Those flat owners owning whose flats have a long lease (granted for more than 21 years) have the right to try and take over the management duties of the block they live in, unless:
• The property is owned by a local authority
• There is a large residential part of the property
• There are fewer than 5 flats in a block with a resident landlord
In order to do this, leaseholders will need to establish a Right to Manage Company and must then invite all other leaseholders to join it. One the company includes a minimum of half of the leaseholders a claim notice should be served on the landlord 2 weeks later giving 16 weeks notice. The landlord can serve a counter-notice within 4 weeks, if so the Leasehold Valuation Tribunal [ LVT] will be required to step in.
Once the company is receives the right to manage, all management responsibilities must be handed over by the freeholder as soon as possible. Whilst the freeholder will still be responsible for flats and retains the right of forfeiture but responsibility for maintenance and other services is handed to the company. The freeholders permission will also be required in order to assign a lease or sub-let a property. If this permission is denied the LVT may need to get involved.
The right to manage seems appealing but there are downsides. The main problem is enforcement because leaseholders who perhaps have not paid a service charge or have breached their lease may not respect the authority of other leaseholders. It can also be awkward for leaseholders to take action against a neighbour.
Problems are also caused by the fact that a Right to Manage company relies on members spending their spend time administrating and maintaining the property. This can be very straightforward where two or three flats are involved but in the case of large blocks of flats, it is likely that not all of the members will pull their weight leading to arguments.
Keeping good ties with the freeholder can prove to be very challenging and the freeholder ultimately retains the right to pursue forfeiture action. Such action enables approaching the court to effectively terminate a lease and evict the leaseholder for a breach of the terms of their lease. A section 146 notice must first be served which details the nature of the breach, what the leaseholder can do to prevent further action and if/how much compensation must be paid. The LVT rarely grants such action though and leaseholders can seek relief from a court.
Leaseholders who do not wish to run the block themselves but are dissatisfied with their freeholder’s management can try to get a managing agent put in charge instead. In order to do this, the freeholder must be served with a notice stating that unless management improves, the LVT will become involved. The LVT can then instate a managing agent if they are convinced by the leaseholder’s case.
If the freeholder breaches the lease by failing to perform a management duty for example, the leaseholder can sue the freeholder. However, in most cases, freeholders bring claims against leaseholders, usually often because of unpaid ground rents or service charges. When a lease is breached, compensation is usually demanded by the court and the losing side often has to cover the other side’s legal fees.
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