Avon Freeholds Limited v Cresta Court E RTM Company Limited [2026] UKSC 31

An RTM company failed to serve a notice of invitation to participate on one qualifying tenant before serving its claim notice. The Supreme Court held that this procedural breach did not invalidate the claim notice, allowing the landlord's objection to fail and the right to manage to transfer.

Facts

Avon Freeholds Limited was the freeholder of Cresta Court, a residential block containing 20 flats. Cresta Court E RTM Company Limited was formed by leasehold owners to acquire the right to manage under Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002.

On 4 November 2021, the RTM company gave notices of invitation to participate (NIPs) to those it had identified as qualifying tenants who had not become members. Ms O’Connor, the holder of a 150-year lease of Flat 17 granted in April 2020 (with registration at HM Land Registry pending, making her an equitable tenant), was not given a NIP. On 21 January 2022 the RTM company served the claim notice on Avon. Five days later, on 26 January 2022, Ms O’Connor agreed to become a member of the RTM company and expressed support for the claim.

Avon served a counter-notice objecting on several grounds, of which only the failure to serve Ms O’Connor with a NIP remained live. It was ultimately common ground that Ms O’Connor was a qualifying tenant throughout. The FtT and Upper Tribunal upheld the RTM company’s claim; the Court of Appeal reversed, holding the claim notice void. The RTM company appealed to the Supreme Court.

Issues

The central issue was whether a failure by an RTM company to give a NIP to a qualifying tenant under section 78(1), and consequential breach of the 14-day rule in section 79(2), rendered the claim notice invalid and thus fatal to the acquisition of the right to manage, where the qualifying tenant herself did not object and later joined the RTM company.

Sub-issues included whether the statement in A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd [2024] UKSC 27 that non-compliance with sections 78(1) and 79(2) meant “no valid claim notice can be given to anyone” formed part of the ratio decidendi, and whether the Soneji principle applied to determine the consequences of non-compliance.

Arguments

Respondent (Avon)

Avon argued that section 78(1) required NIPs to be given to every eligible qualifying tenant before a claim notice, that section 79(2) expressly provided the consequence of non-compliance (the claim notice “may not be given”), and that a claim notice given in breach was void. It contended there was no room for a Soneji analysis because the statute expressly stated the consequence of breach. Avon relied on paragraph 69 of A1 Properties as an authoritative and binding statement.

Appellant (RTM Company)

The RTM company argued that sections 78(1) and 79(2) were procedural rules which did not go to substantive entitlement to acquire the right to manage, that no express sanction of invalidity was prescribed, that the Soneji principle applied, and that neither Avon nor Ms O’Connor had suffered any prejudice. Enforcement of procedural breaches was catered for by section 107.

Judgment

The Supreme Court unanimously allowed the appeal, with Lord Briggs giving the leading judgment.

The absolute voidness thesis

Lord Briggs identified serious difficulties with the Court of Appeal’s conclusion that the claim notice was a nullity. If truly void, the notice could not trigger the counter-notice or FtT jurisdiction under section 84, and there would be no mechanism for determining disputes about compliance. It would also undermine the concept of the “relevant date,” which presupposes a valid claim notice. Faced with this, Avon retreated to a hybrid position (valid for procedural purposes but void for substantive ones), which the Court found untenable, particularly because the scheme is designed to operate automatically absent objection.

Structure of the scheme

The Court identified three compartments: (i) substantive eligibility conditions (sections 72–77 and 79(3)–(5)); (ii) procedural rules for the claim, counter-notice, and adjudication (sections 78–89); and (iii) consequences of acquisition. Objections by counter-notice under section 84(2)(b) can only be based on failure to satisfy substantive entitlement conditions. Sections 78(1) and 79(2), being procedural, do not go to entitlement.

Soneji principle

The Court held that section 79(2) does not contain an express sanction of invalidity. It is a timing rule which can be breached independently of section 78(1) (for example, by serving a claim notice 13 days after the last NIP). No express sanction is provided for either breach; the Soneji principle therefore applies. Applying it, invalidity was not the intended consequence. Section 107 provides a discretionary enforcement mechanism much better tailored to the wide variety of possible procedural defaults.

Treatment of A1 Properties

Lord Briggs (who gave the leading judgment in A1 Properties) held that the passage at paragraph 69 stating “no valid claim notice can be given to anyone” was not part of the ratio decidendi. A1 Properties concerned section 79(6) and a failure to give a claim notice to an intermediate landlord; the point about sections 78(1) and 79(2) was neither argued nor necessary to the decision. Applying any accepted formulation of ratio (including that of the Earl of Halsbury in Quinn v Leathem and Leggatt LJ in R (Youngsam) v Parole Board), the statement was obiter and should not be followed.

Application to facts

The failure caused no prejudice to Avon (who was not within the class the rules were designed to protect) or to Ms O’Connor (who supported and joined the RTM company). Qualifying tenants have no right to object to the transfer by counter-notice. It would be inexplicable to allow the landlord a windfall objection based on a procedural breach affecting another stakeholder who has not complained.

Implications

The decision clarifies that procedural non-compliance with sections 78(1) and 79(2) of the 2002 Act does not invalidate a claim notice and cannot be raised by a landlord in a counter-notice as a basis for a dispute about entitlement. Only breaches of substantive entitlement conditions in Chapter 1 can ground such an objection.

The Court emphasised that section 107 provides the appropriate discretionary enforcement route for procedural defaults, and only by those whom the procedural rule was intended to benefit (in this context, qualifying tenants themselves). The judgment reinforces the approach in A1 Properties that procedural requirements should not become traps for the unwary or unwarranted opportunities for obstructive landlords to thwart the acquisition of the right to manage.

The decision resolves the point expressly left open in A1 Properties at paragraph 67 and confirms (at least in outcome) the reasoning in earlier tribunal authorities such as Sinclair Gardens Investments (Kensington) Ltd v Oak Investments RTM Co Ltd and Avon Freeholds Ltd v Regent Court RTM Co Ltd. It is significant for landlords, RTM companies, leaseholders, and property practitioners because it substantially narrows the scope for procedural objections to right to manage claims and directs enforcement of procedural rules to section 107. The decision also demonstrates the Supreme Court’s willingness to correct obiter statements made in earlier judgments where they were not the product of full argument. Its limits are clear: it addresses only sections 78(1) and 79(2), and the treatment of other procedural failures continues to be governed by the fact-sensitive Soneji analysis affirmed in A1 Properties and Akbars Restaurant (Middlesbrough) Ltd v Secretary of State for the Home Department.

Verdict: Appeal allowed. The Supreme Court restored the decision of the Upper Tribunal, holding that the RTM company’s failure to give a notice of invitation to participate to Ms O’Connor, and the consequent breach of the 14-day rule, did not invalidate the claim notice and could not be relied upon by the landlord as a basis for objecting to the acquisition of the right to manage.

Source: Avon Freeholds Limited v Cresta Court E RTM Company Limited [2026] UKSC 31