Lease Extensions and Enfranchisement Claims

The Right To Manage – The solution for unhappy leaseholders?

Poor maintenance and management of a property containing flats can be a common problem that leaseholders face.

24 Nov 2023

However, there is a way in which leaseholders can (assuming they qualify), as a collective, manage the property themselves and this is known as the Right to Manage under the Commonhold and Leasehold Reform Act 2002 (‘the Act’).  The Act provides leaseholders with the right to acquire the landlord’s management functions by transferring them to a company set up by them – The Right to Manage company ‘RTM Company’.

Once the RTM Company has been set up, and the requisite majority of participating leaseholders is reached, an initial notice can be served on the landlord informing them of the leaseholder’s intention to exercise the Right to Manage. This will also give a date for the management functions to transfer to the RTM Company (a minimum of 3 months from the date the counter notice is due).

The Landlord does not need to consent to the claim and can serve a counter notice rejecting the claim. However, there are limited grounds for them to do so and any rejection would need to fall within the criteria set out under the Act. If this does happen, then an application can be made to the Tribunal for determination of the claim.

Interestingly, the landlord may choose not to serve a counter notice, and if this happens, the management functions pass to the RTM Company on the date specified in the initial notice, as it would if the landlord served a counter notice accepting the claim.

Further, an Order of the Court is not required if the landlord fails to serve a counter notice in response, or if the landlord admits the claim. However, the landlord will have the right to be a member of the RTM (if they choose to be) once the RTM Company takes over the management functions.

Whilst an RTM company does need to be set up, it does not mean that the leaseholders have to manage the management functions personally, they can appoint a professional management company to do so. This is particularly useful where collective leaseholders have no experience of performing management functions at a property.

There is a required minimum number of qualifying tenants in order to exercise the right and this must be equal to at least half the total number of flats in the building.  For example, if there are twelve flats in the building, at least six of the flats of the qualifying tenants must participate in the action.

If all leaseholders do not want to be part of the right to manage, then there must firstly be a notice served on all the leaseholders inviting them to participate in the claim and giving them time to confirm that they would like to exercise the right. The claim notice can then be served on the landlord a minimum of 14 days after this notice.  If this is not completed correctly then this can invalidate the claim notice.

 

M&P Commentary

Shelley Fitzpatrick, a specialist in residential lease extensions and enfranchisement, said:

“The process of Right to Manage does offer a solution to leaseholders who are unhappy with how the building as a whole is being managed. However, leaseholders do need to have careful consideration when it comes to management as managing a building can become strenuous.  Whilst the management passes to the RTM Company, no ownership passes, and all leases remain unaltered.  Therefore, the ownership of the building would remain with the landlord.

There is a lot of groundwork to be done before a notice can be served and leaseholders should make provisions early on in the process as to how the property will be managed once the function passes to the RTM Company.

I am a specialist solicitor within the area of RTM claims, lease extensions and enfranchisement. I currently act for both landlords and leaseholders in RTM claims.”

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