FREQUENTLY ASKED QUESTIONS
Since 30th September 2003, when the relevant sections of the Commonhold and Leasehold Reform Act 2002 came into force, many leaseholders have had the statutory right to take over management of their property. They can exercise the Right to Manage (RTM) even if the landlord or other manager is not at fault in the way they manage or have managed the property.
The take-up of the new right is steadily increasing. The Government’s legal advice is that any contract between the freeholder and the management organisation is deemed to be frustrated by the exercise of RTM.
No. We are able to proceed with your Right to Manage claim through to completion and it’s likely that we’ll be a lot to cheaper!
The savings in your service charges can be significant by completing a Right To Manage. Many of our clients benefit from a return on costs within 12 months of establishing the RTM due to savings on buildings insurance alone. However, you are also able to review all contracts which you have in place and make decisions that affect the ongoing financial control of your building and other savings will inevitably be made.
For a Right to Manage Claim:
a property must be a self-contained building or part of a building
it must consist of flats
two or more flats must be held by long leaseholders
two-thirds of the total number of flats in the property must be held by long leaseholders
Those leaseholders who want to take over must establish an RTM company (validly constituted under the 2002 Act) to take over the management functions (defined as services, repairs, maintenance, improvements, insurance and management but excluding re-entry or forfeiture). Not all eligible leaseholders need be company members but all have a right to be. Company members must represent not less than half the flats for a claim to proceed.
The entire RTM process takes a minimum of four and a half months (2 weeks notice to leaseholders, 4 weeks notice to freeholder and finally 3 months handover period).
You are unable to fund an RTM claim from the Service Charge Accounts because the Service Charge account can only be used for items that are specified in the Lease.
Therefore there are three main options to fund your RTM claim:
Collect funds through a resident’s association and pay the invoice in one go.
A small group of leaseholders provide a set up fund and then pass a resolution at the first company meeting to repay those leaseholders.
For a small block (normally under 10) we can send one invoice to the main contact and they can ensure that each leaseholder pays a proportion of that invoice quoting the invoice number. However, this requires that you know the number of committed members upfront so that the apportionment is agreed prior to you paying against the invoice thus ensuring the full amount is paid.
The Love Your Block Right to Manage Service includes the following activities:
Incorporation of the Right To Manage company
Performing Land Registry searches of all leaseholders and freeholder
Establishing the Register of Members and details of their leases
Writing to all leaseholders inviting them to join the RTM company
Serving Notice on the freeholder that the company intends to enact the Right To Manage
Responding to the freeholder's enquiries
Write to all members of the RTM company informing them of the date that the RTM company takes over responsibility
Company registration and Land Registry fees
The steps for us to proceed are as follows:
We will send you our invoice and RTM Setup questionnaire link. (The fee is due at this stage)
We will then Incorporated your new Company and a communication will be sent to all the Leaseholders, known as the Notice of Invitation to Participate. (Leaseholders have 2 weeks to respond and we need to have 50% of leaseholders in each block, individually, to proceed).
Once we have 50% of leaseholders in each separate block then we have the numbers needed to proceed. We will then send out the Notice of Claim on the Freeholder and copies will be sent to all Leaseholders. The Freeholder then has 30 days to respond.
After this time we will communicate the outcome of the Notice of Claim to Directors. It is at this point that you will need to decide upon, and appoint your new Managing Agent, which we would be happy to help you with too.
Yes, the freeholder is entitled to claim their "reasonable costs". Many freeholders do not claim costs, but where they do, the costs are typically about £800.
There are many advantages to having a Right To Manage, here are the main ones:
The main benefit of gaining the right to manage your block (RTM) from your freeholder is that the leaseholders get the full control over the finances, maintenance and any development for their building. This right can be important in situations where it is believed that the current management company or landlord is not doing a good enough job in the upkeep of the building or the common areas.
Having a well-managed block of flats adds greatly to the value of each of the properties and having the right to manage means the value of the flats is now under your control. If you are trying to sell a flat in a block which is managed by a company formed of the leaseholders, then this usually has a higher selling price, as buyers prefer to know they will have control.
There is also often a feeling among leaseholders that without right to manage they could be overpaying on management charges.
Also, in cases where development of the building is needed and the landlord is not prepared to take on that work, the value of your flat might depend on getting the right to manage.
Existing contracts on site for such things as cleaning, gardening and lift maintenance can be taken over by the RTM company if they and the contractors want to do so. If not, the contract is deemed to be frustrated and lapses. It is important to remember that the RTM company becomes responsible for the management functions immediately from the acquisition date. Therefore, if the company does not intend to continue using the landlord’s previous suppliers, it must have its own new contracts in place.
RTM companies are landlords within the definition at Section 30 of Landlord and Tenant Act 1985 and as such, must comply with all statutory requirements placed on landlords, including: Section 20 consultation, providing service charge summaries of expenditure etc. It should be remembered an RTM company need have no more than 50% of the qualifying leaseholders as members.
Any landlord’s or third party’s powers under the lease for the grant of approvals to leaseholders are passed on to the RTM company. It cannot grant an approval, however, without giving 14 days’ notice to the landlord or third party (30 days for approvals relating to such things as assignments or under-lettings, structural alterations or changes of use). If this produces an objection, the RTM company may only grant approval in accordance with the objector’s written agreement or the decision of an F-tT(PC).
An RTM company must keep under review whether leaseholders’ covenants are being complied with and report any non-compliance to the landlord within three months unless the failure has been remedied or reasonable compensation made.
RTM companies do not have any forfeiture powers. They will need to obtain the landlord’s co-operation if they need to enforce leaseholders’ covenants through the threat of forfeiture. However, they will be able to sue for deb
Love Your Block have a 100% success rate at taking our clients through the RTM process, and indeed were one of the first Property Agents to ever complete one back in 2003 - so we've been doing them for a long time! It is a prescribed and complex procedure that must be followed to the letter, if notices are not served exactly as they should then the claim process will be frustrated or rejected. We guarantee that our notices are served correctly and that the claim will proceed in the correct manner.