Right to Manage – last-minute jitters

At the start of the process the RTM company has to serve a Claim Notice on the landlord. The landlord must then respond by serving a Counter-Notice to either accept or oppose the claim.

A recent case R (Twelve Baytree Ltd) v Rent Assessment Committee highlighted the financial implications of a last-minute change of heart by the RTM company. The original RTM claim was brought under the ‘old LVT’ rules. The landlord had opposed the RTM in his Counter-Notice.

The RTM process continued; proceedings were issued before the LVT and the landlord worked with his legal team to assemble the case in preparation for the LVT hearing.

Two days before the hearing, the RTM company withdrew from the RTM process. They informed the landlord and the LVT but, importantly, did not seek the LVT’s consent to withdraw.

The landlord subsequently applied to the LVT to recover the costs he had incurred in preparing his opposition to the RTM claim.

It is worth noting here that the RTM process is an exception to the normal “no costs” rules in the now named First-Tier Tribunal (FTT). Broadly speaking, the landlord will recover his costs of responding to the Claim Notice, including the costs before the Tribunal, if he succeeds. If the claim is withdrawn, he gets his costs to the date of withdrawal.

The LVT found in favour of the leaseholders stating that, as the claim had been withdrawn, technically the LVT could not decide the issue of the landlord’s costs.

Unsurprisingly, this prompted the landlord to appeal the decision, which resulted in it being overturned and the RTM company being found to be liable for the landlord’s legal costs.

The judge determined that where a RTM company has a change of heart over the RTM process, they must seek the consent of the Tribunal before withdrawing the claim and therefore preserving the Tribunal’s opportunity to order the payment of the landlord’s costs.

This is consistent with the new FTT rules, which require the Tribunal’s consent to any withdrawal.

Our advice? As a leaseholder considering Right to Manage, you must do your research and make sure that you and your fellow leaseholders are committed to the process. You will be liable for the costs that the landlord incurs during the process. If the landlord is opposed to the RTM taking place, costs can quickly mount up as the hearing draws near, when the landlord may have had to instruct a barrister or inspect the property for example. If you are going to withdraw, do it as early as possible with a view to keeping the landlord’s costs at a minimum.