Right to manage: a guide for leaseholders

Right to manage process

As a leaseholder, if you are:

• frustrated by high management charges; or
• otherwise dissatisfied with the management of your building and common areas,

consider exercising your right to manage (RTM). RTM is a statutory power created by the Commonhold and Leasehold Reform Act 2002.

The right to manage process was introduced as a solution to failing landlords and managing agents and as a way to empower leaseholders. After all, remember that between you, the leaseholders hold most of the value in your building.

Leaseholders’ right to manage

Exercising the leaseholders’ right to manage is relatively straightforward. You do not need your landlord’s consent, and there’s no court application required. However, a majority of the leaseholders must be in favour. In addition, the other main right to manage qualifying criteria are:

• At least two-thirds of the flats have “qualifying tenants”, ie leaseholders whose lease term was more than 21 years.
• While part of the building can be commercial, the non-residential part cannot exceed 25% of the building’s total floor area. However, that excludes common parts.
• If any qualifying tenant is the tenant of a local housing authority, right to manage does not apply.
• Right to manage does not apply if the premises fall within the Resident Landlord Exemption. To satisfy this exemption:
  • the premises must not be a purpose-built block (so, for example, it might be a converted house); and
  • must not comprise not more than four flats; and
  • at least one of the flats must have been occupied by the landlord (or an adult member of their family) as their only or principal home for not less than the last twelve months.

Right to manage company

You must exercise your right to manage through a ‘right to manage company’ formed by the leaseholders. Once the leaseholders have acquired the right to manage, the landlord is entitled to membership of the right to manage company.

Right to manage company directors

You will need volunteers to serve as officers of the right to manage company. Remember, they will have not only the usual responsibilities of company directors, but also those of residential property landlords.

Right to manage procedure

Exercise the right to manage process by serving a formal notice on the landlord. After a set period of time, management responsibility transfers to the right to manage company, which the leaseholders will have already set up. It’s important to understand there’s considerable groundwork required before serving the notice. Therefore, it’s advisable to instruct us early, ideally as soon as you know you have sufficient qualifying tenants on board. We will advise you on whether you satisfy the qualifying criteria and, subject to that, guide you through the right to manage procedure.

You should also note that the right to manage applies to an individual building. So, on a development of several blocks, each need to qualify separately. If a co-ordinated approach results in all blocks qualifying, there are usually economies of scale and management advantages in taking over management of the whole development.

Right to manage problems

Since its introduction, right to manage has proved a great success. But there are some problems which do still occur. A residential leasehold specialists, we are well-placed to help you avoid these. Common right to manage problems are:

• ensuring you are aware of and adhere to the rights and obligations you acquire;
• avoiding poor management, which may, after all, be the reason for exercising the right to manage in the first place;
• being aware of all of the ongoing costs associated with the management of the block;
• ensuring you have sufficient initial funds to meet obligations such as maintenance, repair and insurance costs which may fall due before service charges are recovered.

Right to manage costs

The most important consideration when appointing right to manage solicitors is to ensure they have suitable expertise and experience. If they don’t, they could waste you considerable time and money and even risk the directors of the new right to manage company incurring personal liability.

Many factors affect the overall right to manage legal costs per flat, including:

• the type and situation of the building;
• the mix of the building (eg it’s more complex if there’s mixed commercial/residential use or there are some social tenancies in the block);
• the number of participating leaseholders.

We recommend that you contact us initially for a free and informal discussion. Beyond that, many leaseholders instruct us first to advise on whether the qualifying criteria are satisfied. If they are, and you’re happy, we can proceed. Both stages are available on an agreed fixed fee basis under our transparent pricing policy.