of members and confirmation of its location;

(d) copies of the notices of invitation to participate and letters enclosing the same;

(e) a copy of the Articles of Association of the company;

(f) copies of any applications for membership of the company.

[18]On 5 May 2021 (p.137-160), the Respondent provided this information. A copy of the Register of the RTM Company Members was provided (at p.159-160). This confirmed that the nine qualifying tenants were all members of the RTM Company on the date that the Claim Notice was served. All had been served with the Claim Notice (p.185).

[19]On 2 June 2021 (at p.241), the Respondent served its Counter Notice disputing the claim on the ground that the Applicant had failed to establish compliance with section 79(5) of the Act.

[20]On 19 July 2021 (p.244), the Leaseholder Advice Centre responded asserting that the requirements of section 79(5) were satisfied. The Notice and Register of Members clearly stated that all nine qualifying tenants were members of the Applicant RTM Company. The Respondent was asked to confirm that it now admitted that there was no valid opposition to the claim and that the Applicant would not be put to the unnecessary expense of making an application to this tribunal.

[21]The Respondent did not reply to this letter. On 21 July 2021 (at p.247), the Leasehold Advice Centre sent a further email seeking a response. No response was received. The Tribunal’s Determination

[22]The Respondent’s grounds for opposing the application are at p.20-22, with supporting documentation at p.23-47. The Respondent accepts that it has been provided with a Register of the Company Members. However, it suggests that the members have not been registered in accordance with the RTM Company’s Articles of Association.

[23]We accept the submissions made by the Applicant that the Register of Members is prima face evidence of the membership of the RTM Company. The Company is under a duty to maintain it. There are criminal penalties under section 113 of the Companies Act 2006 if the Register is not accurately maintained. Third parties are entitled to rely on it. Under section 112(1), the original five subscribers are deemed to have agreed to have become members of the RTM Company. Section 112(2) provides that every other person (i.e. non-subscribers) who agrees to be a member and whose name is entered on the Register is a member of the RTM Company.

[24]The point taken by the Respondent is wholly without merit. All nine qualifying tenants are anxious to take over the management of their flats. The Respondent has adduced no evidence to contradict this. On the contrary, the Applicant was obliged to serve a copy of the Claim Notice on the nine qualifying tenants. This asserted that they were all qualifying tenants and members of the RTM Company. None have disputed the accuracy of the facts stated in the Claim Notice.

[25]In the light of this, the Tribunal would not have required the Applicant either to disclose or to prove its Register of Members. The approach adopted by the Respondent has merely delayed the outcome that the tenants sought to achieve and has significantly increased the cost of their endeavour. It has used the Register of Members in a hopeless attempt to trip up the tenants in their attempt to secure the management of their flats. All the tenants are united in the outcome that they seek to achieve.

[26]Despite the primary position taken by the Applicant, Mr Gallagher has also addressed the technical arguments raised by Respondent. He suggests, understandably given the stance taken by the Respondent, that it may be cheaper/less expensive to supply the evidence, rather than focus on the purely technical approach adopted by the Respondent.

[27]The Applicant has therefore provided evidence of how each qualifying tenant applied to be a member of the RTM Company. Section 75(7) of the Act provides that where a flat is being let to joint tenants under a long lease, the joint tenants shall be regarded as jointly being the qualifying tenant of the flat.(i) Flat 1: Elizabeth Davis – original subscriber.

(ii) Flat 2: John and Annwen Rigby: On 7 September 2020 they applied to be members (p.234 and 235). On 18 September 2020 they were recorded on the Register.

(iii) Flat 3: Wai Leong Chak and Yun Lun Cheng bought: On 1 April 2021, they applied to be members (p.43 and 44). On the same date they were recorded on the Register.

(iv) Flat 4: Vishal Parekh – original subscriber.

(v) Flat 5: Mark Evans and Katie Weavers: On 17 September 2020 Mark Evans applied for the joint tenants to be members (p.236). On 18 September 2020, they were recorded on the Register. On 6 October 2020 (p.237), Katie Weavers confirmed that Mr Evans had her authority to make this application.

(vi) Flat 6: Christopher and Jennifer Chapman: Their undated application is at p.238. On 18 September 2020, they were recorded on the Register. (vi) Flat 7: Cynthia Rousselot – original subscriber. (viii) Flat 8: James Hamerton – original subscriber. (iv) Flat 9: Therese Davis and Louise Ashley: On 8 September 2020 they applied to be members (p.239 and 240). On 18 September 2020 they were recorded on the Register.

[28]The Tribunal is satisfied that this exercise of identifying the date on which each of the qualifying tenants applied to be members of the RTM Company and the date on which they were registered has not been necessary. The Tribunal is entitled to rely on the Register of Members. Further, in the absence of any evidence to contradict the Register, the Respondent was also obliged to do so. The approach adopted by the Respondent in response to this application has been purely technical and without any substantive merit. It has generated a Bundle of Documents of 266 pages and has merely increased the costs relating to this application. This is not what Parliament intended when this legislation was enacted. Costs

[29]In its application, the Applicant applies for a refund of the fees of £100 that he had paid in respect of the application pursuant to Rule 13(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. In the light of our decision, the Tribunal orders the Respondent to refund any fees paid by the Applicant within 28 days of the date of this decision. This is normally a no costs jurisdiction. However, if any party is minded to make an application under Rule 13(1)(b) of the Tribunal Rules, this must be made within 28 days of notification of this decision (Rule 13(5). Conclusion

[30]The Tribunal determines that the Applicant was on the relevant date entitled to acquire the right to manage the premises pursuant to section 84(5)(a) of the Act.

[31]In accordance with section 90(4), within three months after this determination becomes final the Applicant will acquire the right to manage these premises. According to section 84(7): “(7) A determination on an application under subsection (3) becomes final—(a) if not appealed against, at the end of the period for bringing an appeal, or

(b) if appealed against, at the time when the appeal (or any further appeal) is disposed of.” Judge Robert Latham 7 January 2022 Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case. The application for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the person making the application. If the application is not made within the 28 day time limit, such application must include a request for an extension of time and the reason for not complying with the 28 day time limit; the tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed, despite not being within the time limit. The application for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party making the application is seeking. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).