The Right to Manage

Introduction

The Commonhold and Leasehold Reform Act 2002 has given leasehold property owners in England the opportunity to exercise their right to manage ('RTM') the running of their building.

The Right to Manage is a statutory right granted to leaseholders, who as a collective (at least 50% of qualifying tenants) can form an RTM Company and acquire the management functions listed in their leases – essentially taking control of their own management.

Not less than 50% of the flats in the building must be participating members of the RTM company on the date that the Right to Manage is claimed and if your building is not disqualified, you would succeed in such a venture.

Qualification

The Right to Manage is exercisable upon a "Building" or in situations where blocks are physically connected to others, the law allows the claim to be made over "part of a Building", provided that a vertical distinction can be made from the adjoining block that runs from the ground to the sky.

If the Building contains more than 25% non-residential floor-space (common parts excluded) then, it is taken outside the scope qualification. The building must also:

  1. consist of a self-contained building or part of a building, with or without appurtenant property,
  2. they contain two or more flats held by qualifying tenants, and
  3. the total number of flats held by such tenants is not less than two-thirds of the total number of flats contained in the premises.

The Building (or part of the Building claimed as mentioned above) must also be self-contained, and the law defines this as whether it is "structurally detached".

Conceptually this means that a building (or part) can be physically touching another, but it must be structurally vertically divisible by any other part and if services (such as water and electricity conduits) are shared between it and any neighbouring building (or part) that the works that would be undertaken to separate them would not result in significant interruption to the occupiers of the rest of the building.

Unlike in earlier legislation that sought to deal with transfer of management (namely under the Landlord and Tenant Act 1987) under RTM, leaseholders can change the management without having to prove any fault on the part of the current landlord or manager. Through this RTM process leaseholders can effectively force the transfer of the landlord's management functions into the control of their Right To Manage company.

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:

  1. A greater degree of control over the level of service charge expenditure
  2. You may choose your own preferred managing agent who will work to your instruction
  3. You could select your own buildings insurance policy for the block
  4. Reduce any current obstacles with obtaining landlord permissions for things under the terms in the lease (e.g. a slow or vexatious landlord),
  5. or just to manage things more preferentially 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 incurred in the process, but these are usually affordable especially since such costs can be split with your fellow participating leaseholders.

The Right to Manage Process

It is recommended that the collective instructs a solicitor to assist in these stages, as even the smallest omission can affect validty of the claim. Contact us for more information.

The following are the stages leading up to acquiring the Right to Manage.
Click on the Stages for more detail:-

Stage 1: Rally supporters

In order to achieve the support of at least 50% of qualifying tenants. You can find out how many people are interested by raising the issue at a residents' meeting or knocking on neighbours’ doors. There are excluded premises, such as where the internal floor area of your building is more than 25% commercial property. 

Stage 2: Form a Right To Manage (RTM) company

This must have a prescribed memorandum and articles of association (and include the acronym ‘RTM’ in the title).

Stage 3: Send notices Inviting Participation

Sending notices Inviting Participation of the qualifying tenants in the building (a Section 78 notice).

Stage 4: Serve the Claim Notice

Sending a claim notice to the Landlord/Management Company (Section 79 notice), This will specify the 'acquisition date' – the date when the right to manage is obtained.

Stage 5: The Landlord/Management Company may respond

They are permitted 1 month to do so. If they do not dispute the claim, then the likely acquisition date for the Right to Manage is a further 4 months after the service of the Claim Notice. To dispute the claim, the Landlord/Management Company must prove that the claim from RTM Company does not comply with the 2002 Act. A contested dispute will be referred to the First-tier Tribunal ('FTT') to decide.

Stage 6: The sending of 'Contractor Notices.'

If there is not a dispute the Landlord/Management Company must send out 'contractor notices' – this informs the contractors that the RTM company is taking over and gives them the opportunity to continue its services.

Stage 7: The Acquisition Date occurs

If there is not a dispute (as there should not be if there is no challenge to the qualification of the claim), then the acquisition date occurs at the time specified in the Claim Notice (which should be 4 months from the date of the Claim Notice). The Freeholder/Management Company is obligated to provide the RTM Company with the information it requires to manage. 

Stage 8: The Landlord/Management Company will supply its invoice for its costs

These costs must be reasonable and in accordance with the types of costs specfied within the law, but will include such things as the Landlord/Management Company’s legal fees and any other costs reasonably incurred by the Landlord/Management Company in the handover transition process.

Stage 9: Registration of a Notice upon the Land Registry

A notice can be placed upon the Freehold and Leasehold titles within the managed estate providing information to the public that the Right to Manage has been claimed. This requires a conveyancing certificate to be lodged
Having trouble?
Didn’t find the answer you were looking for?
Contact us
Privacy Policy
Disclaimer: the contents of this site do not constitute legal advice and should not be relied upon as a substitute for legal counsel
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram