The Right to Manage
For more than 10 years, leaseholders fulfilling certain criteria have been able to exercise a right to manage their residential block of flats.
Where owners of the flats are unhappy with the way that the block is being run by their Landlord or managing agent, following a fixed set of procedures can enable the owners instead, to take over the management of their block.
- The first stage is to ensure that the block qualifies, after which the Right to Manage company is formed.
- A Notice to Participate is then issued to all leaseholders, giving 14 days by which to respond. Such notice is quite comprehensive and will have enclosed with it a copy of the memorandum and articles of association of the RTM company.
- Half of the Leaseholders in the block must be willing to become members of the Right to Manage company.
- The landlord is then served with a notice requiring handover of the company within 4 months. If the Landlord does not agree to it then the RTM company needs to apply to have it decided by a tribunal.
- If the tribunal agrees to management passing to the RTM company, the date of acquisition is then three months after the decision. During this time the Leaseholders will decide whether they want to use a managing agent, how much service they will need to give and also liaise with any contractors already in place.
- Various formal notices will be served upon the Landlord, requesting details of any outstanding service charges, management information for the building, and obliging the Landlord to notify any subcontractors of the passing of the management obligations.
The benefits of having a Right to Manage company in place are largely about having more control over the block which in turn might save money and improve the service. Indeed there may be amongst its members, those having required expertise in certain fields that will assist with the functioning of a well-run management company. The owners could oversee the work being done and whilst there is no guarantee that it would be any better, it is likely that savings to the service charges could be made.
The ownership of the building remains the same and leases are not altered, so the new RTM company will need to ensure it maintains the structure of the building so as not to de-value it. The Landlord is entitled to become a member of the new RTM company and can participate in meetings as any other member.
However, with this gained control comes responsibility in having to assume the obligations of the Landlord, including: maintaining the building; ensuring that the Right to Manage company operates in line with company law; and complying with health and safety regulations. Failure to satisfy these can have serious legal and/or financial repercussions for the Right to Manage company and its directors
Clearly, regardless of whether or not you become a member of the Right to Manage company all leaseholders will benefit from any improvement in the service that the management company provides, or reduction in charges levied.
July 4 2014
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.