The right for leasehold tenants to manage their flats rather than buy the freehold is an increasingly popular option.
Taking on the Right to Manage can give tenants a lot more control and security.
As a full-service law firm, we are expertly placed to not only advise you on the process but also set up the Right to Manage company required to manage the building in the correct way and avoid any potential pitfalls in the future.
About The Right to Manage
The Commonhold and Leasehold Reform Act 2002 provides qualifying tenants with an alternative to purchasing the freehold that is the right to manage their building through a Right to Manage (RTM) company.
In the main, the RTM company will acquire responsibility for repairs, maintenance, insurance and services. Neither the landlord’s consent is required nor an order of court but the landlord must be invited to join the RTM company. Please note that the right is exercisable in respect of flats but not houses.
The tenant and the building must qualify:
- A tenant is a qualifying tenant if they hold a lease which was originally granted for a term of over 21 years; and
- Two-thirds of the flats in the building must be let to qualifying tenants (and there is no limit on the number of flats owned by any one qualifying tenant).
However, the premises will not qualify if:
- it is not a purpose-built block (for example a converted house); and
- it comprises four flats or less; and
- one of the flats is occupied by the freeholder or an adult member of their family as their only or principal home for the last twelve months.
It is important to note that if the internal floor area of the non-residential parts exceeds 25% of the whole premises (excluding the common parts) then the premises will be excluded from the right to manage.
Finally, the RTM company must be constituted of qualifying tenants equal to no fewer than half of the total number of flats in the building and the right cannot be exercised if the immediate landlord of any qualifying tenant is a local authority.
There is no premium payable and by comparison with other procedures the overall associated cost is low. Nonetheless, as managers of the building, the RTM company will have to comply with all the statutory and lease obligations as well as run the company amongst other things. Therefore, there is a lot to consider before deciding whether RTM is the most suitable option.
As with procedures under the Leasehold Reform, Housing and Urban Development Act 1993, the process is started by qualifying tenants serving a formal notice.