What is the Right to Manage?
If you own a flat, the Commonhold and Leasehold Reform Act 2002 gives you the right to force your freeholder to hand over to you the right to manage your block of flats, subject to certain criteria being met. You do not have to prove that your freeholder manages your block badly or prove a breach of their obligations and do not have to pay your freeholder compensation. You do however have to set up a Right to Manage Company [also known as an RTM Company or Residents Management Company] to manage your flats.
Got a burning question about your Right To Manage? Call our experts on FREEPHONE 0800 1404544 for no strings attached FREE initial phone advice.
Why would I want the Right to Manage?
If you believe that either your freeholder or the management company is simply too expensive, that they are doing a poor job, and that you and the other tenants can manage the block cheaper, better, or both, then you might want to acquire the right to manage your own block and set up your own Right to Manage Company.
We have helped many tenants successfully exercise the right to manage their block of flats themselves.
Click here to read more about why you might want to exercise your right to manage
Who can apply for the Right to Manage?
You don’t have to prove that the managing agent or freeholder is doing something wrong to make an application for Right to Manage.
However to qualify for UK RTM there are a few basic requirements:
- You must own a long lease with an unexpired term of at least 21 years or your lease must be terminable on death or marriage
- The landlord cannot be a charitable housing trust and the lease must not be a business lease
- The building must contain at least two flats held by qualifying tenants and at least half of the tenants must want to take part in acquiring the right to manage
- Two-thirds of the total number of flats in the building must be owned by qualifying tenants
- Not more than one quarter of the floor space must be in non-residential use
In general terms. leaseholders who meet the criteria for freehold purchase are, in most circumstances, also liable for Right to Manage. it’s also worth noting that the owner of every flat in the block has to be formally offered the opportunity to get involved with the Right to Manage application process and become members of the RTM (Right to Manage) company.
What is the definition of a building?
You might have thought that this was a pretty obvious question – but you might be surprised to hear that sometimes it’s not a simple issue at all.
The principle is that every separate block needs to have its own application for RTM and its own RTM company. And there is a complex case law about whether or not a block is actually separate or not. Here are just some of the issues which have arisen in right to manage applications we’ve been involved in.
• An underground car park. If 2 or more apparently separate blocks share the same underground car park, it can be argued that these buildings are not actually separate.
• Shared services – if services (e.g. water pipes) are shared between blocks and cannot be separated without undue disruption, it can be argued that the blocks they serve are not actually separate
• Overhanging roofs – it’s been argued that if the roof of one block overhangs that of another, then they’re not actually separate buildings.
These are just three examples and there is constantly highly evolving specialist case law on the subject.
The importance of getting your Right to Manage application right in the first place
If you are a leaseholder, then you need to make sure your RTM application is correct. Many freeholders will be reluctant to give up the right to manage the block and solicitors acting for them may use these and other arguments to try to defeat your application – or at least to slow it down and put so many obstacles in the way that some participating leaseholders drop out leaving you with too few remaining leaseholders to qualify for the right to manage.
Since the RTM claim process is a “no fault” process (i.e. there is no need to prove that the landlord or managers have done anything wrong) the only grounds upon which a freeholder can challenge the RTM claim are technical points. It is therefore crucial for the lessees to serve a valid notice to avoid this type of obstruction.
What’s more, where there there are intermediate landlords, or named managers written into the lease, those third parties will also need to be served with the RTM claim notice and will have the same right to reply as the freeholder. Naturally, many managers embedded in leases will be reluctant to hand over the management and may also seek to thwart the lessees claim.
The critical importance of getting that application right in the first place is just one example why it is absolutely essential that your solicitor is a genuine specialist with plenty of right to manage experience. Very few solicitors do, but you can rest assured, when instructing Bonallack & Bishop, our leasehold team have the RTM expertise you need.
We can provide an initial assessment report for you
For medium size and larger blocks, we usually recommend that we carry out an initial assessment on your behalf. We can then provide you with the report confirming whether or not your block is eligible and, if necessary, dealing with the kind of problems listed above. You can then use the report to encourage your fellow leaseholders to participate in the right to manage application – safe in the knowledge that they’ve got serious specialist solicitors on board.
What is the cost of exercising our right?
Just your legal costs and the reasonable legal costs of the freeholder. With RTM there is no premium payable by the participants. Unlike a lease extension or collective enfranchisement application, you do not have to pay any costs incurred by the landlord in loss of interest, or cost of having a valuation done on the property.
Can the freeholder object to the RTM application?
Yes, but freeholders have very few legal grounds on which they can challenge a Right to Manage application. However, as detailed above, getting the application itself wrong quite different – and gives considerable help to any freeholder reluctant to hand over the right to manage.
What powers are not transferred by the right to manage?
Whilst the freeholder will still be responsible for flats and retains the right of forfeiture, for example, it is the responsibility for maintenance and other services that is handed over to the new block management company.
The freeholders permission will also be required in order to assign a lease or sub-let a property. If this permission is denied it may require an application to the First Tier Property Tribunal.
Improving the management of our block – are there any alternatives to RTM?
Yes, there are two legal right which can help you – leasehold enfranchisement, and the surprisingly rarely mentioned court appointed manager.
Click here to read more about Leasehold Enfranchisement
Click here to read more about the Court Appointed Manager
How much does it cost to obtain the Right to Manage?
No premium is payable to take over the rights to manage your block. And unlike both leasehold extension and enfranchisement, you will not need to pay a specialist surveyor to provide any form of valuation.
However you will have to pay:
- Your freeholder’s reasonable legal costs
- Your solicitor’s costs including the cost of transferring ownership of the freehold
- The cost of the Right to Manage Company Formation
Looking for a recommended block management company ?
We are often asked to recommend potential block managers to those taking over control of their own block using RTM, or enfranchisement. And we regularly review our short list of recommended block managers, to make sure they won’t let us or our clients down.
So if you’re looking for a recommended block manager, just ask us.
The Right to Manage Company – the expense of changing your mind
If you are a leaseholder thinking about exercising your Right to Manage with fellow leaseholders, you must be sure that you are all committed to the process.
The starting position is that you will be responsible for the costs that the freeholder incurs during the RTM process.
And if problems emerge, that can become expensive. If the freeholder serves a Counter Notice objecting to the RTM taking place, expenses can rapidly mount up as the hearing draws near.
And if you decide to withdraw your application, then you will all be liable to your freeholder for their reasonable legal costs to the date of withdrawal. For example, the freeholder might have had to order an inspection of the property or instruct a barrister.
What happens when one of the residents sells up?
When any individual leaseholder sells their flat , their share in the Residents Management Company will normally be transferred from the vendors to the purchasers -making sure that only those owning a flat in the building have a say in its management.
We have Acquired The Right to Manage – What Happens Next?
Once the leaseholders of a block of flats has been granted the Right to Manage, what follows is a lot of hard work.
Firstly, it’s important not to forget that although all of the qualifying leaseholders are entitled to be members of your RTM company, not unusual for some leaseholders to be unwilling to get involved – and that regardless of their lack of involvement, you still have a duty to them and also to any leaseholders who didn’t qualify for membership.So it’s important to get the opinion of all leaseholders when the company is taking decisions that will affect the whole building.
Normally every leaseholder participating in the right to manage exercise will end up with one share in the Residents Management Company- with one share per flat owned.
Most Right to Manage applications made because there have been worries about the poor or overpriced management of the block. This can mean that the owners of the flats in the block can be unwelcoming or even hostile to new managing agents. The owners of the flats therefore need to think about whether to use a managing agent, or manage the block themselves.
With larger blocks, it is usually better to look for a professional and experienced managing agent.
- Good management of your block – the need for information
It is also vital that that those running the new RTM company make sure they get hold of all relevant information about the management of the building. This includes the contracts and copies of any lease in existence before the right to manage was granted, financial records and accounts books.
All records and books will have to be inspected carefully – in particular the company which has recently been granted the right to manage may well be looking to renew some of the contracts or leases.
In particular the new directors must be aware of all the contracts the previous landlord and managing company have in place, which remain valid. If there are any relevant contractors you will need to warn them about the change of management.
- Your new RTM company – the need for good communication with the leaseholders
Another important factor is a good level of contact between the leaseholders and the new managing agent. Flat owners should make their expectations clear from the outset in order to create a professional relationship which should keep everyone happy. Putting together a list of jobs which need to be done and prioritising this list should make it clear what needs to be done in the building.
A regular point of contact should be established through the holding of regular monthly meetings, at least for the first six months after the right to manage is granted. The directors of the Right to Manage company should also meet regularly with the owners of the flats to make sure that they are happy with the way things are going, and so that the directors can communicate better with the managing agent.
With larger blocks, it is often good practice for the directors of the new company to introduce themselves to the non-participating flat owners with a letter outlining the situation and detailing what plans they have for the building.
- Your Right to Manage Company – prioritise the outstanding jobs
There are usually many repairs and other job which have to be addressed immediately after Right to Manage is obtained. It is really important that these issues are dealt with as soon as possible. Flat owners in the block will be pleased to see problems being dealt with too.
Even with medium-sized blocks, if there has been a lengthy period of poor management and maintenance, it might well be worth employing a Property Manager for the initial period so there is someone to supervise any repairs and maintenance jobs.
- Getting the right block insurance
When looking for buildings insurance, working with the flat owners can be very cost effective. Any money which is saved from a cheaper insurance premium, can then be reinvested into improving the building, for example for window cleaning or other maintenance issues. Working closely with the owners of the flats should mean that the management of the building is more effective, and will improve relationships between the flat owners and the managing agent.
When it is done properly, getting the right to manage can be hugely effective. Finally, make sure to inform owners of the flats as early as possible about any proposed changes to the management of the building.
End of Right to Manage
There isn’t a time limit set on a right to manage company, but there are some situations in which a company ceases to have the right to run a building. These are:
• When the right to manage company and all of the leaseholders agree to give up the right to manage
• When the right to manage company is wound up or goes into receivership
• When the right to manage company stops acting in that capacity, for example if the company is used for collective enfranchisement to buy the freehold of the block instead.
Contact Our Right to Manage Company Solicitors
Wherever you live, our solicitors can help. For a FREE initial telephone consultation on the Right To Manage Leasehold Property from an expert solicitor,
- contact us today on FREEPHONE 0800 1404544 for FREE initial advice or
- Complete the contact form below