Right to Manage FAQs

The Commonhold and Leasehold Reform Act 2002 gave a new right to tenants of bocks of flats to take over the management of the building without having to acquire the freehold. What follows is necessarily of a general nature and you should not act or refrain from acting without taking advice on the specific circumstances of your case.

Q. Why should we exercise the Right to Manage?
A. Numerous reasons exist for exercising the right. The main reason is to ensure the effective management of your building, particularly if it is not desirable or practical to obtain the freehold. Exercising the right to manage would allow you to remove the existing managing agents and appoint new ones. A well-managed building may also result in the value of the flats increasing. In addition to management issues tenants would have a degree of control over the granting of consents required by their leases, such as for carrying out alterations to flat. However, the right does not allow tenants to extend the terms of their leases or reduce their ground rent to a peppercorn, which they could do if they acquire the freehold interest in their building. See FAQs Collective Enfranchisement.

Q. What are the Qualifying Criteria?
A. The main criteria are that:-

• the building must be a self-contained block of flats (which includes a converted building as well as a purpose built one);
• the building must have no more than 25% non-residential use;
• two-thirds of the flats must be let to qualifying tenants;
• a qualifying tenant is one who holds the flat under a long lease, namely one which is for a term of more than 21 years;
• the qualifying tenants of flats comprising 50% of the total flats in the building must participate.

Q. What happens to the existing managing agents and other persons appointed by the Landlord to provide services to the building?
A. If you are dissatisfied with the services provided by the existing managing agents then you need not retain their services once the right to manage is acquired. If however you wish to keep your managing agents, you could do so by entering into negotiations with them prior to acquiring the right to manage. The landlord is obliged to notify tenants with details of all contracts it enters into for the provision of services at the building well in advance of the right to manage being acquired. Therefore, tenants should have plenty of time to consider whether they wish to retain the services of any contractors.

Q. What is involved in the process?
A. The legislation lays down detailed steps which must be complied with prior to the right to manage being acquired. First a Right to Manage Company (“RTM Company”) must be formed by the tenants. It is this company that will take over the right to manage on behalf of the tenants.

After formation, the RTM Company will serve Notices on those qualifying tenants who have not yet elected to take part in the process, advising them of their right to take part and become members of the RTM Company.

Next, the RTM Company will serve a Claim Notice on the landlord, informing the landlord that the RTM Company wishes to take over the management of the building and specifying two dates. The first date is the date by which the landlord can reply by serving a Counter-Notice; the second date is that on which the RTM Company proposes to acquire the right to manage.

The landlord can serve a Counter-Notice by the first date specified in the Claim Notice objecting to the right of the RTM Company to take over the management of the building by asserting the number of grounds.

Where the landlord fails to object, and in the absence of any dispute, the RTM Company should take over the management of the building on the second date specified in the Claim Notice. If however the landlord does not object to the right of the RTM Company, then the matter may have to be referred to the LVT for determination, which could delay the date on which the right is acquired.

Prior to acquiring the right to manage, the RTM Company will have to obtain all necessary information to effectively manage the building. This can be done by serving an information notice on the landlord. In addition the RTM Company has the right to access parts of the buildings for similar reasons.

Q. How long will it take?
A. The Claim Notice cannot be served until 14 days after the RTM Company formally invites qualifying tenants to participate. Once the Claim Notice is served the latest date on which the landlord can be required to serve a Counter-Notice is one month after the date the Claim Notice is given and the earliest date on which the right to manage can be acquired is three months after the date specified in the Claim Notice for serving a Counter-Notice.

Therefore in the majority of cases the earliest period in which the right to manage can be acquired is four months from the date the Claim Notice is given.

Q. How much does it cost?
A. The costs involved for each participating tenant depend on numerous factors, including the size of the building, number of intermediate landlords and number of participating tenants. The more tenants that participate, the less the cost will be per tenant. In addition to legal costs, tenants may have to pay certain disbursements including the costs of an accountant, surveyor and new managing agent. Occasionally a barrister’s opinion may be required on a technical issue which will be an additional cost.

Q. Do we need to pay the Landlord’s fees?
A. You would be liable to pay the reasonable costs the landlord incurs in having to comply with the steps laid down by the legislation.

Q. Do we need to form a company?
A. Yes. The legislation requires that the right to manage be exercised through a specially formed RTM Company, which has a constitution specified by legislation.

Q. How do we get ourselves organised?
A. It is normal for a Residents Committee to be formed, if this has not already been done. It is a good idea for tenants to canvass the opinion of the other tenants. Once support for the idea has taken hold, it would be a good idea to invite us to attend a meeting of the Committee to answer questions, to explain what is involved and to advise on the advantages and disadvantages. We would normally offer to attend this meeting free of charge.

Q. Do we need a binding commitment from Participating Tenants?
A. It is recommended. We have standard forms of Participation Agreements which are intended to bind the participators to themselves and also to the process. Once a decision in principle has been made to proceed, potential participators are then invited to commit themselves to proceed with the formal RTM process.

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