The Pro's and Con's of Right to Manage

Dissatisfaction with the existing landlord and/or managing agent is often the motivation behind groups of leaseholders considering the potential benefits of taking over the management of the property in which they live. ‘We could do a much better job’ is probably true in many cases, not least because as homeowners, as well as being leaseholders, the owners of individual flats and apartments have a vested interest in protecting the value of their homes, as well as their upkeep and control of maintenance costs.

The decision to manage a property, and all that that entails, should not be taken lightly. While there are considerable benefits to taking control of the management of a property under the Right to Manage terms set out under the Commonhold and Leasehold Reform Act 2002, potential participants in an RTM process should be aware that it might not all be plain sailing.

Do we qualify for RTM?

The criteria for qualifying for RTM status are quite straightforward:

  • The property must comprise flats or apartments, not houses
  • At least half of the property’s leaseholders must be members of the RTM company before it has the right to take control of the management of the building
  • At least two-thirds of the flats must be leasehold
  • At least 75% of the total floor area of the property must be for residential, not commercial, use

We're all in this together - or are we?

It is important to remember that these criteria apply to each building within a complex that comprises more than a single block of flats. For example, where there are three separate blocks of flats, all owned by the same landlord, each block must comply with the above criteria separately.

If one block does not have sufficient leaseholder interest or support to participate in the RTM company, even if the overall level of support among the other two blocks reaches the 50% support level required, the RTM company should exclude the block with insufficient numbers prepared to participate in the RTM bid.

Becoming an RTM company director

Once the required levels of support have been achieved and the numbers of leaseholders prepared to act as RTM company directors are confirmed, what next?

As with any company directorship, volunteering to become part of the RTM company brings with it the roles and responsibilities that may go beyond what some might expect to be involved in managing a block of flats.

In approaching the landlord with the initial notice of intention to take over the management of a property, the RTM directors are unlikely to know what the landlord’s reaction will be – to accept or reject their claim. If the landlord decides to fight the claim, and often with more substantial financial resources than the fledgling RTM company, a legal process can ensue that can last months, or years.

As a director of the Right to Manage Company, this can involve active participation in the legal process, appointing legal counsel, taking the process forward through the Leasehold Valuation Tribunal and without full knowledge of the likely outcome of the process.

If the RTM bid fails, the RTM company will be responsible for the landlord’s legal costs, which might run into thousands, or tens of thousands, of Pounds.

It is therefore imperative that the RTM company has all of its ‘ducks in a row’ before pressing the nuclear button and notifying the landlord of its intention of taking over the running of the property.

Specifically, the landlord can reject the claim if any of the following apply:

  • the block of flats or apartment building does not qualify
  • the RTM company does not comply with the relevant legal requirements
  • the RTM company members do not represent at least half of the flats in the building

Taking back control?

Assuming the RTM company’s bid to take control of the management of the property, this is when the real work begins and the directors and members of the RTM company find out what is actually involved in running a block of flats.

While one of the initial drivers might have been to save costs, time and the resulting leaseholder frustrations, dealing with the day-to-day management of a multi-occupied building is far from straightforward.

For this reason, it is often the case that successful RTM bids transfer these tasks to their own, preferred managing agent, who in turn will replace the managing agent appointed by the landlord.

There is a formal handover process, as well as ongoing requirements to keep the property’s owner, the landlord, in the loop regarding the management of the property. It might even be the case that the landlord is a member of the RTM company, if they own any flats within the building.

Choosing the Right to Manage or not

There are significant advantages in leaseholders managing their own property, especially when taken back from an absentee or uncooperative landlord.

There are also sizeable drawbacks that should be considered ahead of taking the steps described above. Maintaining friendly relationships with fellow leaseholders, and subsequent leaseholders, will make the RTM process more likely to succeed, if all are involved and prepared to do what is necessary to make a success of managing their own property.

And finally - don't forget your right to manage insurance

If you are considering making a right to manage bid, we can help. Don’t forget to check your right to manage insurance policy to make sure your RTM business is properly covered

Need a good right to manage business insurance broker? We’ve got you covered – click here to fill out a short form and we’ll pass your details onto our list of brokers.