Right to manage – process & procedure

Friday, December 14, 2018

The right to manage can broadly be described as the right given to a group of lessees of flats held under long leases to take over the management of their building subject to a fulfilment of the statutory criteria. The right was created by the Commonhold and Leasehold Reform Act 2002.

Key Features Of The Right

(a) There is no need to prove fault on the part of the Landlord.
(b) Provided that the lessees meet the qualifying criteria and the correct procedure is followed, there is very limited scope for the Landlord to object or to hold up the process.

Procedure

(a) In order to qualify, at least 50% of the lessees must participate.
(b) The claim is exercised through a right to manage company which is a company limited by guarantee with a prescribed Constitution.
(c) The right is triggered by the service of a claim notice specifying an acquisition date which is, in effect, a date not less than four months later.
(d) It is a requirement that all qualifying Tenants be invited to become members of the RTM company prior to service of the claim notice.
(e) Once the participation notice, which is the notice inviting Tenants to become members of the company has been served, after a period of fourteen days a claim notice can then be served upon the Landlord and the existing Management Company setting out the following:
- Details of the premises.
- The full names of each qualifying Tenant who is a member of the RTM company and the address of the flat.
- Particulars of the Lease of each participating Tenant i.e. the date, term and term commencement date.
- Name and registered office of the right to manage company.
- The date for service of a counter notice being not earlier than one month after the date the claim notice was give.
- The acquisition date, being a date at least three months after the date for service of the counter notice.

Counter Notice

The Landlord, if he wishes to dispute the claim, has one month in which to serve a counter notice. The basis of a dispute is limited as this is a no fault process the Landlord cannot object because it does not think the RTM company is competent or there are disputes about arrears of service charges. It can only do so on technical grounds, e.g. that the qualifying criteria are not met or there is some substantial defect in the claim notice or its service.

Consequences

Once the appropriate periods have elapsed, management will pass automatically to the RTM company and any uncommitted service charges will be passed by the existing Landlord or Management Company to the right to manage company. If there is a dispute as to uncommitted service charges then the matter can be referred to a First Tier Tribunal . It is important to remember that a right to manage company automatically has the power to insure the building once the right to manage has been exercised. In addition, the existing Landlord or Management Company has a duty to pass over all of its records relating to the company e.g. heath and safety records, guarantees etc.

There is a liability on the right to manage company to pay the Landlord/managers reasonable costs in connection with the claim notice. If the costs are not agreed the Landlord will need to apply to the First Tier Tribunal for a determination. The FTT adopts a fairly critical and conservative approach to the assessment of costs.

Advantages Of Rtm

A for a small block service charges can be high so a saving in overall expenditure
B better value for money e.g. insurance can be placed at a more competitive rate
C decisions are made by the lessees rather than a freeholder with no real interest other than the money to be made from their position

D If a managing agent is appointed they are answerable to the residents and can be dismissed if they are not performing properly

Disadvantages Of Rtm

A Someone has to take responsibility for the management you will need to appoint managing agents .
B If an agent is not appointed then someone has to deal with this which is not as easy as it seems. Health and safety has to be dealt with together with a raft of legislation
C Collection of monies may be difficult as well as ensuring that all lessees observe the lease covenants. Without funds management becomes very difficult
D An annual return for the Management Company will have to be filed at Companies House.