Court of Appeal clarifies consequences of failing to serve Notice of Invitation to Participate on tenant

In Avon Freeholds Ltd v Cresta Court E RTM Co Ltd [2025] EWCA Civ 1016, the Court of Appeal determined that a Right to Manage (“RTM”) company’s failure to serve a notice of invitation to participate (“NIP”) on a tenant, whose lease had yet to be registered at HM Land Registry, resulted in the invalidation of its right to manage claim.

Background: Upper Tribunal’s Interpretation

The case was brought before the Court of Appeal following a decision by the Upper Tribunal regarding the application of the RTM company to acquire the right to manage the relevant block of flats. The Upper Tribunal had found that the RTM company’s failure to serve a NIP on one qualifying tenant did not render the RTM company’s subsequent claim notice invalid. Instead, it found that the claim notice was voidable at the instance of the qualifying tenant who had not been served with a NIP. 

Court of Appeal Decision 

The Court of Appeal overturned the decision made by the Upper Tribunal. The case considered two key legal issues relating to the RTM regime:

1 ) Qualifying Tenant Status

The Court considered whether a tenant whose lease had not yet been officially registered at the Land Registry could still be considered a ‘qualifying’ tenant under 75 of the Commonhold and Leasehold Reform Act 2002 (CLRA 2002).

The Court of Appeal agreed with the Upper Tribunal that the tenant, who held an equitable lease because of the registration gap (being the gap between the completion of the purchase of the interest and its registration at HM Land Registry), met the criteria to be considered a qualifying tenant under CLRA 2002. The Court supported the view that, when a flat is let on an equitable lease and no formal legal lease exists, the tenant is a qualifying tenant – providing the statutory definition of “long lease” in CLRA is met.

This interpretation was reinforced by section 112(2) of the CLRA 2002, which includes “an agreement for a lease or tenancy” within the broader definition of “lease”, where it is appropriate in the context. The court noted that it would be absurd for a tenant to qualify during the period between exchange and completion, but not between completion of the lease and registration. 

2 ) Effect of Failing to Serve a NIP

The second key legal question considered whether the failure to serve a NIP on the qualifying tenant rendered the subsequent RTM claim invalid. Here, the Court of Appeal disagreed with the Upper Tribunal and reversed their decision. The Court concluded that the RTM company’s failure to serve a NIP on the tenant did invalidate the claim notice, meaning the whole statutory process needed to start again.

In reaching this decision, the court referenced the Supreme Court’s reasoning in A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd [2024] UKSC 27. This emphasised that section 79(2) of the CLRA 2002 clearly states that, if a qualifying tenant does not receive an NIP in accordance with section 78(1), the claim notice is not valid. Any failure to serve all required NIPs at least 14 days before the claim notice is served on the landlord renders that claim notice void and incurable.

The court highlighted that, when statute explicitly outlines the consequences of failing to meet a procedural requirement, courts are not required to interpret or determine the consequences of that failure. It is sufficient that there has been non-compliance to render the claim notice invalid.

Key Takeaways

This judgment has significant implications across residential leasehold management.

• An equitable lessee can be a qualifying tenant - Under section 75 of CLRA 2002, where the property is let on an equitable lease and no registered legal lease exists, the equitable lessee with still be considered a qualifying tenant (as long as the statutory definition of “long lease” is met). This highlights the importance for RTM companies to ensure that they are aware of the identity of all qualifying tenants when they come to serve NIPs and that the information shown at HM Land Registry may not be able to be relied upon in this regard. 
• Failure to serve a NIP on every qualifying tenant within the statutory timeframe invalidates any subsequent claim notice – In these circumstances, the RTM company must restart the process. There will now be a higher compliance burden on RTM companies, requiring scrupulous identification of all qualifying tenants (including those in the “registration gap”.) We could see an increased use of information requests pursuant to s82 of CLRA 2002 and, further on-site enquiries might be more commonplace. 

The judgment can be found below:

Avon Freeholds Ltd v Cresta Court E RTM Co Ltd [2025] EWCA Civ 1016 

If you would like more information, please contact Mark Foxcroft or Jatinder Bhamber.