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Leasehold Reform is in the Air – Legal Update on Right to Manage

October 05, 2020

The right to manage (‘the RTM’) was introduced in 2002 to give leaseholders the ability to take over the landlord’s management functions in respect of their building without having to buy the freehold. The RTM is particularly valuable in the situation where the landlord, or their appointed managing agent, repeatedly neglects their obligations to maintain the common parts of the building or demand excessive service charges. However, the RTM is a “no-fault” right which can be claimed by leaseholders without the need to prove mismanagement by the landlord. The right is available, whether the landlord’s management has been good, bad or indifferent. It is important to note that the RTM at present is available to leaseholders of flats only, not of houses.

The Commonhold and Leasehold Reform Act 2002 sets out the qualification requirements and steps that need to be completed before the RTM can be acquired. The acquisition process starts with the leaseholders setting up a dedicated RTM company. The right is exercised by service of a formal notice on the landlord. The landlord can then challenge the RTM on validity of the claim (e.g. the qualification criteria for the RTM have not been met or there is a procedural mistake in the claim notice) within a month, otherwise, they cannot oppose the acquisition claim.

If they do challenge the claim, the RTM company can apply to the First-tier Property Tribunal for a determination. If the RTM is claimed successfully, the leaseholders, through the RTM company, take control of services, repairs, maintenance, improvements and insurance in respect of their building. If the RTM company considers it appropriate, they may employ a managing agent to manage the building on their behalf.

Once the RTM has been acquired, the landlord is also entitled to membership of the company.

There are important issues to consider and a substantial amount of work to be done before service of the notice, if the takeover of management is to be successful. Therefore, it is strongly recommended to instruct a legal advisor to carry out the process on your behalf.

However, there are a number of problems with the existing RTM regime including unpredictable and sometimes excessive costs of claiming the RTM (particularly as the RTM company is liable for the landlord’s costs as well as its own), or restrictive qualifying criteria which means it is not possible to claim the RTM in respect of multiple blocks on an estate, buildings with more than 25% non-residential space or leasehold houses.

In an attempt to address these issues, on 21 July 2020 the Law Commission published a report on Right to Manage “Leasehold Home Ownership: Exercising the Right to Manage”.

Among others, there is a proposal that the requirement for the leaseholders to pay the landlord’s costs of an RTM claim, including in any Tribunal proceedings, should be removed. Furthermore, the qualifying criteria for the RTM should be relaxed, so that the RTM can be claimed in respect of leasehold houses, buildings with up to 50% commercial space and self-contained parts of buildings which do not meet the qualifying criteria but which are capable of being managed independently.

The recommendations in the Law Commission report, if implemented, will make the RTM process much simpler, quicker and more flexible allowing more leaseholders to take control of the buildings they live in.

If you and your fellow leaseholders are considering claiming Right to Manage and wish to consult a professional to guide you throughout the process, or have any other Landlord and Tenant enquiries, please contact our Property Team for assistance.

The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

© Miller Rosenfalck LLP, October 2020

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