Your Right to Manage Your Own Block of Flats
What is Right to Manage? The majority of UK leaseholders don’t own their own freehold. This means they have very little control over the day to day management of their building. One of the biggest problems leaseholders find is unexplained service charges and formally challenging the charges through legal means. The Commonhold and Leasehold Reform Act 2002, does provide leaseholders of private residential flats, the right to take management control of the block of flats building they live in. This legal process is referred to as the ‘Right to Manage’. It provides a right for leaseholders to force the transfer of the landlord’s management functions to a special company set up by them – the right to manage company. The right to manage is not available to leaseholders of houses.
The Right to Manage option is an attractive option for leaseholders of flats because it gives them to power to decide how the managing agents service charges are constructed. Costs like shared security, garden maintenance or flat insurance are all items where tenant leaseholders can practically get involved in reducing costs. Despite this, not many leaseholders of groups of tenants, take up the Right to Manage as the process is a legal one and may feel confusing and complicated to implement.
The quality of a managing agent’s service is not always clearly defined in agreements. Consequently, managing agents receive mixed feedback from leaseholders. A managing agent usually has a range of properties to service at the same time. their fixed costs are property managers salaries and office based costs. The more properties per manager, the greater the margin per manager. As more and more problems arise with individual properties, managers cannot devote as much personal time to each problem, and the service level drops.
Once a formal notice on the landlord has been served, the right can be exercised. The management transfers to the new leaseholder right to manage company (RTM). However, the landlord is also entitled to membership of the company and retains legal ownership of the building.
The leaseholders will then have responsibilities to enforce the covenants of the lease, (but are not allowed to alter any covenants in the lease), budget setting and the provision of repairs and services to the block of flats. Yet the day to day practical delivery of these services to the flats, is usually left in the hands of the property management company. In addition, the RTM must also comply with codes of management practice, from the Royal Institution of Chartered Surveyors (RICS), and/ or the Association of Retirement Housing Managers (ARHM).
To qualify for Right to Manage the building must be self-contained, include at least two flats and have two-thirds of the flats, let to ‘qualifying tenants’, (equal to at least half the total number of flats in the building block). These rules apply individually to each block within a community. The RTM is legally created via the formation of a limited company made up of individual leaseholders. Following RTM company registration, a formal notice of invitation to the new leaseholders to join is sent. The legislation requires all of the leaseholders should have the chance to participate in RTM. The secretary of the RTM company should make sure that evidence of the satisfactory delivery of, or posting of, the notices is retained; in avoid a legal challenge from a qualifying lease-holder or the landlord.
The RTM company does not have to provide the landlord with management information, other than to confirm whether a property management company will be used, or whether self management will take place.
