You have served the notice on the landlord. You have an acquisition date you are moving towards. What are the next steps you will need to take place?
One important step will be the insurance. You will need to ensure that you not only have insurance in place for the acquisition date. But it is exactly what you need. It may be one of the main reasons why you are able or want to proceed so its a good idea to start at an early stage, don’t hesitate to contact us for a quote.
Management contracts by the landlord
The landlord could well have many contracts that are in place in relation to your building. It is the responsibility of the Right to Manage Company to make itself aware of them. That the relevant contractors have given warning of the impending transfer management. There could be a contract with a managing agent for the whole management of the building. A lift maintenance contract. Boilers and central heating contract. Door entry system Contract. Cleaning, gardening, caretaking and other direct services or provisions of supplies.
You are now taking responsibility for the management as it passes to the RTM Company. The landlord will no longer be able to fulfil his part of the contract. The RTM Company will need to make decisions on whether to renew the contract. Or to look elsewhere for other services. This may be due to the cost that you wish to try and get a better quote elsewhere.
What is the RTMs responsibility?
It is important that you make sure you have taken steps to ensure a smooth transfer of management services. It is the RTMs responsibility on the acquisition date. To deal with the day to day management thereon. For instance, if somebody was trapped in a lift. You didn’t have a maintenance contract you would have been responsible. It is so important to make a list and prepare for what needs to be done.
It is the landlord’s duty to ensure that parties are aware of contracts. Through the service of various notices. You should have had any notices and be aware of contracts.
A contract of notice must be served on contractors appointed by the landlord and include the following information:-
a) Confirmation of the relevance of a contract as well as a copy of it.
b) Statement of the Right to Manage to be acquired by the Right to Manage Company
c) The name and address of the Right to Manage Company
d) The Acquisition date
e) A statement advising a contractor you wish to continue to provide services to the building. To contact the Right to Manage Company.
f) It would be in your interest to make sure that you contact these companies to find out whether you wish to continue with them. Or whether you wish to finish. They may have notice periods and it is important that you are aware of these.
g) Where there are services that are subcontracted. Then the contractor who receives the contract notice must send a copy to a sub-contractor as well
h) Contract notice – this must be served on the Right to Manage and include the following information:-
I. The details of its existing contract and the name and address of the contractor
II. A statement advising the Right to Manage Company to contact those contractual services that it wishes to keep.
The landlord doesn’t have to supply you necessarily with a copy of the contract. But inform the Right to Manage Company of its existence and that it is now party to it. It is so important that you get the information direct from the contractor if required.
The contractor contract notices should be served by the landlord. As soon as possible after he receives the notice of any claim from the RTM Company. But, this should be no later than is reasonable or practicable. This should be after the determination date. It is enforceable through the County Courts. So you need to try and work out from the maintenance accounts whether you think there are contracts. The Law changed some considerable time ago so you should have been given notice of any long term contract that had been entered into.
Determination date is the date specified on notice of a claim. For the service of the landlord of the counter-notice and if the claim is disputed by the landlord. The final date of the determination of the tribunal or the date or subsequent agreement by the landlord. This is outlined in our previous article.
Because there is a gap of three months between the determination and the acquisition. The notice should be served well before the management is transferred.
If you are going to be a well-organized Right to Manage Company you should have obtained all these details at a much earlier stage. You should have already made the decisions on whether to keep the existing works contracts or get a new contractor. It is important that you are organized. That all existing contractors will be prepared to contract with the Right to Manage Company and that the company should investigate any alternative providers if they are not. You need to realize that as you are breaking an existing contract. That the company has the opportunity to review the contract services of the building. They can re-specify or re-negotiate their terms. It is up to you whether you decide to keep them.
Has the landlord a duty to provide all the information
A lot of landlords will drag their heels when it comes to transferring information to an RTM company. The RTM company cannot manage a building without detailed information and records. They may need the landlord to provide whatever the company determines is reasonable. in connection with the exercise of the Right to Manage Company to manage the building. These requests will be different as they are requests for information. The earlier requirement for information was the purpose of serving notice of claim. This right for information isn’t the management of the building so they are very different. The RTM Company must be quite clear on its requirements. You might want to consider having professional advice on what you wish to get information on as you may not get to ask this twice.
Unfortunately, the landlord has no statutory obligation to provide the information requested. He is not obliged to volunteer. The company must make clear and precise in the notice to him what they need. The Company may need sight and the inspection of document. Or copies of them for example contracts, accounts, etc. as well as maintenance schedule. It is important sometimes as landlords aren’t often forthcoming. That you try and get this information as you go through.
If the RTM is appointing a new managing agent then they may be able to tell you and get records on your behalf.
The notice for information can be served on the landlord any time during the process. But, he is not obliged to act on it before the acquisition date. He must comply within 28 days of a notice but cannot do so before the acquisition date itself. You will often find thus that he may not have any information. Of what is in the maintenance account. Until the day you complete so it is important that you have a budget in advance of what you are able to pay out at the time.
If for example you serve a notice on the acquisition date the landlord must comply within 28 days of the notice. If the notice is served say 28 days before the acquisition date. Then the landlord must comply within 8 days of the acquisition date. It is thus important so you know exactly how much money you may have in any account. When they transfer it over that the notice is served as early as possible.
The timings allow the landlord enough time to assemble information but does not need him to release sensitive or confidential material. Before the RTM company actually takes over the management. They can thus delay this and make it very difficult for the Right to Manage Company to work out where they will be. It is so important that this notice is served as early as is possible.
Delaying the service of notices until the acquisition date could create a very difficult situation for you. The company would not be able to manage without proper information but a landlord could quite legally delay it for 28 days. You should take legal advice on exactly when to serve this notice.
Most reasonable landlords will be concerned with maintaining proper management of his long term asset. They should provide the information and records required. In other cases arrangements must be put in place for the continuity of the management. Without the information during the notice period. Or even longer if the landlord fails to comply. With any matter that has to be referred to a court for enforcement. It is important so that you take professional advice on this on what you may be required to do.
It is important that you are aware that on the acquisition date if you wish to transfer the insurance. You are liable to pay the premium on that day. But we are able to help you in this regard. In accepting part payments or delayed payments. Don’t hesitate to contact us or look in our recent guide for the services that we provide in this area.
What are landlords’ duties to transfer funds?
The landlord has an obligation to hand over any sums that are not yet paid out to the RTM company. He should be holding these into a Trust fund and any service charges that have been paid in advance should be paid over. These will not only include the unspent charges but also any reserve or sinking fund that they may have accrued. This does not need any form of notice from the RTM company. The actual law requires the landlord to act and make payment to the RTM company. Equal to those uncommitted sums held by him on the acquisition date or as soon as is practicable.
The amount of the sum paid are the monies paid by the leaseholders as service charges. Monies invested in service charge payments. Any interest and the landlords outgoings for the provision of services up to the date of acquisition. It would be like any normal account showing the income and expenditure.
The RTM Company has no need to have any form of capital. It is important that they can control these funds. As soon as is possible. To maintain the service provisions to the leaseholders of the building. Any difficulties likely to arise lie in agreeing what the sum should be as accounts are not always up to date. It is down to the landlord to ensure that these accounts are provided. On the acquisition date or thereafter.
The Landlord & Tenant Act provides that an application may be made to the Tribunal. To determine the amount to be paid. Where some landlords rely on the Tribunal to fix the sum other landlords make pay what they consider to be appropriate. The Right to Manage Company can challenge this through the Tribunal at a later date if required. You will find that in most cases the RTM company and landlord agree an external audit of the service charge account. The RTM company to cover the cost of this so that they can take over. An audit is a list of income and expenditure carried out by an accountant and is certified by them so that it can be used in the future. This is done by either an accountant or a managing agent. Acting on behalf of the landlord. They may be prepared to take over the responsibility of handing over the sums to the Right to Manage Company. You would expect some form of verification.
Where there is a dispute the Tribunal can provide a final route for determination. This shouldn’t be the first port of call. As the Tribunal are under constant pressure. Determinations can take a long period of time and not help the lessees deal with the maintenance on a day to day basis in the future. You can challenge service charges at any point through the Tribunal if you wish.
The RTM company might be in a difficult position if a hand over of monies is delayed and it is sensible to expect that this may be the case. You would have to put in some form of financial ability to deal with the day to day operation. i.e. the members of the RTM making a special contribution or the company seeking a loan which you are unable to do. It is down to you that you know what is due to come out of the maintenance account and what you need to provide for. In the event that you did have to take any form of enforcement procedure. Then this would have to be an application to the county court on a 14 day default notice.
It is clear from the beginning of any Right to manage that you will know well in advance when the end date will be. As such there take into account what monies you need to have. It may be that you even ask for maintenance demands to be delayed. So that you can send these out to lessees in future yourselves or that you make loans to the account. It is a question of whether you have a landlord who wishes the right to manage to go through or is being difficult. You should take legal advice on this.