Right to manage is the term used for the statutory freehold management right. It allows a group of leaseholders to take over management of their freehold. However, it is not dependent on the freeholder doing anything wrong. There are some strict qualification criteria in place. So, it is not always possible to acquire management using the statutory process.
The basic criteria are that you must have:
- Over 50% of qualifying tenants want to proceed, meaning leaseholders who have a long lease.
- A self-contained and self-sufficient (or capable of being self-sufficient) building
- At least 75% of the building must be used for residential purposes
- There cannot be an existing right to manage agreement in place
What do the leaseholders now manage?
If successful, the right to manage company takes over the following duties in respect of the building:
If the building is part of a large estate, the management does not include communal grounds or areas. The management of those areas will continue with the freeholder (or managing agent). In addition, the landlord will still own the freehold and will remain involved in the collection of ground rents and the granting of lease consents (like subletting or carrying out works inside the flat).
What happens to existing contractors?
After the right to manage company takes over, the leaseholders will get to choose which contractors and third parties to use for maintenance. Consequently, all the freeholder’s contracts end as part of the right to manage take over unless specifically requested by the right to manage company.
Do the leaseholders have to manage the building themselves?
No, there is the option to appoint a managing agent of the leaseholders’ choice. There is no obligation to choose the same managing agent as the previous freeholder. Interviewing at least 3 different managing agents would certainly be recommended as there can be huge differences between agents.
How long will this take and how much will it cost?
Estimated timings are below. However, in total, the process will take around 6 months if the freeholder does not contest it. Costs can vary based on building, solicitors and freeholders.
|Stage 1: Assessment||One week||Assessing if a right to manage can be applied.|
|Stage 2: Setting up the company||One week||There needs to be a minimum of one director and one member initially.|
|Stage 3: Notice Inviting Participation||Four weeks||Notice to all remaining leaseholders asking if they would like to join the company.|
|Stage 4: Qualification||One week||At least 50% of the qualifying leaseholders have to have signed up. If not the process cannot go ahead.|
|Stage 5: Claim Notice||One week||Serving notice to the freeholder that a correct right to manage application has been made|
|Stage 6: Counternotice||Six weeks||If the claim is accepted, Stage 8 applies. If the claim is rejected, Stage 7 applies.|
|Stage 7: Tribunal Proceedings||Two months||If the claim is rejected the leaseholders have two months to apply to the Tribunal who decide if the freeholder’s rejection of the application is legitimate.|
|Stage 8: Management handover||Three months||If the claim is accepted, the leaseholders acquire management approximately three months from the date of the counternotice or Tribunal’s decision.|