Right to manage
The Commonhold and Leasehold Reform Act 2002 has given leasehold property owners in England the opportunity to exercise their right to manage ('RTM') their property.
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The Right to Manage is a statutory right granted to leaseholders, who as a collective can form an RTM Company and acquire the management functions listed in their leases – essentially becoming their own property manager. More than 50% of the qualifying tenants are required in order to exercise such a right, and any commercial part of the building must not exceed 25% of the total floor-space (common parts excluded).
There is no need to prove any fault on the part of the current landlord or property manager. Through this RTM process leaseholders can effectively force the transfer of the landlord’s management functions into a special company they set up called a Right To Manage company.
Typical functions taken over by the RTM company include:
- repairs, redecorations and maintenance of the structure of the building and the common parts.
- services such as lighting, cleaning, gardening etc. where appropriate.
- insuring the building.
- collection of service charges, accounting etc.
- complying with statutory requirements relating to the management.
- the day-to-day running & management of the block.
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Why Exercise the Right to Manage?
There could be many reasons as to why you as a leaseholder may wish to take over the responsibility to manage your building:
- A greater degree of control over the level of service charge expenditure
- You may choose your own preferred managing agent who will work to your instruction
- You could select your own insurance policy for the block
- Reduce any current problems with getting consent for things in the lease (e.g. a slow or vexatious landlord), or just to manage things more suitably going forward.
Whatever the reason, leaseholders could benefit directly from exercising the Right to Manage as long as they understand the responsibility that this brings.
Unlike in leasehold enfranchisement, in which you would be buying the freehold land, you do not have to pay a premium in order to take over the management of your building. You will only have to pay the freeholder’s (and/or management company’s) reasonable legal and administrative costs in the process, but these are usually not very high and you would be able to split all these costs with your fellow participants.
The Right To Manage – Landlords FAQs
If receiving a notice such as this, it potentially means that a collective group of leaseholders in a building is trying to take control of management. By law, providing the claim is valid, you are compelled to comply; you would then have at least one month from receipt (which should be the date specified in the notice) in order to exercise your right of access to any part of the premises, and to produce a counter-notice, that either accepts or (if the RTM company does not qualify) rejects the right of the Tenants to take over management. If no counter notice is served, a Landlord will be deemed to have admitted the right.
It is therefore important to instruct a Solicitor and a Surveyor as soon as possible to deal with such a notice. The Leaseholders must pay your reasonable costs involved in this process (but note, these are only payable toward the end of the process).
While many Landlords would prefer not to be compelled to part with the management of their building, depending on the circumstances, the right to manage can be stopped or delayed. We can for example advise on preventative measures to a potential right to manage claim.
Yes, you may become a member of the company upon its acquisition.
For more information and to speak to a Leasehold Solicitor, please contact Lewis Myatt on 020 8290 0333 or email [email protected]
The Right To Manage – Tenants FAQs
If you are a long leaseholder of a residential lease (originally granted for more than 21 years, you qualify). You will need to have, within your (RTM) Company the requisite majority of qualifying tenants to be eligible to exercise the Right to Manage.
No, once you obtain the Right to Manage, you can hire a managing agent to do this on your behalf and report to you accordingly.
Yes, a Right to Manage company has to contain a particular constitution. It has a prescribed memorandum and articles of association.
The process is started by forming a RTM company and sending participation notices to the qualifying tenants, and once the requisite amount of tenants are within, a claim notice can be served on the Landlord. The notices have to meet certain requirements in order for them to be deemed valid, we would therefore recommend that you obtain the right legal advice before proceeding with such endeavours.
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