What is Right to Manage?
Right to Manage is a no fault based option for long leaseholders who collectively wish to manage their own building given by the Commonhold and Leasehold Reform Act 2002 (“the Act”).
Why might I want to exercise my Right to Manage?
You may be unhappy with the way the freeholder or their managing agent are managing, maintaining and/or repairing the building, or you may be unhappy about the level of service charges you are paying. You may want a greater say in the way your service charge money is spent. Exercising the right to manage permits lessees to take over the management functions of the landlord under their lease. This includes obligations relating to repairs and maintenance, the collection of service charges, insurance and the ability to deal with consents which may be required under the leases, such as consent to sublet or make alterations. The Right to Manage company can manage the building themselves or appoint a professional manager of their choice.
How do I exercise my Right to Manage?
Most purpose built and converted blocks of flats qualify for lessees Right to Manage under the Act, however, there are strict qualification criteria for mixed use buildings and there are some other exemptions. It is important that you obtain early advice as to whether the building and the lessees qualify. Importantly, there must be at least 2 flats in the building.
The Act provides for a majority of qualifying lessees (at least 51% of the number of flats in the building) to exercise their Right to Manage. The lessees are required to incorporate a special kind of limited company to exercise the Right to Manage in which each of the participating lessees take membership. The landlord is also entitled to membership of the RTM company.
The process is fixed by the Act and involves, firstly the service of participation notices upon all lessees inviting them to join the RTM company and secondly the service of a formal claim notice upon your landlord(s). Your landlord(s) will have the opportunity to serve a counter-notice. There are limited circumstances in which the landlord can object to a RTM claim. If the landlord does object then the First Tier Tribunal (Property Chamber) has jurisdiction to determine whether or not the RTM company is entitled to the Right to Manage.
Management will be handed over on a date specified in the claim notice which is a date at least 3 months after the landlords counter-notice is due one month after service of the claim notice. The whole process can take 4-6 months. If there are any disputes relating to the service charges paid or alleged to be due the First Tier Tribunal (Property Chamber) has jurisdiction to determine most matters.
What costs are involved?
There is no premium to be paid to the landlord.
You will be responsible for paying your own legal fees and any disbursements, such as Land Registry fees and occasionally for the advice of a building surveyor if there is a question about whether the building qualifies. You will also be responsible for paying the landlords(s) reasonable fees which may include legal fees, surveyor’s fees and managing agents fees, however, this does not extend to paying for any fees the landlord(s) incur in connection with a Tribunal application.
Are there any alternatives?
You should also discuss with your fellow lessees whether Collective Enfranchisement is of interest. The Act provides a right for a majority of long lessees who own flats in a building to purchase the freehold of that building. In most collective claims, the lessees automatically take over the management of the building. There are strict qualification criteria so legal and valuation advice is essential. Please refer to our guide on Collective Enfranchisement.
In some strict circumstances, a majority of lessees, may be eligible to acquire their freehold at market value (which is usually less than enfranchisement value) under the provisions of the Landlord and Tenant Act 1987. This is usually appropriate where the freeholder has failed to manage the building and is in breach of covenant. There is much more scope for dispute with the freeholder under this procedure but it is worth consideration with your specialist advisors.
If the building does not qualify for the RTM, or there is not enough interest from lessees then you should consider the Appointment of a Manager by the First Tier Tribunal (Property Chamber). This is a fault based procedure so can be more contentious in nature but for some lessees it may be the only option to secure better management for their building.
How can Hart Brown Solicitors help me?
Our award winning Leasehold Enfranchisement team have the specialist knowledge, expertise and experience to advise you in respect of the Right to Manage and any alternatives. They can assist you in determining whether you and your building qualify, guide you through the procedure and likely costs involved in more detail and of course act for you in connection with the claim itself.