Publications

Taking Hold - Managing your Block

Many flat owners are taking advantage of the falling prices in the housing market to purchase the freehold of the block or building that their flat is in*. Meanwhile those who cannot afford this option continue to battle on with poor management and demands for increasingly unreasonable service charges from their landlord. If you fall into the latter category then read on because as will be explained all is not lost, there is still money to be saved and investment to be had.

Take control of your building

Under the Commonhold and Leasehold Reform Act 2002 (“Act”) and subject to certain conditions leaseholders can by serving a Notice of Claim force their landlord to transfer the management functions set out in the leases to a company known as a Right to Manage Company (RTM Company), which is a company set up by the leaseholders.  Even better news is that the Act firstly does not require leaseholders to pay a premium for the transfer (there are limited circumstances of which the landlord can dispute the leaseholders’ rights) and secondly leaseholders do not have to prove that the landlord has been at fault or been a ‘bad landlord’.

Do you qualify to obtain the Right to Manage?

Amongst the conditions:

  • The building must generally be self contained;
  • Contain a minimum of two flats;
  • At least two thirds of the flats must be let to qualifying tenants;
  • Any non-residential part of the building cannot exceed 25% of the total floor area; and
  • To be a qualifying tenant, generally a leaseholder must own a lease which was originally granted for a term of more than 21 years.

So as to not unfairly exclude anyone from the ability to come on board a right to manage action, all qualifying leaseholders are entitled to become a member of the RTM company.

What are the benefits of RTM?

The RTM company assumes responsibilities and duties which the landlord was obliged to undertake under your leases. These duties would include:

  • The repairs and maintenance of the structure of the building and common parts;
  • Arranging insurance for the building; and
  • collecting service charge and the day to day management of the building. (There are certain limited functions that the RTM company would not be entitled to carry out or which require notification [not consent] to be sent to the landlord).

Where does the landlord fit in with this new arrangement?

On receipt of a Notice of Claim exercising the first stage to acquire the right to manage, the landlord is:

  • Obliged to ensure parties with whom the landlord has entered into contracts to manage the building are made aware of the claim to takeover management.
  • Required to transfer funds that have been collected in advance but not yet spent, which can also include funds held in the sinking fund.
  • Entitled to become a member of the company. However, where there is a danger of say multiple landlords or landlords that contain an interest in the building, the votes of the leaseholders in the RTM company will be allocated to ensure that the landlords’ do not have a majority vote over the leaseholders

RTM is a useful tool and one that should be explored, if as a leaseholder you are not concerned about short leases or cannot afford to pay a premium to acquire the freehold and wish to address the management of the block in which you have invested or which contains your home.

Author: Hema Anand

Publication: Angel and Northwest / Living Hadley Magazines

Date: February 2009