The Right to Manage was brought in by Parliament to create a low-cost means of leaseholders taking over the management of their building, without having to incur the capital expense of buying the freehold.
The costs of buying the freehold can be prohibitive, particularly if there are several non-participating flat owners, as it can be difficult to find ways for groups to fund the purchase. The Right to Manage is a useful alternative which in many cases can be a precursor to buying the freehold until that is possible.
The key feature of the right is that it is a ‘no-fault’ right, and unlike other leaseholder rights, no wrongdoing on the part of the freeholder needs to be established. In addition, the landlord’s consent is not required. Put simply, if the procedure is correctly followed and if the building qualifies, a group of leaseholders should be able to assume responsibility for the management of their block in little over 4 months.
Five key benefits:
- 1) Freedom to shop around for competitive insurance policies as opposed to being responsible for the costs of insurance of the landlord’s choice, usually significantly reducing the costs for flat owners. This alone can recover the expenditure of the Right to Manage process within a year or two.
- 2) The ability to appoint managing agents and hold them to account if the level of service is not satisfactory, unlike the existing model whereby the agents are answerable to the landlord, who may have limited interest in day to day matters.
- 3) Being able to keep the service charge under control and use suppliers chosen by the leaseholders.
- 4) The ability to plan for major works to better suit the needs of leaseholders and consider the views of leaseholders throughout the tendering process and carrying out of works.
- 5) The Directors assume responsibility for applications for consent to alterations, which can reduce the delays and costs involved in obtaining consent. Although the freeholder does retain the right to be kept informed.
What makes this a useful alternative to buying the freehold?
In addition to the lower cost, the Right to manage the process is also quicker than buying the freehold, which can take more than 12 months or more if terms such as the purchase price are disputed. Most Right to Manage claims should be concluded within around 5-6 months from the date of instruction.
Are there any downsides?
Whilst your solicitor will see to setting up your Right to Manage Company, service of notices and handling the handover of management and the service charge fund, it should be noted that the building will need to have a number of flat owners who are prepared to give up some time to handling company matters by standing as Directors. With this responsibility comes all the usual Directors duties however we can advise on steps to take, to minimise any personal risk.
In terms of the day to day running of the building, it is common to outsource management to managing agents and leave the company’s filing requirements at Companies House to accountants, to ensure annual filing dates are met.
In the case of all but the smallest blocks, retaining managing agents is advisable to ensure the plethora of residential service charge rules comply.
The leaseholders bringing the claim are also responsible for the landlord’s reasonable costs of responding to the claim, as well as their own.
Blocks which are managed by flat owners and for flat owners can be happier places to live. A well maintained and managed block is also more likely to be desirable to buyers, increasing the value of the flats, which is further incentive to utilise this right to remedy a poorly managed building.