Right to manage Director?

Right to manage Director? Are you taking your responsibilities seriously?

Did you know whether you are a right to manage or resident management companies Director you need to be aware that you have a large amount of duties and liabilities under Company law? Most people don’t appreciate that whilst you are a director it does not limit your liability. Individuals appointed as Directors should note that their role is not just for the purpose of forming the above companies but it will be on an ongoing basis. The Directors responsibility continues until you resign and it is registered at Companies House.

All Companies must have Articles of Association which governs the purpose on the running of a company. The articles is prescribed by law. The company won’t be valid unless they are in the correct form, the procedure for appointing and the termination of Directors will also be within the article. Right to Manage Companies have Articles of Association that are specifically used for this type of property. If you are not sure you should either speak to your solicitor or Companies House that can help you. You will find that all RTM companies will always have the words RTM or right to manage in the name of the Company.

Do Directors have duties under different areas of the law such as health and safety, insurance and employment law? Yes of course and they need to understand how they work in the context of a management of a building or even instructing a managing agent.

Do they have a duty to exercise their powers for their proper purpose?

You need to ensure that the company’s articles and constitution states that you are always acting within your powers and check if there are any limitations a Director can and cannot do. It is important that you understand your liabilities and whilst it may seem daunting in reading what limitations are they are normally well laid out within the Articles of Association.

Do you have a duty to promote the Success of a Company?

The duty of a Director is primarily for the Company. You have to assess what these duties include for example if the decision will have a long term consequence or impact on the community and/or the environment. The Company has been set up deliberately for the purpose of running a right to manage property and you need to understand that this is the number one though in dealing with a Director. You also have to ensure that the lease is adhered to as well as you cannot extend your powers over the contents of the lease even as a Director.

Do you have a duty to ensure that you exercise your independent judgement?

Directors need to make sure that they are not influenced by others and arrive at decisions on their own. Whilst you can take into account other people’s thoughts it is so important to ensure that you are aware that you have to be independent and separate. Even it is an emotional discussion. For example dealing with neighbour issues are likely to arise from time to time. In these situations Directors should ensure that their decisions are not influenced by their personal opinions. They should also refer to the contents of the lease.

Do you have a duty to exercise reasonable care, skill and diligence?

It is important to ensure that decisions are considered carefully. You should take your time in looking at the situation and if required, and you have one, take advice from either your managing agent or your solicitor on what you should be doing. If you are uncertain on the situation then professional advice is critical.

What happens if I have a conflict of interest do I have a duty on this?

Directors must not put themselves into a situation where their interest conflicts with those of the company. The Articles of Association will detail the procedure dealing with Directors conflict of interest. For example if the Right to manage company is in need of a plumber and the Director suggests using his brothers company, that Director should not take part in the decision making process. You have to ensure that any decision making process by the Director is a void of any financial gain.

Do I have duty not to accept benefit from a third party?

Directors should consider any offers of company hospitality. For example if a builder engaged in exchange for offering his services to a Director personally. You have to understand that not only are you looking on behalf of the company but also on the building overall. You have to have a clean conscience when making decisions as a Director that you have done this in the best interest of the Company.

Do I have a duty to declare an interest in a proposed transaction or an arrangement with a Company?

You are absolutely required as a Director to declare both the nature and extent of your interest to any other Directors. This is in writing or at a Board meeting where its recorded in the minutes before the transaction is entered into. It is critical for you as a Director yourself to ensure that if its put in writing that everybody is aware of it. For example if a Director works for a fuel company and the block is looking to change fuel suppliers and considers his company he or she must let the other Directors know and not take part in the decision making process. This is critical as a Director as you can be found negligent in the event that you do not.

It is very important that you bear in mind that Directors cannot avoid their duties by resigning, a Directors duty will still apply in relation to all actions taken whilst in the office. You have to take into account when considering recording in writing matters that have been and decision’s made so there is a proof of careful consideration that has been given to them. This would be in the minutes of a meeting. You can look to put these in an email as well.

There are more obligations as a director which you must consider. Directors have a duty to keep accounting records, file annual accounts and annual returns. In respect of a Right to Manage Company it is often misunderstood that if you do not collect ground rent then you need to do accounts. The money you collect i.e. maintenance money is held in a Trust account and is not the Companies money as such and so accounts aren’t required. If you need guidance on this we would suggest that you speak to Companies House who often will be able to help you as you may not need an accountant and you could be incurring a cost you do not need.

But, Company law requires that every company must keep adequate records to show and explain the company’s transaction and to be in a position to disclose the financial position of the company at any time. Please take an accountants advice in this regard but again make him aware that the maintenance money you are receiving is not the companies. These records must have entries of the day to day sums of monies received and expended and a record of the assets and liabilities of the company. This may be very little or nothing.

A company must keep the records at the registered office or a place a Director thinks fit and proper and this must be available for inspection at any time. Records must be kept for a period of three to six years on the date they were made.

Directors also have a duty to prepare accounts for the company for each of its financial years. In the case of the Right to Manage Company the accounts or balance sheet will be a true and fair view of the state of the affairs of the company in the last financial year. The Directors must approve accounts and these must be signed off by the Directors and filed at Companies House. But you will often find that these are zero accounts and a dormant company form can always be entered into via Companies House but you should speak to them. The returns must be filed at company’s house each year usually on the anniversary of the companies and corporation that they will contact you. But it is your responsibility to ensure that this is done. The annual return must state the date which the companies is made up. The address of the companies registered office, type of company it is and the officers of the Company. These types of records do change on a regular basis and you should keep yourself updated with the newsletter from Companies house in this regard.

Company law requires you to keep statutory registered recording the details of the officers and members (shareholders). They should be available for inspection at all times. These registers have to be updated to record events such as appointments and the resignation of Directors. The contents of the registers and what is showing at companies how should be exactly the same.

Failure to prepare and keep records and file accounts and returns and maintain them can result in a Director being held personally liable for penalties, prosecution and possible disqualification. If there is a persistent failure to file accounts and any returns Companies House may strike the company off the register of Companies. Companies House will normally give several warning letters giving notice of the failure to file these documents. If there is no response from the Company, the moment the company’s struck off all the assets of the company will become the property of the Crown and the company will no longer exist. In the case of the assets the building means which of the members own as a flat. It is so important so that you keep and maintain these documents.

If the company’s struck off the Director of the company should seek advice on restoration procedures whilst these procedures can be costly and time consuming it can be dealt with. There are professional advisors that can advise on fees as well as Company House fees and penalties. You may have to go through the Court or restoration process and it can take up to six months before the Company’s reinstated.

We can offer you Directors and officers insurance that can cover you for all these points. The insurance enables you to know that you’re covered but it still does not absolve you of any responsibility but will pay any fines and would help you in the event that you needed to resolve anything.

Don’t hesitate to contact us in this regard.

What is the criteria for Right to Management?

Right to manage is only available to leaseholders of flats not houses. It is there to empower leaseholders to take hold of the majority of their property and take responsibility for the management of their block.

While the process is simple a landlords consent is not required nor is a court order. There is no need to prove any form of mismanagement. The right is available whether the landlord’s management has been good, bad or indifferent.

The right is often exercised by way of a formal notice but we will lay this out for you in detail below

But, to summarise the situation we confirm as follows:-

What is the Right to Manage (RTM)

The right of the leaseholders of a building that contains flats to take over the management from the freeholder and/or managing agent via having a Right to Manage company.

What are good qualifications?

These are as follows:-

1. The right applies to leaseholders of a building or part of the building containing at least two flats. It is important that you are aware it does not relate to houses i.e. where there is a long lease of one whole house.
2. At least two thirds of the flats within the building must are owned by long leaseholders. A long leaseholder is somebody that has a lease that is for more than at least 21 years. You will find in most blocks that this is always the case. You can find this information by applying to the Land Registry for a land registry search. This document will outline for you how the property is held as leasehold i.e. how many flats and how long the leases have left on their lease.

3. At least half of the flats in the building, held by long leaseholders, must take part. This would mean for instance that if the freeholder held some flats these would be excluded unless they were on long leases. Again, you would need to take solicitors advice.

4. The building does not qualify for a right to manage if there are non-residential parts of the area. This would mean some form of shops, commercial areas that would be at least over and above 25% of the whole floor area of the building. It does not mean 25% of the building but the actual floor area of the building.

5. The building will not qualify if there are four or fewer flats and there is a resident landlord.

What is the procedure?

1. Participating leaseholders i.e. the people that wish to take part. Must set up a right to manage company using a prescribed Articles of Association. These are specifically laid out for this type of property. If you wished to set up such a Company it can be via your solicitor or through a formation company but you need to ensure this is the right company you are setting up.

2. A notice inviting participation must be served on all the leaseholders who are not members, and who have not agreed to become members. This is critical and there are certain requirements to show that you have done this. You should take your solicitors advice on this.

3. A notice of claim for the right to manage must be served on the freeholder no less than two weeks after the above notice. This is a technical notice, and it should be drawn up by a professional. We would suggest that you take legal advice on this.

4. The freeholder can challenge right to manage by a counter notice within one month. It is thus critical that all these documents are served by a solicitor. If the freeholder does then the right to manage company can apply for a first tier Tribunal or the leasehold Valuation Tribunal where the property is in Wales for a ruling on whether they have the right to manage. This means that they will then decide whether the notices were correct or not. This is important that you serve the correct notices on the correct people as this can lead to you not being able to take over the management for a period of time.

5. If the freeholder does not challenge the notice then the right to manage Company will get the right to manage four months from the date of the notice of claim “the acquisition date”. You would thus need to at that point consider what you wish to do with the management which we will do a summary below on

6. The freeholder should notify the right to manage company of the existing contractors and also notify those contractors of the takeover by the right to manage company.

7. What management do I need to take into account?

The right to manage company does not have to keep on the freeholders existing contractors i.e. the managing agents they can use their own agents or manage the building themselves. We discussed this in detail in another article but you should consider what you want to do even before proceeding with the right to manage. It is important that you are prepared as four months can go very quickly.

8. The right to manage company takes over all the management functions of the lease. Although the freeholder has to be kept informed on such matters as consents e.g. to alterations and lettings. It is so important that you are aware of your responsibilities and at this point you may wish to consider taking out Directors and officers insurance.

9. The right to manage company has the power to enforce obligations under the lease but not to use the forfeiture procedure. You should refer this to your solicitor for a full explanation.

10. The freeholders are entitled to apply to be a member of the Right to Manage Company after the acquisition date.

11. The right to manage company must abide by the Articles of Association and Company law and officers of the Company will need to be Directors. It is therefore very important that you consider Directors and officers insurance as well as the insurance of the building overall which we could help you with a quote.

12. Do you know what a right to manage means?

All the above does sound complicated. But the reality of the situation is if you use a solicitor then they should be able to help you go through the process very easily. It allows you to ensure that you are then responsible for collecting and managing the service charge of the property. Keeping the update of the communal areas and the structure of the building and dealing with any complaints. One of the main reasons that leaseholders often take over the right to manage the property is due to the ever increasing costs by the landlord and/or managing agent. You should look into what areas you could reduce such as insurance. We have often found that we have been able to reduce large amounts of premiums for leaseholders especially where landlords and managing agents include commission.

It is important that you are aware that preparation in relation to taking over is much more important than the actual process of it. It would be wise to work out why you are taking over the building and what is the purpose. Who is going to manage the property on your behalf and how is it going to benefit you long term.

13. Did you know that your block must be self-contained?

To qualify for the right to manage your block must be structurally detached. You would need to consider not just the parts above ground but also aspects of it such as an underground car park or gym facilities that might be shared with other buildings.

It is important as part of the building can be deemed to be self-contained if it is a vertical division i.e. from the earth to the sky the building is detached from its neighbour.

You can deal with this through certain tests that can be applied to assess if your block is self-contained such as:-

a) Could the block be redeveloped independently of the rest of the building

b) Are the services i.e. gas, electricity, water independently provided

c) Can the services be changed or interrupted without affecting the rest of the building?

Some landlords have been able to successfully challenge right to manage applications on the basis that too many pipes would need to be rearranged to meet the tests above. If you are unsure on whether the block is specifically self-contained we would suggest you speak to a solicitor for expert advice.

14. What is a resident landlord?

There is a qualifying criteria that relates to smaller properties where the landlord is one of the resident tenants. In this instance your block would not qualify for right to manage if:-

a) The building is not a purpose built block

b) The block has four or fewer flats

c) The landlord (or an adult member of his family) have lived in one of the flats for the last year

Leaseholders applying for right to manage will be liable for the costs incurred by the landlord as well as your own legal costs in the event that you do not get this correct. This makes it critical that you do your diligence to ensure that the block qualifies for the RTM before you incur any significant costs and we would suggest you speak to your solicitor.

Don’t be frightened of talking to a solicitor about the right to manage or any other Company that deals in this specialist area. You will often find that people will be able to help you and it is not as daunting as it seems. Don’t hesitate to contact us for your insurance quote to see how much you could reduce your overall premium on a yearly basis that may even pay for the transfer! We recently did a case where the leaseholder saved in excess of £9,000.00 on their premium! This paid for their costs to do the work.

Appointing a managing agent: Part 2

They need to be aware of the requirements of Data Protection in relation to holding and handling information and who they can give it to.  Overall the guide should include as follows:-

• Fair and lawful process
• Processed for limited purposes
• Adequate, relevant and non-excessive
• Accurate and up to date
• Not kept for any longer than is necessary
• Processed in line with individual rights
• Secure
• Not transferred to other countries without adequate protection
• They also need to take into account any new rules under GDP
• Obviously in relation to how you communicate with them also includes what hours that they will be working from and whether they have any emergency call out number for you.

Inspections

You need to ensure that there is a procedure in place for visiting your building on regular intervals having regard to the type and nature of the occupation and the complexity provided.  This would be subject to their terms and conditions but access may be needed to individual flats if required.  You will often find that some managing agents have never inspected the building unless there are works to be carried out.  It is totally a matter for you on what you require.  You obviously have got to appreciate that none of these will be during working hours and unless there is an emergency would not normally be outside these.

Consultations

They will have a requirement to consult with you in relation to any updated law or requirement in respect of major works.

It is important that they keep in contact with you on a regular basis as well as you outlining to them what is required in relation to the management of your building.  Often on a right to manage these are transferred over due to major works being carried out by a freeholder that should either never be carried out or alternatively have too much money.  You might find that you would want your new managing agent to deal with this again and obviously consultation would take place.

They must consult under the law with the leaseholders individually and any recognised association and hold meetings where appropriate.  If a meeting is convened with a residents association the managing agents have to give notice to all leaseholders including the place, date and time of the meeting to take place.

Money laundering

All managing agents have to comply with the money laundering regulations and proceeds of Crime Act.  You may not think that it applies to you especially under right to manage but money laundering is now a requirement by law.  It is used to conceal serious criminal activity.  Legislation has created broad criminal offences which are as follows:-

• Assisting a criminal to obtain, conceal or retain or invest funds in a person giving assistance, knows or suspects the funds to be the proceeds of crime.
• Tipping off a person who is the subject or suspicion or under investigation
• Failure to report, knowledge or suspicions of a laundering acquired in the process of one’s trade or profession

In general

The managing agent should always levy any charges in accordance with the law and the terms of the lease and the contract.  They should maintain efficient records relating to the building.  They should keep notes of any statutory limitations of any actions.

They will need to comply with all applicable health and safety requirements.  They need to devise and maintain a proper health and safety policy and arrange regular health and safety fire and any other applicable risk assessments for your property.

They need to have sufficient professional indemnity insurance which you should always check and ask for a copy.  They also need to have protect client money insurance as well.

Disputes between occupiers?

When you are dealing with leaseholders and especially on a right to manage you might often find that there are some disputes between leaseholders and this would be the managing agents responsibility.  They need to deal with this as per the contents and the terms of the lease.  You will often find with leaseholders that they don’t understand that properties are dealt with by way of the lease not by what the freeholder or the managing agent says but within the orders contained with the contents of the lease.

Most leases will allow for the recovery of costs from the service charge in connection with disputes between occupiers if it goes that far.  They may contact the local authority if this went into items such as noise or anti social behaviour.  Most leases will particularly contain a mutual enforceability clause regarding landlords to seek indemnity for their costs from leaseholders requesting any form of enforcement.  It may be that the freeholder does not require you to enforce anything under the interest of good management.  Obviously any enforcement action would need to be agreed with you in advance and to be lawful.

All complaints should be given with a realistic time and cost involved in any enforcement.  You should also consider other methods of dispute resolution such as mediation and be familiar with local mediation services and should suggest this and any dispute resolution.

Disputes between a landlord/right to manage company and leaseholder.

In the lease there is often a provision for disputes procedure such as arbitration which may involve any form of additional costs.  Following the introduction of the common hold and leasehold Reform Act 2002 such clauses are likely to be void and arbitration must be agreed post dispute.

You should as a landlord/right to manage company try to resolve any dispute by informal means and consider suggesting mediation or arbitration by way of an agreement rather than going into litigation.  It is a much better way of settling particular disputes.  The leaseholder should be recommended to seek legal advice on any suggestions.

Unresolved disputes concerning level, quality and cost of services recovered as surcharges may be a basis of an application to the first tier tribunal.  This tribunal deals with these type of service charge disputes.  Obviously you would normally require your managing agent to deal with this for you but it is something that you should be aware of

Complaints

It is not always straight forward to differentiate between a complaint against a managing agent and/or landlord/right to manage company.  Complaints about matters such as service delivery time scales and cost are typically landlord/leaseholder disputes.

Your managing agent should have a written formal complaints handling procedure in place to deal with complaints about them and their staff.  The procedure should be made available to any leaseholder or you as a client.  It should include a short series of steps and response time for its various stages and should provide for leaseholders to complain to the landlord.  The procedure should provide for complaints about their staff to be made to a responsible principal and for them to investigate quickly and fairly.  It should also include any details of a nominated ombudsman scheme which they should belong to.  There are various managing agents associations which you can look into.

Where there is a lease/tenancy agreement dispute then the procedure would be arbitration.  There will be formal arrangements that may involve extra costs and any subsequent agreement containing a long lease may not be valid unless it has a result of an agreement after the dispute has risen.  It would be desirable to try and resolve the dispute by informal matters before turning to any formal provision in the lease or tenancy agreement.

Leaseholders have a right for the management audit to be carried out.  You should note that managing agents need to comply with any notices in this respect.

It is a lot to take in when dealing with a managing agent and how to work out exactly who you wish to instruct if anybody.  You need to take into account what you are looking for for a managing agent how you want your property managed whether formally or informally.  Whoever takes over the management has to take into account the full contents of the lease.  You cannot just decide to manage a building on an ad hoc basis without referring back to the lease each time. It is important that you are aware of this and take legal advice if you are unsure.

There are Associations that can recommend managing agents or alternatively you can look on Google and see what reviews there are for them.  The contract should be read in full and understood by all parties concerned.

Appointing a managing agent: Part 1

If you are a freeholder or Right to Manage Company and you are thinking of employing a managing agent you need to ascertain what they charge and how they do it.  Every managing agent will be different but they have to adhere to the Royal Institute of Chartered Surveyors code for managing agents known as RICS code.

You will need to contact the managing agent and potentially ask them for the following:-

1. A copy of their contract.
2. A copy of their terms and conditions
3. A copy of what they charge in relation to the management

What are you looking for in a managing agent?

You need to decide what the most important thing is in relation to your management before you even consider employing a managing agent.

There are requirements that the managing agent has taken into account.  There will be a relationship between you and the managing agent based on the terms of engagement, a management agreement or a contract which confirms the rights and duties of each individual party.

Money laundering is an international concern and as general guidance they must take every reasonable effort to confirm the suitability of you before accepting instructions so don’t be offended if they ask for a passport or some form of identification.

Do I need a management contract?

You should always have some form of management contract between yourself and your managing agent so you know what their responsibilities and duties are.  You should give them your written confirmation that they can manage the property on your behalf.  They should outline to you details of the fees and expenses and the business terms and conditions during the term of their instructions.  This should include any notice period in the event that you are not happy with them.  The contract should clearly state the scope of the duties that they will carry out to specify all activities for which any additional fee which is chargeable.  Every managing agent will be different however they should have some form of good practice.  The charges should be reasonable for the task involved and should always be pre-agreed with you before the contract starts.  Where there is a service charge, basic fees are usually quoted as a fixed amount rather than a percentage of any outgoings or income.  However, where the lease specifies a different form of charging the method in the lease needs to be used by the managing agents.   You need to ensure that the lease entitles you to use a managing agent and ask them to check this for you.

In the event that you do employ them they would need to give you reasonable and adequate notice of any increase in charges in accordance with the terms of the contract again which you should read through.  It may be worthwhile you getting your solicitor to read through the terms and conditions.  For instance charges may often be subject to indexation and it should be outlined which index they are referring to and what is agreed in advance.

Charges that they may include are such things as a percentage – this is not accepted as good practice i.e. that they charge you a fee for what is expended during the year and is very rarely used by managing agents.

Average fees per unit – you often find fees are referred to as per unit of accommodation which means an average basic fee per flats.  So for instance if the fee was £600.00 for 30 units the average would be £200.00 per flat.  This doesn’t necessarily always mean that it is the average fee that they charge the leaseholders but it will be determined within your contact.

Major works and long term agreement and fees – it will be standard practice for your managing agent to charge additional fees for handling major works and long term agreements.  These include any form of consultation as required by the Section 20 under the Landlord & Tenant Act 1985 and you should check what these are and who they employ to carry out the supervision of these works.

Commissions

You will often find that managing agents often have an insurance commission and other sources of income arising out of management.  These should always be declared from you from day one.  You need to know exactly what your managing agent is going to charge for etc.  You may also find that they charge an administration fee for other such items such as alterations to a flat, subletting, registering assignments and Deed of covenants which are classed as administration charges and normally paid by individual leaseholders depending on what is required.

Obviously if they are charging an insurance commission you may not be getting the best possible price for your building insurance.  Contact us to see whether we can reduce your premium.

Did you know that you are entitled to request confirmation of what commission your managing agent is receiving by way of insurance?  This was law some considerable time ago and it is often not used by leaseholders who don’t understand that some of their insurance premiums are inflated due to the fact that managing agents charge a commission.  All you have to do is ask and see what they charge.  You will find that managing agents often treat this commission as their administration for claims.  However if you haven’t had any claims for three to five years then what is it for?  It is always best to check before you start.  If you have taken over on a right to manage what you don’t wish to go is go from a freeholder you want to get rid of to a managing agent that does exactly the same as what the previous person did.  It is often the case on a right to manage that they are being entered into to reduce costs not increase them.

What is the annual fee for?

Subject to the terms and conditions an annual fee is provided and would normally include the following:-

1. Prepare invoice for collection of service charges from all the leaseholders in accordance with the terms of the lease.
2. Instruct with the clients consents solicitors and debt recovery agents to deal with unpaid service charges subject to any statutory provisions that will be required
3. Prepare and submit a service charge statement and demand service charge contributions.
4. Pay for general maintenance out of the funds provided and ensure that the service charge and all other outgoing monies are used for the purpose specified in the lease
5. Produce an annual spending estimate budget to calculate the service charge as well as administrating funds.
6. Produce and provide service charge accounts that comply with legislation to all leaseholders and residents associations
7. Administered building and other insurance if needed and authorised subject to the FCA (Financial Conduct Authority)
8. If required on behalf of the clients engaging supervised staff such as caretakers, gardeners and cleaners
9. Arrange and manage contracts for service charges in respect of the property such as lifts, boilers, cleaning, etc.
10. Arrange Health and Safety, fire and other inspections to the property. These include any risk assessments that may be required.
11. Visit the property and visually check its condition and deal with any minor parts of the building plants and fixtures and fittings. It is dependent on the terms on how frequent the visits should be and agreed in the context of the contract.
12. Do as reasonably and promptly as possible with enquiries from leaseholders of any requirements and constraints in the contract.
13. Keep records on leases with regard to data protection legislation.
14. Keep clients informed of any legal changes of statutory notices.
15. Advise and deal with the day to day management of any policies.

What would constitute an additional charge?

This will depend on the terms and conditions of your contract and exactly what you have agreed with the managing agents.  However it often includes the following:-

1. Preparing statutory notices and dealing with consultations where qualified works and qualified long term agreements are proposed
2. Preparing specifications and obtaining tenders and supervising additional repairs and work
3. Attending courts and tribunals
4. Considering applications for alternation by leaseholders
5. Advising and dealing with any leases on subletting and change of use
6. Dealing with breaches of lease for example late payment of service charge
7. Giving information to prospective purchasers although often this is paid for by them

You might also find that they do provide if required for companies that deal with services.  However, under a right to manage company often it is not required as these companies are dormant.

What are the duties and conduct of a managing agent?

You need to remember that managing agents should not act outside the scope of their authority and they should follow all instructions where necessary.  It is therefore important that you have a contract to ascertain exactly what their terms and conditions are as well as what their limits are.

They must comply with the law and observe the terms and conditions of the lease.  They should have effective and fair policies and procedures for dealing with the responsible management matters.

They should always manage the property on an open and transparent basis.  As soon as is reasonably practical and consistent with statutory obligations they should keep information confidential and be aware of the GDPR.

What are their general property activities?

They should respond promptly to all reasonable requests from leaseholders for information and observations to relevant management of the property including the time scale by which the request is to be dealt with.  You should therefore always agree this with them in advance.  A charge may be made if there are issues regarding a lease/tenancy agreement and you would need to agree this with them.  They should always communicate with you as you have laid out to them for instance email or letter depending on what you require.

Fire Risk Assessment

Even if you have a right to manage or managing agents. You need to ensure that you have a fire risk assessment in relation to your property at least every five years. It is important when managing a property that you are controlling the fire risks. You have to protect against risks of fire. The first step is to identify these risk and this is where the risk assessment comes in. There is a legal demand for non-domestic fire risk assessments i.e. commercial as well as on residential.

What is the law?

The law comes under the regulatory reform (fire safety) Order 2005. This came into force in October 2006 and replaced more than seventy pieces of different regulation on fire risk. It applies to all non-domestic premises in England and Wales. Including the common parts of blocks of flats and houses in multiple occupation.

What does the Act say?

The Act lays out that a responsible person must ensure that a fire risk assessment has been undertaken by a competent person. It must implement and maintain a fire risk management plan. This must include with a generic risk assessment, or undertaken separately by a fire risk safety specialist. However, you need to have qualifications to do this to ensure that it is correct. You need to ensure that the assessments has been undertaken. An up to date fire management plan has been implemented every time this takes place which should be every five years.

It states that either an employer, a person who has control of the premises in connection with business or trade or the owner of the property is responsible to do this.

There are various Government Departments that deal with this being the local Government Regulation, the Department of Communities and local Government Guides, the local Government Association and the Health and Safety Executive which is the most important.

The Health and Safety Executive state that there are various problems as follows:-

1. General Fire Safety Hazards
2. Fires are normally started by three things, a source of ignition, a source of fuel and oxygen.
3. Sources of Ignition for instant could include heaters, lighting, naked flames, electrical equipment, smoker’s materials, electrical installation and anything else that can cause heat or cause sparks.
4. Sources of fuel include wood, paper, plastic, rubber, foam, loose packaging materials, waste, rubbish and furniture. The oxygen is in the air around us.
5. What do the Health and Safety Executive say I have to do? They need you to carry out the following:-
6. A fire risk assessment
7. Keep sources of ignition and flammable substances apart
8. Avoid accidental fires e.g. make sure that heaters cannot be knocked over
9. Ensure good housekeeping at all times avoid the build-up of rubbish that can burn
10. Consider how to detect fires and how to warn people quickly if they start i.e. smoke alarms and fire alarms.
11. Have the correct firefighting equipment for putting out a fire quickly
12. Keep fire exits and escape routes clearly marked and unobstructed.
13. Ensure your workers receive proper training on procedures.
14. Review this on a regular basis and at least every five years.

They also state that dangerous substances can cause fire and explosion. You have to ensure there are none of these items. This includes any form of storage of chemicals, vapours and dusts and anything that can burn easily.

What are the key points to remember from the Health and Safety Executive?

They state that you need to look at the following:-

1. Think about the risk of fire and exposure from substances you use or create
2. You supply safety details on any form of sheet or anything that is flammable
3. Make sure that there is nothing flammable stored at the property
4. Keep sources of ignition and substances that burn apart
5. Get rid of any flammable or explosive substances
6. Renew your fire risk regularly and at least every five years

If you are managing your building under a right to manage you need to ensure that if you are managing the property then you carry out a fire risk assessment. You are in control and thus it is important that you carry these works out.

You need to have a qualified person to do the fire risk assessment and they will attend the premises and check the common area and services. They will then compile a report that lays out recommendations that have been followed through.

What do they take into account in the report?

They take the following into account:-

1. The property
2. Occupants
3. Occupants at risk
4. Fire loss
5. Relevant information
6. Relevant fire safety and station of method
7. Electrical sources of ignition
8. Smoking
9. Arson
10. Portable heaters and heating installations
11. Lightening conduction
12. Housekeeping
13. Hazards introduced by outside contractors and building
14. Other fire hazards
15. Means of escape from fire
16. Measures to limit fire spread and development
17. Emergency lighting
18. Signs and notices
19. Fire alarms
20. Extinguishing
21. Management procedures and arrangements
22. Records
23. Fire fighter safety and access
24. Fire risk assessment matrix

They will then have an action plan together with photographs.

The report will lay out the general information stating exactly what type of property it is, how it was built and the approximately square footage of the building. It will state how many people live in the property. It will lay out the legislation that it comes under. Including the HMG fire safety sleeping and accommodation guide 2006 and LACORs housing fire safety 2008.

We will lay out the electrical hazards and whether there is any work that is required in these. Layout where there are any issues in respect of arson and portable heating installations and whether they need to be checked or not. The rest of the report will deal with the main management of the building. The signs together with any form of lighting and fire alarm system that may be required. It is important that you are aware that this report includes means of fire escape at the property and may have recommendations in this regard which we outline later.

The report will layout at the end full details of any improvements required within the property. These have to be carried out within a specific period of time and are done by way of a fire risk assessment matrix. This is laid out as slight harm, moderate harm and extreme harm. There are low, medium and high risks and these need to be taken into account. They will lay out exactly which item is which and give an action and time scale of when these items should be carried out. They often include recommendations as follows:-

1. Any boiler and electrical intake consumer units or distribution on escape routes normally enclosed in a 30 minute fire resistant material to include intumescent and cold smoke seals to any opening.
2. An EICR report which please see our previous article on which has to be carried out every five years.
3. Smoke free legislation signs that need to be put up in relation to the property
4. Arson which normally relates to an anti-arson letterbox etc.
5. Fire doors – there are various fire doors in relation to properties. Most are required to be a minimum FD30 which is a minimum of 30 minutes in order for them to burn through the door. These would include cold smoke seals and intumescent strips at the top and edges of the door to prevent the passage of smoke and fire. These all come under a British Standard BS8214:2008 and hinges under BSEN1935:2002: minimum grade CFD30
6. Compartmentation. This includes any protecting of pipes or cables or services through floors and is at least 30 minute fire resistant.
7. Fire alarm system – there are various fire alarm systems that they may recommend depending on the type of property but normally this is a category LD2 grade D automatic smoke detection within the common areas including integral sounders and heat detectors in each flat in the ceiling.
8. Fire extinguishers – may also be required
9. Fire safety arrangements – this is normally a detail of what needs to be done by the tenants etc. This needs to be kept in the building.

The above is only a guide of what may be required as each individual property is different. It is something you need to check.

There is also a guide form LACORs that come under Housing and Fire Safety and we have detailed this out under a separate article

It is so important that you are aware of what your legal requirements are. As in view of recent events that have taken place we expect that these may change over the years. If you do not have a fire risk assessment you should have one carried out and have any recommendations done within the time limit. They differ from property to property so it is important that you use a professional to do this.

Fire Safety – Part 2 (Do I require fire doors?)

Introduction to fire doors

Fire doors are now a legal requirement in almost all commercial buildings, most accommodation premises – including blocks of flats, sheltered accommodation, housing in multiple occupation etc and even some larger owned houses.

Why are they important?

You first need to understand the difference between compartmentation and passive fire protection. Compartmentation is the idea behind passive fire protection. The process of stopping an active fire from spreading further. It is a structural design principal requiring areas of the building to be sealed off from each other by fire resistant materials. So if a fire occurs in one area it cannot or will take a long time to spread to the other area. This is for the purpose of protecting escape routes for occupants of other areas and to hope to prevent the premises from burning down.

What is a fire door then?

A fire door is a door that stops the spread of fire. They are constructed from material designed to resist fire for a certain amount of time rather than a normal door. The most common types are either 30 or 60 minute fire resistance although you can have specialist doors made up where they have four hours of fire resistance.

You will often see fire doors around buildings where they have a blue circle on with white text stating “fire door keep shut” these signs are mandatory and identify doors within a building. Another common indicator is the existence of a door closer which is mandatory on most fire doors.

Essential items of fire door furniture

Any component of a fire door other than the actual door leaf and its frame will fall under the term “fire door hardware” or “fire door furniture” including hinges and edge guards and some pieces of furniture are considered “essential items” these are all mandatory for doors. The most important items are hinges, appropriate signage, and either a lock or an automatic door closer.

Fire doors have components such as furniture and aesthetic components which penetrate the surface of the door – or wrap around the door from one side to the other – must be fire rated. This includes hinges onto the frame such as intumescent seals and strips as well as a door closer fitted at the top.

For example it is no use hanging an FD60 fire door with a standard lock.

Intumescent seals and smoke protection

When hanging fire doors intumescent materials are often used to swell and enlarge when exposed to heat. This thus seals any gaps in and around a fire door blocking the path of a fire or smoke. Intumescent fire seals are required around the edges of doors although they can be attached to the frame as well.

Strips of intumescent material may be required between frame and hinges as well as the hinge in the door. Intumescent sealant is often used as an expanding foam between the frame and the wall and other gaps to be filled. The intumescent seals around the edges of the doors and frame will often have integrated smoke brush to stop the spread of smoke and these are called cold smoke seals.

You should be aware that smoke has a tendency to spread a lot quicker than fire. It often will not provide enough heat to activate intumescent seals allowing it to flow around the door within its frame. This often can’t be avoided but you should speak to the manufacturer. Fire doors leading to fire escapes often have a policy that they would need cold smoke seals.

Fire door retainers

Fire doors are put in properties to stop the spread of fire within buildings and they are absolutely essential. The whole purpose of fire doors are equipped with fire door closers so that when people pass through them they automatically close.

Fire door retainers are used when there is a free flow of people throughout a building and can hold a door in its position and release the door in case of fire allowing the door to close the door shut. They are an alternative but you should check whether they are acceptable in your area.

There are various different types such as electro magnet fire door holders and acoustically activated fire doors.

There is a third option which is a premium choice and includes free swing door closers. They are battery powered and acoustically triggered as a free swing door closer. The door closer mechanism remains inactive as standard and will only activate on hearing the fire alarm.

Summary for fire doors

Fire doors are an absolute crucial defence against the spread of fire. You should check with your local fire brigade on whether they are required. They are designed to contain a blaze for long enough in order for the occupants to be able to escape the property safely whilst also limiting the damage caused by the fire. They can be crucial barriers in a building.

This may change once the report comes out on the recent fire that took place on a block of flats and at the present time this is the situation.

There are different types of door retainers such as:-

• Door mouse – they are cheap retainers and have no batteries. They are installed at the top or bottom of the door or at the back of the door.
• Door guard – they are a quick install and holds the door open in its position and are perfect for a retro fit. They are triggered by loud continued noises and either installed at the bottom or the front of the door.
• Agrippa – can be fitted for a specific fire alarm sound they are installed at either the top or the bottom of the door.
• Geze T000EF – they are battery operated and very easy of opening a door. They are installed at the top of the door and the bottom at the front or the back of the door.
• Freedor – these are a cheaper installation and requires a battery change and are at the top of the door or the bottom.
• Agrippa free swing – again a cheaper installation and can be installed at the front or back of the door.

It is important as a landlord, freeholder, managing agent or right to manage that you take everything into account. Most fires can be prevented by taking some basic and common sense precautions. There are specific guidelines for shared or rented properties.

Did you know?

• About 200 people die a year in accidental fires at home.
• Not having a working smoke alarm makes the risk of dying in a fire at least four times greater.
• Faulty electrics (appliances, wiring and overloaded sockets) cause around 6000 fires in the home each year.
• 2 fires a day are started by candles
• What are your landlord’s obligations to keep your home safe from fire?
• It is your responsibility to meet the safety requirements under the law. This includes making sure gas and electric appliances are safe and in a good working order.
• You must ensure that your property has at least one smoke alarm on every level of your home used as living accommodation.
• You must check that all gas appliances have a gas safety every year and are served on the tenant within 30 days and are acknowledged.
• All electrical appliances must carry a British Safety standard sign.
• As a landlord you must ensure that all furnishings are fire resistant and meet safety regulations
• You must show that you have a fire safety certificate so that you can tell the tenants and so that they can see when the gas and electrical appliances were last checked.
• You must ensure that carbon monoxide alarm is present in all rooms containing solid fuel burning appliance and are used as living accommodation. Landlords must test these and are required to have smoke alarms on the first day of the tenancy.
• Landlords need to ensure that there is a planned escape route at the property and that everybody knows it.

It is important that a fire risk assessment is carried out every five years in relation to your property to ensure that you are secure.

Fire Safety – Part 1

What type of fire equipment do I need within my properties?

If you are a landlord, freeholder, Right to Manage or rent property you need to consider what type of fire equipment that you need to have in your property. It is always difficult to know but you should really have a fire risk assessment which should lay out to you exactly what is required.

We will list out below some items that might help you:-

Carbon monoxide (commonly known as Co), carbon monoxide is a colourless, odourless, tasteless poisonous gas produced by incomplete burning of carbon based fuels including gas, oil, wood and coal. Carbon based fuels are usually safe to use however when the fuel does not burn properly excess co2 is produced which can be poisonous and it is a killer. When co2 enters the body it prevents the blood from bringing oxygen to the cells, tissues and organs.

Unfortunately, you cannot see it, taste it or smell it but co2 can quickly kill without little warning. There are least 50 people a year that die from co2 poisoning. This is caused by gas or solid fuel appliances and flues that have not been installed properly, properly maintained or they are poorly ventilated. Lower co2 levels do not cause immediately and can cause serious harm to health if breathed in over a long period of time. In extreme cases paralysis and brain damage can be caused as a result of prolonged exposure to co2.

Do I need to take preventative measures?

It is important that you do take some form of preventative measures such as the following:-

Ensure that any work carried out in relation to gas appliances in your domestic premises is undertaken by a gas safe registered engineer and that the work is competent.

The Health and Safety Executive advises that gas appliances and/or flues are installed and serviced regularly by a gas safety registered engineer. The law is that these need to be carried out with a gas safety certificate and produced every year. Served on the tenants within 30 days and acknowledged by them (see our previous article on this). It is a landlord’s legal duty to carry out an annual gas safety and have the gas appliances maintained.

If you have a wood or coal burning stove fitted make sure that it is fitted HETAS approved installer. Make sure that the chimneys are swept at least twice a year. Always make sure that there is enough fresh air in the room containing your gas oiled solid fuel appliances for your chimney or flue.

Make sure that none of your properties have paraffin heaters and cabinet heaters in your house.

Is it worth considering putting a co2 carbon monoxide alarm?

The Health and safety executive recommends and it is a legal requirement for landlords to put in an audible carbon monoxide alarm. They are an important precaution for tenants in the event there is an escape of co2. You should ensure that any co2 alarm complies with British Standards EN50291 and carries a British Approval mark such as a kite mark. They should be installed, checked and serviced in line with the manufacturer’s instructions.

Please note that tenants can be at risk from co2 poisoning when they are asleep because they may not be aware of the early co2 sensors and it is absolutely vital that these are installed.

What are the symptoms of carbon monoxide poisoning?

There can be various early symptoms of carbon monoxide poisoning. They can often mimic common ailments and can easily be confused with food poisoning, viral inspections, flue or simple tiredness such as:-

• Headaches
• Breathlessness
• Nausea
• Dizziness
• Collapse
• Loss of consciousness
• Tiredness
• Drowsiness
• Vomiting
• Pains in the chest
• Stomach pains
• Erratic behaviour
• Visual problems

How would I know if my tenant is at risk from carbon monoxide?

Although carbon monoxide is colourless, odourless and tasteless. There can be signs that indicate incomplete combustion that can be recurring such as yellow or orange flames rather than blue, soot or yellow brown staining around appliances, pilot lights that are frequently blown out and increased condensation inside windows.

How do I purchase a co2 alarm?

Most alarms can be purchased from reputable contractors and currently last between 7 and 10 years. Some co2 alarms do not warn when they reach the end of their life. Which means that they might not function or give the impression of protection and it is important that you make a note of these. We would suggest that Kiddle or Fire/Angel co2 alarms have a sensor life for 10 years and a 10 year guarantee. The kiddle sensor alarm also gives a warning when they are at their useful life so it may be worth looking at this.

Fire extinguishers

Not all fire extinguishers are the same. They are all different and have different effectiveness depending on the fire. So before buying a fire extinguisher it is important that you look carefully at what type of fire it could be used on.

There are five main types of extinguisher used:-

1. Water
2. Foam
3. Dry powder (ABC rated)
4. Carbon dioxide (co2) and dry water mist

There also are some smaller wet chemical fire extinguishers but these aren’t normally used for household but for deep fat fryers etc.

What are the differences and the strengths and weaknesses of each individual fire extinguisher?

Water fire extinguishers

These are good for tackling fires including burning paper, wood and soft furnishing as the water soaks into the materials and cools them whilst extinguishing the fire. It does not contain any form of harmful chemicals but has very low firefighting rating. They are normally quite large and heavy to overcome so they do have a lack of firefighting power. It is also important to remember that water is an electrolyte and conducts electricity so it is important that you are careful when using these or accidental use on exposed power cables. They are free of harm or substances and water fire extinguishers are especially suitable for households where children’s have access to an extinguisher and it reduces the accidental discharge.

Foam fire extinguishers

These type of extinguishers have a smothering film of foam over the fire which starves it of oxygen and puts it out. The foam penetrates porous materials and cools the fire through evaporation of the water content of the foam. It creates a type of foam carpet on burning liquids like petrol and is suitable for liquids and areas where the main fibres of soft furnishings and carpets might be liquefied under the intense heat. They are often used for electrical equipment as well.

Co2 (carbon dioxide) fire extinguishers

These are pressurised co2 gas and thus leave no residue. The type of extinguisher is suitable for fires including burning liquids but it also a good solution for dealing with computer equipment and other electrical appliances. They do not cause damage to electrical items. It is important to remember when using these that there is a possibility once smothering the gas has floated away the fire might re-ignite at source. This depends on whether the materials are extremely hot or not. These are not fitted with swivel horns and therefore can cause your fingers to freeze to the horn during the deployment of an extinguisher. It is extremely important on how you use them to use the guidelines on the equipment itself. They are not suitable for deep fat fryers.

Powder fire extinguishers

Powder fire extinguishers are suitable for firefighting any form of class A, B and C fires. A, B and C fires are such as A – suitable for paper, wood and textiles, B – suitable for thermal liquids, C – suitable for flammable glasses. The powder does not smoke into materials and does not have a good effect on cooling of the fire. This can always result in re-igniting. Care must be taken when using such extinguishers to ensure that you do not inhale the powder. They are small and should not be used in confined spaces where there is a risk of inhaling them. They are not allowed in offices and if you do have them in accommodation they should now be removed.

Water mist extinguishers

Dry water mist extinguishers discharge a jet of mist which wets and cools the surface of the burning item. They are fine mist and partly evaporate when close to a burning surface and it massively expands as a result of steam expelling oxygen from the area thus starving the fire of oxygen. As the water droplets are very light they do not sink below the surface of the hot burning liquids thus avoiding the explosion reaction of ordinary water extinguishers used on burning oil or fat. The water mist can be used on fat fryers.

Wet chemical fire extinguishers

These are specifically designed for kitchen fires involving burning oil and deep fat fryers. The extinguishers come with special long application arms which allows you to safely lay out a cooling layer of foam on top of the burning oil.

What points should be taken into account when tackling a fire?

• Don’t attempt to use a fire extinguisher on a fire unless you feel it is safe to do so
• Position yourself where you can to get it quickly like the hall
• Buy extinguishers that you can carry easily
• Don’t position the extinguisher over the heat to a fire but do fix them to a wallMake sure that you have a fire risk assessment carried out in relation to the property so that you are aware of what requirements you have for these.

Right to Manage – Management responsibilities

You’re pleased to know that the acquisition date is agreed. So you know the day that you will be taking over the management of the building. The Right to Manage Company takes over all the management functions of the premises. Under the contents of the lease. This would be the function exercised by the landlord. But is often delegated to third parties such as management companies or managing agents. It doesn’t matter whoever handles managing the property. The functions pass to the Right to Manage Company on the acquisition date. Then you are responsible from then.

What’s included in the responsibilities?

You need to understand what management you have to take place in respect of the building. This is defined within legislations. As “functions about services, repairs, maintenance improvements, insurance and management”. In real terms it is everything contained within the contents of the lease on your building. It is often misunderstood by lessees who take over on a right to manage that you can now do whatever you wish. You have to take into account the covenants of the lease together with the normal law on management. It is always important to look at RICS code of management and what it consists of. For example what you’re required to do will be as follows:-

1. Carry out the repairs, redecoration and maintenance of the structure of the building. The common parts. Including whether this is on a cycle or seasonal basis. Will be contained within the contents of the lease. It could include for instance lifts and central heating if communal.
2. Any repairs to the building
3. Dealing with all utilities in relation to the property. Including lighting of the common hallways, cleaning, grounds, maintenance and anything else.
4. Arranging the insurance for the building
5. Collection of the service charges and accounting and any statutory provisions or requirements in this regard
6. Compliance with all statutory requirements in respect to the management and fabric of a building. We have already mentioned before RICS code of practice this should be taken into account.
7. The day to day management of the building.
8. Dealing with lessees and any correspondence if you are dealing with the day to day management.

The Right to Manage Company deals with all functions to include approvals and enforcements of the covenants under the terms of the lease. The ground rents collection do not pass to the Right to Manage Company but remain with the landlord. The landlord might yet use a Right to Manage Company to collect his ground rent on this behalf if required.

What is not included in the responsibilities?

1. Management of any commercial parts of the building
2. Functions relating to forfeiture and possession

Non-residential parts are also not included and explained below.

If the building you are going to manage has a non-residential commercial unit. Such as shops or offices, garage etc. then these are not included in the leases. The management of these parts remains the responsibility of the landlord. If a dispute arises. Then unfortunately there is no provision in the legislation to deal with this.

In all cases these will need to be resolved. Through simple and sensible negotiation or at the last resort through the Arbitration or Court. It is something that you need to take into account.

Non qualifying flats

If a landlord owns and lets flats within the building other than on long leases. Then he handles the general management of the tenants of the flats. But will be liable for the RTM company for the service charge on those flats. If repairs are needed to be carried out. Then the landlord will be responsible for the works within the flat. But when the repair relates to the structure of the building then this generally comes under the RTM company. But you should always check the leases. There is a provision under the Act for the landlord’s share of the cost of the management repair to be recovered from him. If there is no lease on this flat so you would always be covered.

Forfeiture and possession

This is a very specific remedy that is for the landlord only and cannot be exercised by the Right to Manage Company. The RTM Company cannot instigate forfeiture proceedings in recovery of arrears of service charges. If the arrears cannot be recovered through other means, the company will have to seek the cooperation of the landlord. If the RTM Company does have the power to sue for arrears of service charge on costs incurred or after the acquisition date.

It is very important that the powers are as clear as possible and that powers are transferred on the acquisition date. The day to day functions and responsibility of the management of the building. Pass to the RTM company. Thus the original management is no longer entitled to perform those functions. But a landlord is still responsible under the terms of the lease. So handles the performance of the landlord’s covenants outside the general duties of any general management. This would be such things as providing quiet enjoyment of your property and the rights of support of flats i.e. the main structure of the building. The Act provides for the landlord to remain entitled to collect service charges. On costs incurrebefore the date of any acquisition.

What happens if one of the lessees needs approval for something?

All leases will contain some form of provisions. Requiring some form of consent to certain actions of the leaseholder. Such as a subletting or making alterations to a flat. The power to issue such approval passes to the RTM company. Although the company must keep the landlord informed. They cannot grant an approval without giving notice to the landlord first. The approvals relating to assignment, subletting, placing a charge on, parting with possession, or making structural alterations or improvements for the change of use of the unit. The RTM must give at least 30 days’ notice. For any other approvals it is 14 days’ notice.

The RTM company does not need specific consent of the landlord. If he does nothing the Company may grant the approval. Where the landlord objects consent is granted. Until the landlord withdraws his objection or the matter is decided by the Tribunal. Where the landlord wishes to object he must do so by writing to the RTM Company and to the leaseholder concerned. This would then be sent to the tribunal.

The leaseholder’s covenants or obligations under the terms of the lease. Become the responsibility of the RTM Company. thus the company must ensure that all covenants are complied with and must keep the landlord informed. The company has a statutory duty to review the leaseholder’s compliance with their covenants. It must take steps requiring any remedy of any breaches. Any breaches which may not have been remedied must be reported to the landlord unless he confirms that he doesn’t need you to do so. The landlord may proceed to enforce these.

We are thinking of ending our Right to manage what do we wish to do?

When you get a Right to manage once it is acquired it is not subject to a time limit and will continue until it is terminated. There is nothing that suggests that it needs to be reviewed at any point.

If you feel that you don’t wish to carry on the Right to Manage any longer then there are three circumstances which it can be terminated:-

1. By agreement with the landlord. The Right to Manage Company may simply agree to return the management to the landlord. But, this will be in agreement with the landlord and is a joint matter and the landlord must agree to take it back. It cannot be imposed on a reluctant landlord to take responsibility of the building. It is so important that you understand the position when you a take on a Right to Manage from day one.
2. A Right to Manage Company may collapse. If the company for instance is wound up. Or taken into receivership or goes into voluntary insolvency. It can also be struck off by Companies House. This would normally be when accounts aren’t supplied to them. Many RTM companies and leaseholders don’t appreciate that when it comes to accounts they only have to deal with money. That they need for the company only not the maintenance account. The maintenance account is held in a Trust fund and as such is not the companies. Company money for instance would be where the shareholders pay money in. To pay out for an insurance such as a Directors and Officers policy. Which would not come under the maintenance fund. Thus it would only be a very simple account for you to give to companies House. At the end of the year. Or if you do not collect or pay out any money of any nature then you would provide Companies house with a dormant company form. This is a very simple form and Companies House will be able to give you advice on this.
3. Through the appointment of a manger. Part II of the Landlord & Tenant Act 1987 provides for a Tribunal to appoint the managers to take over and run the building. Such an order may be in response to an application from any leaseholders or by the landlord. The Tribunal may simply place an order that ceases the right to be exercised by the Right to Manage Company. The grounds for such an application are quite specific and are the landlord or the Right to Manage Company as follows:-

1. A breach of obligations under the terms of the lease
2. Has demanded or is likely to demand unreasonable service charges
3. Has failed to follow the relevant provisions of approved code of management practice
4. Other circumstances which makes it just and convenient to put the order to be made

Where the right to manage is terminated. For any reason. No further application for Right may be made. For another four years other than the consent of the Tribunal. It is imperative that you understand what the responsibilities are. Please do not hesitate to see our previous articles on this.

Do you need a quote for your insurance?

Are you considering Right to Manage and concerned about the cost?

We can provide you with a quote for your Right to Manage in relation to your property. You might find that there are large savings in your insurance. That will provide you with the funds to be able to proceed. We have done on many occasions quotes for lessees. Who are surprised at the amount that the freeholder/managing agent is charging by way of commission. Did you know that you are entitled to ask your managing agent how much commission they are obtaining through the insurance? It may be that their receiving up to 40% commission on the premium itself. We have a guide that we have now produced for Right to Manage. Which has examples where we have saved large amounts of money. For lessees who have been able to use the savings on a year by year basis. To not only pay for the Right to Manage but to also improve the costs of their building on a year to year basis. Please don’t hesitate to contact Charlotte Skinner on (01273) 827090

Right to Manage – how to appoint a Managing agent?

You have completed your Right to Manage and now you have decided to have a managing agent to manage your building. You don’t want to take on the day to day running of the property. Youre concerned about the legislation and paperwork that you need involved.

What is the role of a managing agent?

The managing agent’s role is a complex one and it should also be professional. They need to carry out the role of what is required of the Right to Manage Company. They also need to know Landlord & Tenant Law. Building construction, Health & Safety regulations and basic accounting and more.

There are benefits of a professional management. Which should be balanced against any fees which they will be charging you as you will have to bear these.

Are there benefits of using an agent?

Managing agents are professionals. They should have an organized approach to the planning. Collection of service charges. Reserve funds. As well as time tables for redecoration, repairs, inspection and supervision of works.

They need to assess the building. To understand what will be done and take into account private interests and preferences as well as keeping the property in a good state of repair. They are responsible for collecting funds. Taking reasonable steps to make sure that any unpaid charges are dealt with. All responsibilities for the Right to Manage Company are dealt with. The managing agents should be able to handle mundane and time consuming administration. As well as being efficient in organizing records and documentation for accounting purposes.

As part of employing a managing agent. The Right to Manage Company would be able to distance themselves from any disputes. Be an impartial arm’s length agent who will deal with it for them. The managing agent must hold some form of professional indemnity cover. Against acts of negligence or incompetence. If the right to Manage is going to use an agent. Then they can provide some of the responsibilities for complying with the leases and laws. Codes of practice but please note that Directors will still have a responsibility.

How would I go about appointing a Managing agent?

We give some ideas of what you could do:-

1. Try Check a Trade and see whether there are any managing agents on their and their reputation.
2. Look on Google for any managing agents and see what reviews that they have.
3. See recommendations from other Right to manage or lessees.
4. Check for Tribunal cases on a website to see if any managing agent’s names appear for lessees.
5. Get any local advice from other lessees or your solicitors.

How would I then use a managing agent? And what is the best way to do it?

It will be your responsibility to make sure you get the right professional. You could have informal meetings with managing agents to find out what they are like. You could explain the problems that you are currently having. Ask them to give details of how they would deal with it. Each agent would tackle the problems.

Who will be your contact if they take over the management and what are their response times to emails and phone calls. What happens if that person is on holiday? Will you be able to choose the contractors you want to use or do they have set contractors that they wish to use. Do you keep final approval?

Ask them about disclosure of commissions for insurance. As this can be a particularly difficult question. It may be that you wish to do your own insurance because you know that they will get commission and you will not get the best possible price. You may wish to make this clear from the beginning of the agreement.

Check how they will deal with the financial records including accounts and demands and what their arrears procedure is.

There is an Association of Residential managing agents. Called ARMA who will be able to help you with local managing agents as they will have a code of conduct. Also RICS who we have mentioned before in another article. Which is the Royal Institute of Chartered surveyors who will have a management contract that you could read. You must take into account that management fees may go up on a yearly basis so you would need to check this.

How do I get the best from my managing agents once I have employed them?

It is important that you give clear instructions from the outset of the contract. That you are going to enter into and how you want to deal with instructions. You need to make sure that they know what responsibilities that they have as well as what authority. They need to make sure that they know how much to spend from the service charge without your authority and what time scale you need for any action. You need to make very clear what are the lines of reporting and communication and how you wish this to take place.

It is important that individual leaseholders and the agent know from day one who to take instructions from. An Agent cannot be expected to read instructions from all lessees. It needs to have one point of contact at the very least. A most effective arrangement would be for an agent to attend and report to meetings of the board. Between meetings one of the Directors would be the point of contact. It depends on you from the beginning how many meetings you would have with the board i.e. whether these are six monthly or yearly. Meetings can be organized. The board’s instruction to the agent then could be minuted enabling the lines of communications to be free and open.

Remember that your agent cannot take instructions from the board that would put him in breach of the lease with the landlord. He has a code of practice and statutory requirements. As well as health and safety legislation to take into account but he must inform you when this is the case.

It is all about communication when dealing with a managing agent and how you want to make sure that they respond to not only you but the lessees in general.

Do Managing agents need professional qualifications?

If you are looking for an agent you may go for experience rather than qualifications. Most managing agents include the membership of the Institute of residential property managementRICS. Or any other qualification you may have in property management. You should look for firms who have a membership of certain established trade bodies. Most agents are either members of ARMA or RICS which will be important to you.

The advantage of having a membership of a registered professional organization. Are that they will have some form of professional indemnity insurance. If the agent acted negligently. They should have and hold infidelity insurance. In the case where a member of staffs found to have stolen monies. They will be checked the way that they hold monies. Collected on behalf of clients i.e. you. They will have to have a complaint handling procedure and access to an independent ombudsman service. This would only be in the event of a dispute.

What do managing agents need by way of insurance?

It is so important that you ensure that your agent has professional indemnity insurance. If an agent is a member of a professional or trade organization. Then professional indemnity insurance will be an automatic part of their conditions of their membership. They need to supply you with a copy so that you can check this.

But, please be aware that this would not cover you for an act or omission or negligence by a Director. But would only would deal with the managing agent. You need separate Directors and Officers insurance that we can provide you with.

Codes of Practice

There is a code of practice of the management of residential leasehold properties. The Government so far has approved two schemes being one of our ARHM which relates to housing and one by RICS which relates to management. If you appoint an agent you should always ask to confirm that they comply with the RICS code of practice and most ARMA agents would do so.

Should I enter a contract/management agreement?

This is extremely important and we would suggest that you get your solicitors advice on it. There are several models that can be used as well as RICS have a standard one which can be purchased. This is something that you do need to take advice on.

Can we remove our existing agent before appointing a new one?

It depends if you are unhappy with your current agent and you have tried to use their complaints procedure and ombudsman if available. If you are so unhappy you decide that you want to change agents then there are various things that you need to consider before you do so.

1. You may find that they have a notice period that is required under the terms of their management agreement. If there is no management agreement or period in the agreement then you need to agree with them a time for them to leave.
2. It would always be sensible to end on a date that fits in with the service charge payment periods or an end of year accounting period. This would make the accounting easier for you to deal with or your new managing agent.
3. Check what the financial position of your scheme is. Is the service account in deficit and if so how will you deal with this when transferring it over?
4. Are there any large outstanding arrears that would make it difficult for you to have your new agent provide a service?
5. Are any of the management services or management fees in dispute?
6. Draw up a list of what documents you want handed over from one agent to another
7. What sort of accounting statement should be drawn up for the termination which you need to agree?
8. Don’t just appoint another agent to sort out any problems. Try and get them resolved before you transfer it over.
9. Try and understand with your new managing agent what they need and perhaps get a list up from them before you contact your managing agent
10. You may find that a new agent is happy to deal with the changeover for you.

Is there a list of items that I should be asking the new managing agent or that I can check that he does?

• Will you prepare an annual budget for service charges?
• What regular billing and collection of service charges will you do including management fees?
• Is there a provision for you to do a budget report of income expenditure and cash flow?
• Will you arrange for the preparation of draft accounts in anticipation of an examination from an independent accountant?
• Do we need an independent accountant for accounts?
• Would you prepare a reserve fund plan relating to maintenance?
• How do you pay your invoices monthly or weekly?
• What is the arrears collection procedure for service charges?
• How do you attend to routine enquiries from lessees and residents?
• How do you respond to solicitors and lessees enquiries requiring assignments and leases?
• How often would you have a general meeting with lessees?
• Do you deal with insurance claims?
• Would you prepare a long time maintenance and repair plan
• Do you deal with the day to day repairs and maintenance promptly and efficiently and if so is there a time scale.
• How do you deal with the preparation of maintenance plans and contracts for plant machinery?
• Do you advise on major contract work and the use of specialist professional contractor?
• Do we have to use your contractor?
• How do you deal with the compliance of the lease terms. What the policy will be agreed with the board on authorisation to instruct solicitors in relation to breaches.
• Would you represent us at the County Court arbitration tribunal?
• How many contractors do you use when you put out to tender
• What is your cost for supervising works?
• What is your training for the compliance with Health and safety regulations?
• What do you charge and is it fixed or increased every year
• How would you update the board on any procedures or requirements for new legislation?
• Would you tell the board of any suggested management policy?
• Would you tell the board on any financial maintenance and legal matters?
• Would you report any significant lessee issues?
• What is your document management procedures and issues?
• Do you do any periodic newsletters to lessees?
• Do you deal with any issues in relation to the company?

The more research you do in relation to managing agents. The reviews they have the easier it will become for you in the event that you wish to use a managing agent

Right to Manage preparation, How to qualify

Introduction:

We have created this article to try and give you an overview of the law it is not an interpretation of it. In that event we would suggest if you have any queries then please do not hesitate to contact a solicitor. We are more than happy to recommend one if you do not have a specialist solicitor who works in this area.

If you are in any doubt about your rights and duties you should seek specific advice.

The Commonhold and Leasehold Reform Act 2002. Provides a right for leaseholders to get the landlords management functions. by a transfer to a Company set up by them. This is a Right to Manage (known as RTM). It allows you to manage the building rather than the freeholder. So you can ensure your costs for the building are reduced. Without paying for excessive insurance, maintenance costs and anything else. that you believe that you would be able to maintain your property better.

It was first introduced to empower leaseholders. Who generally hold the majority of the value in their property. To take responsibility of their block. It was not meant to get rid of bad landlords or managing agents. But to help leaseholders improve their own building. The Right to Manage is available to leaseholders of flats. But not yet houses although there is legislation being created to help with these scenarios.

The Law Commission has recently published a proposal for new procedures within the Right to Manage. They have found that many leaseholders with setting up a Right to Manage Company and the Right to Manage Regulations. Which are often quite complicated. The proposals being outlined are to simplify the whole process. To ensure that leaseholders have a much easier way of dealing with their freeholder in future.

The process can be simple if the guidelines are followed and landlords consent is not required or a Court Order. There is no need for the leaseholders to prove that there has been any mismanagement by a landlord. The Right to Manage is available whether the landlord has been good or bad at management. It is more for empowering the leaseholders and lessees.

The right is exercised by a formal notice on the landlord. After a set period of time the management transfers to the Right to Manage Company (RTM) which will be set up by the leaseholders. Please see our Article on forming a Right to Manage Company. Once the Right to Manage has been acquired, the landlord is also entitled to be a member of the company.

It is important for lessees who wish to do this process that there is a large amount of research and work to be carried out before any notice can be served. It is important that you thus take legal advice. Prior to serving any such notice because if it is invalid then it can preclude you from managing a building or employing your own managing agents for a period of time. You will also have to take over the management of the building if you are successful. so you have to consider whether you wish tousey your own managing agent in future or do it yourself.

This guide sets out the issues and practicalities of the right and what you would have to do.

How to prepare to serve the notice for a Right to Manage Company.

You would need to take into account what the leaseholders want to achieve by taking over the management of the building. Is this to reduce your costs or to put your own managing agent into place? It will make sense for leaseholders to take general control of the upkeep of their most valuable asset being their flat. It will also bring duties with it and liabilities so it is important that you understand what is involved. You can insure yourself against any such issues once the Right to Manage Company has taken over through a Directors and Officers insurance policy. Please see our article on this. When acquiring the power to make approval and enforcements of the covenants, you have to adhere to the contents of the lease. The leaseholders become wholly responsible for all decision making on budget and reserve funds. As well as standards of management and the provision of services. Such as repairs and major works together with the function of the building. It is important at that point on whether you decide to manage the property yourself or to use a managing agent. You will be in control of your costs and thus Directors and officer’s liability insurance is and will be key for you. It is something that we would always recommend.

You need to take the above into account before you make any decisions on whether you wish to have the Right to Manage.

RTM does not mean self-management in itself. The Right to Manage Company can decide to either carry out a day to day management or delegate the function to a managing agent. Any managing agents will be instructed by the RTM Company. So decisions such as major works could still be taken to the Right to Manage Company if they wished.

If the building is small and say no more than six flats the day to day management may be left to a professional managing agent. This may be the best way of dealing with it. RTMs are often put in place through the dissatisfaction with the present managing agents. The leaseholders feelings of importance in the decision making process may not be taken into account. By the managing agents and they may have shortcomings in their ability. You may find that the same managing agents working with the instructions of an RTM could deliver a better service. Rather than the upheaval of changing managing agents. Only you will know dependent on your individual building.

Major motivations on a RTM are to save money on maintenance and repair works. It is a sensible goal for the RTM to adopt a responsible attitude for long term maintenance aspects of the buildings. You must understand that the building remains in the landlord’s ownership. The flats remain the leaseholder’s principal financial asset. The Right to Manage Company has to be careful. In not reducing the money spent to the point where essential services are not provided and the building may deteriorate. You need to know the RTM still has to deal with the covenants in the lease and carries out the duties and responsibilities. You have to do exactly what the lease states not carry out items when it comes necessary and convenient. This is your legal duty.

Right to Manage Companies need like any other landlord to follow the Government approved code of management practice. There are currently two such codes one produced by the Royal Institute of Chartered Surveyors (RICS). Secondly the Association of Retirement Housing Managers (ARHM). Which relates to specifically purpose built retirement properties. It is not mandatory at the present time although there are proposals to make it so to follow the codes. But if you fail to do so these are grounds at a Tribunal to either use a new manager or end the Right to Manage if it has not been done properly.

These documents can be difficult to understand but are easily accessible on the internet.

A brief summary of what taking over the management of the property will bring by way of responsibilities.

It is very important at an early stage of any Right to Manage to consider what the responsibilities will be in future.

These can be as follows:-

a) The leaseholders will manage the building for an RTM and will need to learn about companies procedures. Or to employ somebody who can advise them on such matters. However, Companies House are extremely helpful and any solicitor would help you through this process.

Officers for the RTM company must be found initially but also on an ongoing basis. The officers have the normal responsibilities of Company Directors as well as the landlords of residential properties.

The RTM Company can be vulnerable to criticism from lessees and residents as was the landlord. You must understand that being in control of the management responsibilities often brings out irrational behaviour from people. You may have to take the rough with the smooth.

b) You may need to have regular meetings so that people are informed what is going on.

There may be technical issues to deal with such as budgets and accounts, specifications and legal requirements but any solicitor advising you through the process can help you with this.

c) There will be a need to keep the RTM company solvent. It is important that you understand what accounts a Company has to provide which are not leaseholders accounts. This should be very minimal and again Companies House can help you with this.

d) There may be difficulties and sensitive issues to deal with such as neighbours and leaseholders on difficult subjects but this is the whole point of taking over the management.

e) The company’s Directors are legally required to comply with a range of Company Housing and safety under Health and Safety law which you will need to look into.

f) If you have an employed person by the freeholder you would have to look at the TUPE which is a transfer of undertakings and protection of employment regulations. However, this would be highly unlikely and very unusual.

All of the above may seem difficult but the Right to Manage is an opportunity for those who have an interest in the building, the leaseholders, to run their own affairs to make the decisions to upkeep their flat. It is an opportunity that most times peoples shouldn’t dismiss lightly.

Qualification for RTM.

We have provided this in other articles in detail but there are minimum requirements as follows:-

1) At least two thirds of the flats must be “qualifying tenants”

2) It can be part commercial but the non-residential must not exceed 25% of the total floor area, excluding common parts.

3) RTM does not apply where the immediate landlord of any qualifying tenant is a local housing authority.

4) RTM does not apply when a premises fall within RESIDENTIAL LANDLORD EXEMPTION. For a landlord to have this exemption they would require the following:

a) The premises must be other than a purpose built block for example a converted house and it must comprise of not much than four flats and one of the flats must be occupied by the freeholder or an adult member of their family as their only or principal home for the last twelve months.

A qualifying tenant is a leaseholder whose lease was originally granted for an original term of more than 21 years. There is no requirement for any past or present residents in the flat, nor any limit on the number of flats which can be owned by one person.

The Right to Manage may only be exercised by the Right to Manage Company and the members of the Right to Manage Company must comprise of a sufficient number of qualifying tenants. The required minimum number of qualifying tenants must be equal to at least half in terms of number of flats within the building.

The right relates to a building so, in an estate of separate blocks, each block would need to qualify separately and an individual RTM notice served. In the case of an estate of flats under the Right to Management, it will be sensible to take over the management of the whole estate, but this would have to be accomplished by application in respect of each separate block.

The RTM Company

The Right to Manage can only be exercised by the Company, not the individual leaseholders, and cannot be done without the formation of a company. Please see our previous article. It is the Company which obtains the right to manage and which takes responsibility for the management. This is to ensure that as the leaseholders change over a period of time it does not affect the overall management of the building through the Right to Manage Company.

The Right to Manage Company must have Articles of Association which govern the purpose and running of the company. The articles are prescribed by law and a company which does not have a valid RTM for the purposes of the act does not match these provisions. This can be done when you form a Right to Manage Company and please see previous article on forming a Right to Manage Company.

There are various prescribed articles which are set out in a statutory instrument 2009 number 2767.

If you want to form a Right to Manage Company it is quite a simple operation. This can either be done by a solicitor, company agent or the qualifying leaseholders themselves.

Companies House produce various articles and leaflets that would help you within this process and they are extremely helpful.

You can contact the registrar of Companies which is at Companies House, 4 Abbey Orchard Street London Westminster SW1P 2HT telephone number 0303 1234500. They also have one in Cardiff being Crown Way, Cardiff CF14 3UZ.

Any number of qualifying lessees/leaseholders may set up the RTM company. The law does not require the full number of participants at this stage. Simply enough participants to provide a Chairman, some Directors and a secretary. However, the law has recently changed on this and you may not even need to provide a company secretary or Chairman but you should check with Companies House. One of the very first steps when dealing with a Right to Manage Company is to identify those leaseholders of the building who are prepared to take on this responsibility. They can get insurance through Directors and officers insurance and please see our article on this. Once the Right to Manage Company has bene registered, with its original members, then it must formally invite the rest of qualifying leaseholders to join and we outline this in a separate article.