The 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') 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 as they exist within their leases – essentially taking control of their building's own management.

No fewer 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 by the criteria laid out in law (for examples RTM is not viable for those that have Local Authority Landlords), the leaseholders 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 one another, the law also 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 functions (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.

There could be many reasons as to why you as a leaseholder may wish to take over the responsibility of managing 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 specification
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 generally manage things preferentially going forward.

These things can also assist with the marketability of a leasehold property, since it is clear that a inept of missing Manager can hinder the prospects of sale of a property.

Whatever the reason, leaseholders could benefit directly from exercising the Right to Manage as long as they understand the responsibility that this brings. In almost all cases, when exercising RTM, we would encourage that leaseholders look to hire a managing agent rather that trying to run this themselves.

Unlike in leasehold enfranchisement, in which you would be buying the freehold land, one does not have to pay a Premium in order to take over the management of your building. You would only have to pay the freeholder’s (and/or management company’s) reasonable legal and administrative costs incurred in the process, but these are limited by reasonableness and are usually affordable especially since such costs can be split with your fellow participating leaseholders.