Solicitors who specialise in the right to manage
What are the benefits of taking on the right to manage?
• The main benefit of gaining the right to manage your block (RTM) from your freeholder is that the leaseholders get the full control over the maintenance and any development for their building. This right can be important in situations where it is believed that the current management company or landlord is not doing a good enough job in the upkeep of the building or the common areas.
• Having a well-managed block of flats adds greatly to the value of each of the properties and having the right to manage means the value of the flats is now under your control. If you are trying to sell a flat in a block which is managed by a company formed of the leaseholders, then this usually has a higher selling price, as buyers prefer to know they will have control.
• There is also often a feeling among leaseholders that without right to manage they could be overpaying on management charges.
• Also, in cases where development of the building is needed and the landlord is not prepared to take on that work, the value of your flat might depend on getting the right to manage.
Want to know more about exercising your Right To Manage? Call our experts on FREEPHONE 0800 1404544 for no strings attached FREE initial phone advice.
Establishing a Right to Manage Company
Acquiring the right to manage is not something that one leaseholder can do alone. Exercising the right to manage your block means getting at least 50% of the leaseholders in your block to support the move. So it’s not just you who is driving the right to manage; think of it as you and your fellow tenants getting together to create the company. The company will then take care of both the building and its maintenance.
Right to Manage companies in the UK are limited by guarantee rather than being limited by shares. This means that when a flat owned by a participating leaseholder is sold, the RTM company does not have to issue shares to whoever buys the flat.
Exercising Your Right to Manage – the Downside?
There are some disadvantages to establishing a RTM company and it is important to be aware of these. They include:
• Cost – Leaseholders who apply and are granted a Right to Manage have to pay their own legal costs, and the necessary reasonable costs of the landlord too
• One leaseholder will have to step up to act as director of the company. This means taking on additional responsibilities to the other members of the company.
• You have to go through the formal process of establishing a right to manage company. This company then takes over from the landlord’s current management company. Tenants have to be prepared for the responsibilities which are part and parcel of right to manage companies.
• You can never keep everyone happy. Some tenants might be keen to develop the building and others are against. This creates conflict, and the director of the RTM company might shoulder the blame. All members of the company have to be aware of both the financial and practical responsibilities involved with a RTM company.
However Government research in 2019 found that 2/3 of RTM company directors felt that “they have a good relationship with fellow directors and leaseholders “
• In particular, chasing any of your fellow tenants for unpaid arrears of their service charges or ground rent, or trying to enforce breaches of any lease, could prove to be a cause of significant conflict between you and your neighbours. Unlike your landlord, remember you’re going to have to live with these people!
• The current freeholder is entitled to join the company as a member too, and depending on the way in which the company is structured, they might have voting rights to determine what course of action is taken.
• Keeping a healthy relationship with the freeholder can prove to be very challenging – remember that the freeholder ultimately retains the right to pursue forfeiture action,amonst other powers. If the freeholder breaches the lease by failing to perform a management duty for example, the leaseholders can sue the freeholder. However, in most cases, freeholders bring claims against leaseholders, usually often because of unpaid ground rents or service charges
• Not every tenant will want to get involved with a right to manage company, but if it goes ahead, they will still benefit from everyone else’s hard work.
• The financial control aspects of company management have to be considered. There’s more to RTM than just arranging to do jobs as needed; you have to monitor budgets and cash flow, and chase up payments from tenants which become overdue. If you are not on top of the finances, this can cause problems which put the company at risk.
• Often, the organisation of the finances of the company is often the trickiest area to get to grips with. From the second the RTM company is formed, the participating tenants are liable for any shortfall in monies. Every tenant will have to pay monthly maintenance fees as they do at present, but if one or more of them don’t make payments, then the members of the company can become liable to pay them instead. This responsibility doesn’t just lie with the director – it also applies to every tenant who has become a member of the company.
• Questions concerning the personal liability of you and your fellow tenants under the requirements of the Companies Act can occur where tenants exercise their right to manage – as some members will be required to become Directors of the RTM company. It is well worth considering taking a specialist insurance to cover personal of any and all Officers and Directors of the RTM company
• The formal administrative running of the company can also be highly time-consuming – the directors and officers of the RTM company will have to deal with the responsibility for management of accounts, calling them holding regular tenants and RTM company meetings etc.
• Some of the freeholder’s existing contracts will be terminated when a Right to Manage is granted
A survey of leaseholders by the UK government on the right to manage
Among the research published in August 2019 work the following figures:
• Around 20% of leaseholders were completely unaware they were able to replace a poorly performing managing agent.
• 2/3 of leaseholders said that they were not receiving a good level of service from their managing agent.
• Only 6% reported that they were “very confident the managing agent could resolve issues”.
• Over 2/3 of leaseholders have little or no confidence that their managing agent could resolve issues efficiently and effectively. In contrast just 6% reported that they were “very confident the managing agent could resolve issues”.
Want to Exercise the Right to Manage Your Block of Flats? Contact Us Now
Wherever your block is based in England and Wales, we can help. For A FREE initial phone consultation on how to exercise your right to manage your flats;
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