A Right To Manage Claim could be the perfect solution
Far too often we hear of leaseholders who are at a loss as to what to do, due to their landlord’s poor management of their property, astronomical service charges incurred for what seems like little, or no, ‘service’ and of disrepair to the buildings their flats are situated in. A leaseholder in this position may well feel trapped and unable to take control of a situation which impacts the enjoyment of their property on a day-to-day basis.
This is where a Right to Manage (RTM) claim, if eligible, could be the perfect solution. The Commonhold and Leasehold Reform Act 2002 grants leaseholders the right to form a company and use this company to acquire the landlord’s management functions. The company itself does not have to deal with the management and can still delegate these duties to a Managing Agent, just as a landlord could.
The right to manage is only available to leaseholders of flats, not of houses and any leaseholder will need to ensure they qualify in order to initiate the process.
Do I qualify for a Right To Manage claim?
For your building to qualify the following criteria must be met:
- The property must be a self-contained whole or part of a building (and that part must be structurally detached).
- It can be a part-commercial building, but the non-residential part must not exceed 25% of the total floor area, excluding common parts.
- The property must consist of at least two flats and at least two-thirds of the flats must be let to ‘qualifying tenants’.
What does ‘Qualifying tenant’ mean?
This is a leaseholder who was originally granted a ‘long lease’ that is one that has an original term of more than 21 years. The leaseholder does not have to be the occupier of the flat so if you are a leaseholder of a buy-to-let property, you will still qualify.
The RTM will not apply where the immediate landlord or any of the qualifying tenants is a local housing authority. The RTM will also not apply where the premises fall within the ‘Resident Landlord Exemption’. For this exemption to apply the following 3 criteria would ALL need to apply:
- The premises must be other than a purpose-built block (e.g., a converted house);
- They must comprise not more than 4 flats;
- One of the flats must be occupied by the freeholder and/ or adult members of their family as their only or principal home for the last 12 months.
I think I qualify…
If your building qualifies, you will need 50% of the leaseholder’s, including you, to participate in order to form a RTM Company. There must be a minimum number of qualifying tenants amongst the members of the RTM Company and the required minimum number of qualifying tenants must be equal to at least half the total number of flats in the building.
The RTM Company will then be formed by you and your fellow leaseholders and then a notice to participate must be served on all of the other leaseholders. This is the formal way of inviting them to join the RTM Company.
What is the process for Right To Manage claims?
Step 1 - When you have decided which leaseholders wish to participate, those leaseholders, on behalf of the RTM Company, will serve a Notice of Claim on the landlord. The landlord will have a month to reply with a Counter-Notice.
Step 2 - If the landlord does not object in his counter-notice, then from the point of receiving consent, the RTM Company will have 3 months to prepare to take over the management of the company. A formal acquisition date will be decided.
Step 3 - Understandably, the process is much longer if, in the landlord’s counter-notice he alleges reasons why the RTM Company is not entitled to proceed. The landlord is only able to dispute on the following grounds:
- The building does not qualify; or
- The RTM company does not comply with the legislative requirements; or
- The members of the RTM company do not represent half the flats in the building.
Step 4 - An application will then need to be made to the First Tier Tribunal within 2 months of the date of the counter-notice, for a determination. If an application is not made in time, then the claim is deemed to be withdrawn. The First Tier Tribunal will then make a determination as to whether the RTM can be granted.
What costs are involved?
The RTM Company is responsible for reimbursing the landlord for any costs incurred in the process. Where the RTM Company is successful in their claim this will be limited to any legal expenses associated with ‘the notice, any accountancy or audit costs arising from provision of accounts or transfer of monies and the costs of his solicitor or managing agent in the hand-over of management records and functions’.
The landlord cannot recover their costs in relation to a Tribunal hearing unless the Tribunal finds against the RTM Company. Where costs are disputed, an application can be made to the Tribunal for determination.
How can we help?
Our dedicated enfranchisement team have years of experience in dealing with Right to Manage claims and acting for both leaseholder’s and landlords. We are able to assist in serving the relevant statutory notices where there is no dispute between parties and also in dealing with applications to the Tribunal and legal issues presented by this where the RTM claim is disputed.
If you would like to speak to one of our team members in relation to a potential RTM claim or have any queries over whether you would qualify as a leaseholder, please do get in touch.