Right To Manage Insurance
Do you own a leasehold property and want the Right to manage it yourself?
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Do you want the opportunity to control how your property is managed and reduce your costs?
Right to Manage gives leaseholders the opportunity to take over the management of their property and reduce their outgoings.
Freeholders and managing agents are often charging substantial sums on various outgoings and especially insurance. Leaseholders who manage their own buildingn without the help of a managing agents can make substantial savings from freeholders and managing agents as these people often receive commissions. Why not look at the leasehold advisery service by the government that also has useful information, click here.
Right to Manage as your legal right!
Parliament passed legislation to help owners like yourself to have the Right to Manage your property without having to prove fault by your landlord or managing agents and to pay any compensation.
Why claim your Right to Manage?
If you live in a block of flats and do not have any say in who runs the block then you can benefit from the Right to Manage process.
The right is available to flat owners, in all blocks, where they fulfil the following criteria:-
- At least 50% of the flat owners within a physical block of flats must want to go through the process.
- At least two-thirds of the flat owners within the physical block must have long leases (more than 21 years)
- No more than 25% of the property may be used for non-residential use i.e. commercial
If your block fulfils this criteria then it is highly likely that you will be able to go through the Right to Manage process. There are certain legalities that you need to go through, please see our article on this.
There is no need to prove mismanagement by the landlord or current managing agent to implement the right. It just means that you will be taking over the management functions and dealing with items such as:-
- Repairs, redecoration and maintenance of the structure of the building and common parts.
- Services such as lighting, cleaning and gardening.
- Collection of service charge and accounting
- Complying with statutory requirements relating to the management
- The day to day running and management of the block
- Insuring your building
Don’t hesitate to call us on (01273) 827090 as we have an extensive knowledge of the process of Right to Manage and how lessees can not only reduce their premiums but ensure that the amount of the reductions sometimes pay for the whole of the process itself!
Purchasing the freehold
You can as a resident also purchase the freehold. Whilst you may be a leaseholder there is always a freehold and you can through enfranchisement purchase a freehold through a statutory process. It may be that you can informally approach the owner of the building and negotiate with them to see if they will sell it. They are commonly known as a freeholder or a landlord.
In the event that the freehold does intend to sell the freehold then they must first offer it to the leaseholders.
These rights can be very important because they allow leaseholders communities greater control over how and when repairs should take place. They very much help in relation to costs. You might often find that freeholders are carrying out repairs for wear and tear but they don’t actually need them. You can then decide on what work contracts you want and building insurance cover.
To quality to purchase the freehold, there are certain conditions that must be met and these do change but they are the following;
- At least two flats must be held in the building.
- 25% or less of the freehold building must be used for purposes which are not residential.
- 2/3 of the flats at least much be owned by qualifying leaseholds.
- At least half of the flat owners must want to participate in the purchase of the freehold.
- Qualifying leasehold must hold leases that have been granted for 21 years or more.
You also need to take into account when you are looking at your insurance what your current building insurance cover has and whether you need this type of insurance. Freeholders often put in additional items that may not be required. You may want for instance loss of rental income as well as malicious damage which we can provide for you.
What are the advantages?
Whilst there is additional responsibility with owning the freehold, in most cases leaseholders find that there are significant advantages with doing so. These can be;
- Residents gain the full ownership not only of their flat, but the building in its entirety which means they can take over things like communal areas, maintenance, repair and building insurance. This means keeping the building to a much higher standard at a more affordable cost.
- Owners of the freehold no long need to pay ground rent and instead will only need to collect service charge.
- Residents have complete control of the third party contractors or services provided that they chose to maintain, repair and manage the building which can lead to better work and more affordable service charges. This includes, building insurance why not as for a quote here.
- Freeholders no long need to pay for their lease extensions and can extend their lease for whatever term they wish for.
- Purchasing the freehold can add significant value to the property. Buyers often find it to secure a mortgage on all flats if the building lease is running down. So the longer the lease and the share in the freehold this makes it much more attractive to any buyer.
- Freeholders can bring in, subject to the terms of the lease, any rules and regulations they see fit in respect of the building.
What are the disadvantages?
There are some benefits to owning your own freehold but it is also important you understand what the disadvantages are the main thing to consider is that the full responsibility of the building falls to you as the new freeholder. This can be an individual group who may not have experience in dealing with a building or management. Other draw backs can be such as;
- Initially getting the agreement and funding residents can be difficult. You always want them to be involved and committed. This can be more of a problem with larger buildings than with smaller ones.
- Depending on the types of maintenance in the building required, you may find that smaller blocks are much more expensive than larger blocks and you still have to do the legal paperwork that is involved in this.
- Freeholders need to be aware of their obligations regarding the administration and legal paperwork. Failure to file the right to documentation or keep up with finances could incur financial consequences. Why not contact us and discuss directors and offices insurance in this regard.
What are the cost differences between freehold purchase VS right to manage?
Significant differences are maintained between right to manage and purchasing a freehold. Obviously, when you are dealing with the purchase of the property this can be much more expensive than dealing with trying to organise a right to manage. Long term you will find that the overall costs in respect of the building will be coming down but sometimes especially with the current cost of living people are not always conducive to increasing their cost. Why not ask us for an insurance quote to see whether the saving on your insurance could pay for the process?
Right to manage costs
There are costs associated with right to manage…
Once you have served the notice of claim, the right to manage company is liable for any reasonable costs incurred by any of the landlords or management companies in the process. This could run to a couple of hundred pounds, a typical budget of £200 per flat is sensible. Make sure you have this money before you start. There are also administration costs such as postage for the documents, looking up deeds and registering your right to manage with companies house.
A right to manage claim can be very complicated. If you make a mistake you could find the costs increase quite substantially. It is therefore extremely important that you consider using a solicitor right from the beginning of the process than the end.
Right to manage solicitor – Do I need one?
There isn’t a requirement for you to get one but setting up a right to manage company and navigating the process of taking over management of your building can be very complicated.
It is a legal process and you may want to consider getting advice from a solicitor to ensure you do everything properly. It can be extremely costly in the event that you don’t use a solicitor and you do part of the legal process incorrectly.
You will find that this is a specialist area and not doubt with on a day by day basis by many solicitors. We can happily recommend right to manage solicitors as we deal with them on a regular basis who are lessee based. They will deal with lease extensions, enfranchisement and right to manage cases on a regular basis.
Acquisition of the right to manage
If it all proceeds and the freeholder doesn’t challenge your claim, you should take over the management of your building four months after the date of the notice of the claim.
If you do have to go to a tribunal and it rules in your favour, your company should acquire the right to manage three months after a tribunal decision.
When you take over the right to manage the freeholder should supply you with the details of any existing contractors and inform them of the change of management. They should also transfer any service charge that has been collected but not yet spent. The freeholder can also apply to be a member of the right to manage company.
Setting up a right to manage company
The right to manage company must be done via a company, you cannot do it as an individual or group of leaseholders. This means you must form a company to claim your right to manage.
For your company to be recognised you must have article association which set out the purpose of your company and how it will run. You also need a memorandum of association. This is a document listed of people who intend to form the company. You will also need to assign people to be the officers of the company such as directors.
We would advise you to use a solicitor to do this.
Once you have acquired the right to manage you take on all aspects of managing the building listed under the terms of your lease. However, you must inform the freeholder of anything that requires consent such as alterations to the building.
The right to manage company does not have to keep on any existing contractors which means you can switch to others if you are unhappy with the cost or quality of the service.
You now have the power to enforce obligations under the terms of the lease.
The right to manage company is responsible for ensuring the common areas are lit, heated and cleaned. You will need to ensure the building is adequately insured and all service charges are collected.
Why not contact us prior to you starting the process? We will happily give you a quote in order to help you with the cost. Could we reduce your insurance premium to such an extent that allows you to use the savings to pay for/contribute towards the cost of the right to manage.
Contact us on 01273 827090 or email@example.com
Right to manage problems.
Claiming the right to manage of your building can give you great power to run it as you think fit but there are always problems.
These can often include as follows;
- Understanding what you are taking on – Make sure you aware the level of responsibility that comes with right to manage.
- Unexpected costs – Right to manage comes with costs over and above your usual service charge. This includes admin fees, accountants, submitting annual returns and insurance for company directors. If you require directors and offices insurance contact us on 01273 827090. Make sure you have a budget for these.
- Funding shortfall – if your building needs immediate repairs or improvements you may find there isn’t enough in the pot to cover these costs. This could mean the right to manage company members have to pay extra money to pay for repairs in the interim before the next round of service charges are collected.
- Poor management – you have jumped out the frying pan into the fire. The common problem occurs with right to manage when leaseholders don’t fully understand what they are taking on then struggle to run the company. Why not think of employing a managing agent to do this for you.
Some examples of our Right To Manage clients
Freeholders Insurance/ Managing Agents – Premium £5,814 Comprising of 9 Leasehold Flats
iInsure365 – Premium £3,106 – no compromising on the level of cover Massive saving for the client – £2,707
Some examples of our Right To Manage clients
Discovered that sum insured was incorrect. Potentially risking any claim being paid out at a substantially reduce amount Average pay out would have been applied. There was a risk of the claim not being paid at all. The sum insured was reviewed with our low cost service which resulted in an increase from £850,000 to £1,200,000
iInsure365 – Premium £1,665.19
Some examples of our Right To Manage clients
Grade 2 listed building – Landlord has major block policy on various sites Comprising of 69 Flats. Directors and Officers now included and Terrorism added for client Landlord Premium £21,646
Our premium matched but included Directors and Officers cover
More Right To Manage Insurance Information
iInsure365 Brochure for Right to Manage and Enfranchisement clients
Click here to download the iInsure365 Brochure for Right to Manage and Enfranchisement clients
Customer reviews on building insurance premium savings.
‘Always a really good experience renewing my insurance with iInsure365. They contact me well ahead of time and hunt down the best rates. Great, friendly and professional service!’
‘Fast, friendly insurance at a very competitive price. 100% recommend!’
‘A great company to deal with. I contacted them and provided my details and in less than ten minutes, I received with a competitive quote for Landlord House Insurance and copy of the certificate.
I would highly recommend this company.’
‘Very helpful service with quick replies and great staff.’
We have exclusive insurance products for the ownership types described above. Request a call back to speak to a member of the team.