The Court of Appeal (CoA) heard a case regarding the right to manage, as defined in the Commonhold and Leasehold Reform Act (CLRA) 2002.
Background:
The appellant, 159-167 Prince of Wales Right to Manage (RTM) Company Ltd. (RTM Co.), was formed in May 2021 by some of the flats' leaseholders with a view to taking over its management. The respondent, Assethold Ltd., is a company that, on October 10, 2019, purchased both the freehold and a 999-year headlease of the property.
The dispute arises from the fact that, when RTM Co. served its claim notice under Section 79 of the CLRA 2002 in June 2021, Millcastle rather than Assethold Ltd. was still the registered owner of the freehold and the headlease. RTM Co. addressed its claim notice to both Assethold Ltd. and Millcastle Properties Ltd. Assethold Ltd. then served a counter-notice under Section 84(1), contending that the legislation's requirements had not been met.
The appellant applied to the First-tier Tribunal (FTT) under Section 84(3) for a determination that it was entitled to manage the property but subsequently withdrew the application. Assethold Ltd. then unsuccessfully applied to the FTT for its costs under Section 88. The Upper Tribunal (UT) allowed the respondent's appeal. RTM successfully appealed to the CoA.
Decision:
The CoA held that a party named as the landlord in an RTM application was not entitled to recover its costs from the RTM company because it was not the registered freehold owner at the relevant time. Moreover, the Court ruled that the respondent was not a “landlord under a lease” for the purposes of Sections 79(6) and 88 of the CLRA. In its ordinary and natural meaning, a "landlord under a lease" means the landlord as a matter of law. As the freehold and headlease interest were not vested in the respondent, they were therefore not the legal owner.
Assethold's possession of equitable interests during the registration gap thus did not suffice for landlord status. This conclusion was in alignment with Section 112 CLRA and the Land Registration Act 2002.
Regarding the estoppel claim, the Court determined that Assethold did not exert any representation or create a common assumption that would bind RTM Co. to treat it as a landlord. The requirement for detrimental reliance was thus not met.
Implications:
This decision clarifies that, under the CLRA 2002, a landlord only refers to legal owners and not equitable ones. However, it should be noted that Section 88 of the CLRA is set to be repealed by Section 50(4) of the Leasehold and Freehold Reform Act 2024. However, this case still provides useful insights regarding the position of landowners within the registration gap. This judgement highlights the need for timely registration of property interests to make any gap in registration as small as possible and thus avoid similar situations.
It also demonstrates the need for specific evidence for a claim in estoppel to be successful. This decision now makes it clear that relying on procedural actions to establish landlord status is not sufficient for an estoppel.