Leaseholders and the legal right to manage: A Stairway to Heaven

 

 

Leaseholders who are unhappy with the management of their block can set up a right to manage company (RTM) to transfer the management function of their building to their own company. No application to court is required. This company is composed only of leaseholders. The RTM can decide whether it wishes to manage the block themselves or to appoint professional agents to do so on their behalf. The RTM can only apply to one building.

Leaseholders often set up these companies as they are unhappy with the management and/or service charge costs imposed on them by their freeholder.  They are over 6,000 such companies in existence.

This is a legal right. It can be exercised regardless of whether the freeholder or their agents are at fault. The management functions can be exercised by the leaseholders themselves or they can appoint professional agents to do so on their behalf. For an example of pensioners setting up a right to manage company see youtu.be/Ngoo5evI2qU RTM Directors need not necessarily be qualifying tenants. It is therefore possible for relatives of older leaseholders to also be directors. There are reports on high service charges in retirement buildings who would appear to benefit from exercising these rights.

 

The right to manage only applies to premises which satisfy the following conditions:

  • They consist of a self-contained building or part of a building.
  • They contain two or more flats held by qualifying tenants, and
  • 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

Qualifying tenants will include leaseholders with a lease of at least 21 years and appears to include shared owners as well. Local authority blocks are excluded though housing association blocks are included.

In Worcester Close,  in Annerley SE20 a group of leaseholders have set up 3 RTM companies to manage 3 blocks of approximately 150 flats. They were unhappy about the quality of the services provided by their Freeholder, First Port who were based in Luton. Each block has 3 directors.

The leaseholders decided to appoint their own managing agents who would handle the formation of the company. The legal requirements to serve notice on the freeholder are difficult and as a result leaseholders prefer to rely on professionals to do it for them.

The leaseholders researched which professional agents to appoint. The Lease Knowledge partnership charity has a list of accredited agents. After a selection process, Prime Property Management were awarded the management contract. They are based in Bromley and handled the formation of the RTM.

 

Some leaseholders such as those in the block of flats near Lower Sydenham Station struggled to obtain the numbers to form the RTM. At least half of the qualifying tenants must be members of the RTM. If flats are let out, it can be difficult to contact the owner. However, anybody can search the land registry for a fee of £3 to find out the owner of a flat.

The Law Commission are proposing to make it easier to set up RTM and other reforms including extending the number of premises eligible. The Leasehold Advisory Service has information on the right to manage. The campaigning charity, the Leasehold Knowledge Partnership has information on right to manage success stories on its website.   The National Leasehold Campaign has been leading the leasehold reform campaign. It has a FB page with over 21,000 followers where leaseholders share problems with each other.

 

There are lots of flats in Southeast London who would benefit from forming an RTM. Until the Law Commission proposal are enacted the right to manage is only a stairway to heaven as full ownership is not transferred. The Government has yet to announce when it will enact these proposals. This will depend to some extent on how active leaseholders are in campaigning for extra legal protection.

 

Dermot Mckibbin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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