Supreme Court Judgment Summary
Factual and Procedural Background
Company A was the registered freeholder of a residential building in The City containing 20 flats. Company B was an RTM company formed by leaseholders to acquire the building’s right to manage under the Commonhold and Leasehold Reform Act 2002. [1]
Company B gave notices of invitation to participate (“NIPs”) to those it had identified as eligible qualifying tenants, but it did not give one to the Qualifying Tenant. The Qualifying Tenant subsequently joined Company B and supported its claim, but did so five days after Company B had served its claim notice on Company A. [2][3][4]
Company A served a counter-notice disputing Company B’s entitlement. The only surviving objection was that Company B had breached sections 78(1) and 79(2) of the 2002 Act by failing to give the Qualifying Tenant a NIP at least 14 days before serving the claim notice. [5][6]
Company B satisfied all substantive eligibility conditions, including the requirement that qualifying-tenant members represented at least half of the flats, but it had not complied with the two procedural requirements concerning the NIP. [7][8][6]
The First-tier Tribunal upheld Company B’s claim, and the Upper Tribunal agreed. The Court of Appeal reversed those decisions, holding that the failure rendered the claim notice void. Company B appealed to the Supreme Court. [9][10][11]
Legal Issues Presented
- Whether non-compliance with sections 78(1) and 79(2) of the 2002 Act invalidated Company B’s claim notice. [9][12][13][14]
- Whether a landlord may rely on those procedural breaches in a counter-notice as establishing that an RTM company is not entitled to acquire the right to manage. [15][16][17]
- Whether the statement in paragraph 69 of A1 Properties that no valid claim notice could be given following such non-compliance formed part of that decision’s ratio decidendi and was binding. [18][19][20][21]
Arguments of the Parties
Respondent’s Arguments
- Company A argued that section 78(1) required every eligible qualifying tenant to receive a NIP before service of the claim notice and that section 79(2) supplied the consequence of non-compliance: the purported claim notice was void. [12][13][14][22]
- Company A initially maintained that the notice was absolutely void, but later submitted that it could remain effective for procedural purposes while being void as a foundation for Company B’s substantive claim. [23][24][25][26]
- Company A submitted that the invalidity analysis was supported by paragraph 69 of A1 Properties and by an earlier description of the statutory scheme in Settlers Court. [18][19][20][27][28]
- Company A also contended that serving a claim notice before expiry of the 14-day period should have the same invalidating consequence as serving it before all required NIPs had been given. [29][30]
Appellant’s Position
- Company B sought a determination that its claim was well-founded notwithstanding its failure to give the Qualifying Tenant a NIP. [9]
- Its position was upheld by the First-tier Tribunal and Upper Tribunal but rejected by the Court of Appeal. [10][11]
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd [2024] UKSC 27; [2025] AC 1075 |
A procedural omission does not necessarily invalidate an RTM claim; the consequences depend particularly on whether a relevant party lost a significant opportunity or suffered disadvantage. |
The Court held that its earlier statement concerning sections 78(1) and 79(2) was not part of the ratio, while the decision’s broader reasoning supported Company B because neither Company A nor the Qualifying Tenant suffered relevant prejudice. [31][32][33][21][34][35][36] |
| R v Soneji [2005] UKHL 49; [2006] 1 AC 340 |
Where legislation does not expressly state the consequences of procedural non-compliance, the court determines Parliament’s intention by examining the statutory purpose, the facts, prejudice, and possible injustice. |
The Court applied this principle because neither section 78(1) nor section 79(2) expressly made non-compliance invalidate a claim notice. [37][38][39][40][41][42][43] |
| Akbars Restaurant (Middlesbrough) Ltd v Secretary of State for the Home Department [2026] UKSC 26 |
Recent affirmation of the Soneji approach to determining the consequences of statutory procedural non-compliance. |
The Court cited it as confirmation that statutory purpose, prejudice, and injustice must be assessed where no express consequence is prescribed. [39][44] |
| Settlers Court RTM Co Ltd v FirstPort Property Services Ltd [2022] UKSC 1; [2022] 1 WLR 519 |
Contained a general description suggesting that the RTM scheme requires all qualifying tenants first to be invited to participate. |
The Court treated that statement as irrelevant to the present issue because sections 78 and 79 were not in issue in that case and the statement did not determine whether premature service invalidated a claim notice. [27][28][45] |
| Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89; [2018] QB 571 |
Failure to give a claim notice to a landlord under section 79(6)(a) did not inevitably invalidate acquisition of the right to manage. |
The Court explained that A1 Properties reached the same result as the tribunals, although not for the reasoning adopted in Elim Court. [46][32] |
| Quinn v Leathem [1901] AC 495 |
A case is authority only for what it actually decides. |
This narrow formulation supported the conclusion that the comments in paragraph 69 of A1 Properties were not part of its ratio. [47][21] |
| R (Youngsam) v Parole Board [2019] EWCA Civ 229; [2020] QB 387 |
A ruling may form part of the ratio where it is part of the preferred justification for the result, with relevance given to whether the point was disputed, argued, intended to be binding, or necessary to the outcome. |
Under none of the discussed formulations was the earlier statement about sections 78(1) and 79(2) part of the ratio of A1 Properties. [47][48][21] |
| Sinclair Gardens Investments (Kensington) Ltd v Oak Investments RTM Co Ltd [2005] RVR 426 |
Earlier tribunal authority concerning whether a landlord could rely on failure to give an eligible qualifying tenant a NIP. |
The Court noted that A1 Properties had expressly left open whether this decision was correct. [49] |
| Avon Freeholds Ltd v Regent Court RTM Co Ltd [2013] UKUT 213 (LC); [2013] L & TR 23 |
Earlier tribunal authority rejecting a landlord’s attempt to rely on failure to give an eligible qualifying tenant a NIP. |
The Court noted that the correctness of this decision had been expressly reserved in A1 Properties. [49] |
Court’s Reasoning and Analysis
The Court distinguished substantive entitlement conditions from procedural rules. Sections 72–77 and the membership threshold in section 79(3)–(5) prescribe substantive conditions, while sections 78–89 principally establish the procedure for implementing an existing entitlement and resolving permissible objections. [50][51][52][53]
Section 84 permits a counter-notice disputing entitlement by reference to a specified provision of the statutory scheme, but “entitlement” concerns substantive entitlement to acquire the right to manage rather than mere compliance with the procedure for giving a claim notice. [54][55][15][56]
Sections 78(1) and 79(2) are procedural. Section 78(1) requires NIPs to be given to eligible qualifying tenants, while section 79(2) principally creates a 14-day waiting period after the final required NIP; neither provision expressly states that breach invalidates the claim notice. [40][57][41][58][59]
The language that a notice “may not be given” was mandatory, but that did not itself determine the legal consequences of breach. Parliament expressly referred to validity elsewhere in the scheme and provided a discretionary enforcement mechanism in section 107, indicating that invalidity was not the implied sanction here. [59][60]
Treating the claim notice as absolutely void would prevent it from triggering a counter-notice, deprive the First-tier Tribunal of its ordinary route to jurisdiction, and undermine the statutory definition of the relevant date. These consequences were improbable and internally inconsistent with the scheme. [61][62][63]
Treating the notice as valid for procedural purposes but void for the substantive claim was also unworkable because, absent a counter-notice, the statutory process operates automatically. Such partial validity would create unacceptable uncertainty about transfers carrying significant financial consequences. [26][64]
The NIP requirements protect eligible qualifying tenants rather than landlords. Qualifying tenants may join the RTM company but possess no statutory right to oppose the transfer by counter-notice, making it unlikely that Parliament intended landlords to use a breach affecting those tenants to defeat the claim. [65][66][67][68][69][70]
No prejudice resulted from the breach. The Qualifying Tenant joined Company B five days later and supported the transfer, while Company A identified no prejudice to itself. [71][72][73][74][75]
Section 107 supplies the appropriate remedy by allowing any interested person to seek a discretionary order requiring compliance. That mechanism is better tailored to procedural breaches of varying seriousness than automatic invalidity. [60][17][76][77]
The consultation paper and Explanatory Notes reinforced this interpretation by indicating that NIPs give leaseholders time to decide whether to support the transfer, while counter-notices are limited to non-compliance with substantive eligibility criteria. [78][79][80]
The Court concluded that the contrary statement in paragraph 69 of A1 Properties was not binding because it was unnecessary to that decision, was not argued, concerned provisions different from those actually in issue, and had expressly been accompanied by a reservation of the present question. [33][21][49]
Holding and Implications
APPEAL ALLOWED. The Supreme Court restored the Upper Tribunal’s decision upholding Company B’s claim to acquire the right to manage. [81]
Non-compliance with sections 78(1) and 79(2) did not invalidate the claim notice and could not be relied upon by Company A in a counter-notice as a dispute about Company B’s substantive entitlement. [17][18][43][82]
The direct consequence is that Company B’s claim remains effective despite the procedural omission. Procedural non-compliance may instead be addressed through the discretionary enforcement jurisdiction under section 107, particularly at the request of an interested qualifying tenant. [17][77][83]