What is the right to manage and how do you go about getting it, or avoiding it?

When it comes to the building management of leased properties, which includes management of common areas and services, by default the responsibilities sit with the landlord. But for eligible leaseholders, there’s the opportunity to take over management.

The decision to go down this path comes with some key considerations, and with the government’s new Bill giving leaseholders more power, some might decide that the benefits outweigh the investment required.

In this article, we’re going to discuss the process and the eligibility criteria for Right to Manage, diving into what’s involved, and how landlords and leaseholders can navigate this complicated exchange of control.

Right to Manage – a brief overview

What is Right to Manage?

In simple terms, the Right to Manage is where the owner of a leasehold flat or apartment decides to take over management of the leased building. Though the leaseholders must notify the landlord of their intent, they can take over management without agreement from the landlord, and there doesn’t need to be proof of mismanagement, unlike other legal remedies in this area.

The landlord will still own the building even if the leaseholders are successful in securing management of the building, and they also have the right to vote on decisions. The more flats you own within the building, the more votes you’ll get.

It can be difficult terrain, with conflicting opinions from multiple voters (which include the other leaseholders), making the decision process hard to navigate and slowing down effective change.

Responsibilities of building management

• Collecting and managing the service charge
• Upkeep of communal areas (such as communal hallways and stairs)
• Upkeep of the structure of the building (such as the roof)
• Dealing with complaints about the building from other leaseholders

The government’s bill and the impact on leaseholders and freeholders

There’s change happening in the area of leasehold. As part of a long-term housing plan, the government have recently passed the Leasehold and Freehold Reform Bill, providing greater rights, more protection, and a fairer deal to homeowners.

The Bill will give leaseholder’s more power, including lease extension terms being increased to 990 years from the current 90 year extension, transparency over service charges, and make the process for purchasing a property from the freeholder more accessible.

Leaseholders will also have the power to challenge the charges set by the landlord or freeholder. And when it comes to the Right to Manage, the Bill will make the process of taking over management of a property easier and cheaper for leaseholders.

More information about the new bill and how to affects both leaseholders and freelancers can be found here.

What are the qualifying criteria for Right to Manage

Despite the government’s new Bill, you still need to qualify for the Right to Manage. There’s a strict criteria that leaseholders must fulfil or be eligible for in or order to successfully gain management of the building.

1. 50% of leaseholders are required to create an RTM company, which will either manage the building or allow a third party to do so, such as a managing agent.

2. The building needs to be a residential property, made up of either flats or apartments. A house doesn’t qualify.

3. At least two thirds of the building apartments must have leases that were for more than 21 years when they were agreed.

4. Within these buildings, it is currently the case that no more than 25% can allocated to non-residential areas (for example, a ground floor shop). More than this, and it doesn’t qualify. The new Bill proposes to increase the maximum permitted commercial floor space to 50%.

5. It can get tricky if the landlord is living in the one of the flats or apartments, and there needs to be at least 4 flats to still qualify for the right.

6. All residential apartments must all be in one building, for example, a group of block of flats needs management for each individual building and this can result in several separate claims for neighbouring blocks on the same development.

7. Housing association properties are not eligible for Right to Manage.

The pros and cons of Right to Manage for leaseholders

Advantages

· Financial control – leaseholders get to choose what to spend on expenses and services.

· The ability to challenge – leaseholders do not need to prove bad management. If they’re dissatisfied with the current building management, rather than having to accept the current setup, they can choose to take the reins, pending eligibility.

· Cost savings – if leaseholders choose not to pay for a property management company their costs can be reduced. Equally, savings can usually be made by shopping around for lower insurance premiums.

· Freedom of choice – leaseholders can change contractors as and when they wish to, switching to providers that offer better services or rates.

Disadvantages

· Stressful – it can be a time-consuming and overwhelming project if you’re unfamiliar with building management, or simply don’t have much time or capacity.

· Compliance – leaseholders must remain compliant with various legislation.

· Responsibility – the maintenance of a building, the financial obligation, and all the services come packed with responsibility, and in the end, the freeholder still owns the building.

· Landlord vote – the freeholder will have the right to vote on decisions, and this can be contentious, as well as differing opinions from other leaseholders.

· Negotiation skills – in order to secure services at the best price, you’ll need to be a strong negotiator, making sure you’re working in the best interests of all parties.

How landlords can navigate Right to Manage

Although landlords don’t have the power to reject an RTM company’s ‘notice of claim’, which is a notice to the landlord from the leaseholder of their intention to take over management, they do have the option to dispute it.

Landlords can serve a counter-notice to the RTM company, stating their case as to why the RTM company aren’t entitled to manage to the building. Reasons to dispute the claim:

· the building doesn’t qualify

· the RTM company doesn’t comply with the legal requirements

· the RTM company members don’t represent half the flats in the building

These are the only approved reasons a dispute can be raised. The RTM company can battle a dispute, and if this happens, the case is taken to an impartial third party, the Leasehold Valuation Tribunal, who give the final decision. In many cases, a group will simply re-start the RTM claim and correct any issues, rather than spend time and money on Tribunal proceedings.

But it’s worth noting, that the new Bill will require freeholders to be part of a redress scheme, a scheme that managing agents already must be signed up to, which allows the leaseholders to challenge issues, service charges, or service vendors.

Final thoughts

Right to Manage isn’t something to be undertaken lightly, but it can provide leaseholders with more control and ultimately, a worthwhile endeavour that creates a better standard of living. And with the government’s Leasehold and Freehold Reform Bill, leaseholders are likely to experience cheaper and better access to the Right to Manage, as well as more transparency from freeholders.

They key is knowing the pros and cons to property management. Here at Bate & Albon, we’re specialists in property law. Our experienced solicitors provide a 360 view of the Right to Manage process, and the latest laws that impact you. We steer our landlord and leasehold clients through the Right to Manage landscape, helping them make informed decisions, understand their rights, obligations, and legal position.

For more information and to chat to our expert solicitors, head to our website.