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:-
- 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.
- 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.
- 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.
- 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.
- The building will not qualify if there are four or fewer flats and there is a resident landlord.
What is the procedure?
- 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.
- 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.
- 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.
- 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.
- 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
- 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.
- 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.
- 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.
- 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.
- The freeholders are entitled to apply to be a member of the Right to Manage Company after the acquisition date.
- 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.
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.
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.
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.