Lease Extensions and Property Management
The Right to Manage (RTM)
Leasehold property is fraught with disagreements over how blocks of flats should be managed and when a landlord is managing a larger block, it is very difficult to keep all the leaseholders happy!
The Commonhold and Leasehold Reform Act 2002 entitles leaseholders to take control of the management of their building from the landlord by setting up a Right to Manage Company. As this is a right, as opposed to a remedy, there is no need for leaseholders to prove that the building has been mismanaged in any way.
How does it work?
The building first has to qualify for the right:
- it must be a self-contained whole or part of a building (a part must be structurally detached);
- it must contain at least two flats;
- at least two thirds of the flats must be held by what are called qualifying leaseholders;
If the building includes some commercial use this part of the building cannot exceed 25% of the total floor area of the building.
A qualifying Leaseholder is one whose lease was originally granted for longer than 21 years. They do not need to be resident so the flat can be rented out.
The leaseholders also need to set up a special RTM Company, which must use the prescribed form of a document called “articles”. Once the company has been incorporated the leaseholders that have taken this first step will need to formally invite all leaseholders to join it; there can be no exclusions. They must then ensure that at least half of the number of flats join the RTM company.
Once a majority is achieved, a Notice of Claim for the RTM can be served on the landlord and if the right is accepted the management functions will pass to the RTM Company automatically on a set date.
RTM is very flexible in that once the right has been acquired leaseholders are able to take a decision as to how they manage the building moving forward. It may be that one of the leaseholders has some experience in this area and so you may wish to self-manage or you may wish to appoint an alternative third party as a Managing Agent to manage the building for you. The RTM voids all existing contracts the landlord may have had with for example maintenance companies, so leaseholders are able to “start from scratch”, or, if there was one area of management that they were happy with, they can opt to keep that contractor on.
How Can We Help?
In straight forward RTM claims, where there is little dispute, our involvement would be limited to serving the required Notices at each stage of the process and assisting with the handover process.
However, RTM is very easy to get wrong if you are acting without legal advice or representation. The process effectively takes away a lot of the Landlord’s rights, so if leaseholders get it wrong, it is no surprise that Landlord’s tend to challenge claims quite fiercely.
We can assist in any challenges that are received to the RTM and hopefully ensure that none arise in the first place.
Once the RTM has been acquired we have a wealth of contacts in the Property Management industry that our leaseholder clients will have access to should they decide to employ an alternative Managing Agent.