Why should you consider Right to Manage?
It will save you a substantial amount of money and increase the value of your property
Right to Manage was introduced in 2002, (The commonhold and leasehold reform act 2002). It gives leaseholders of a property the legal right to take the responsibility of managing the property away from the freeholder or landlord and gives it to the leaseholders. This includes all aspects of management including the buildings insurance. If your property meets the criteria detailed below and the correct legal steps are followed then an application for right to manage will be successful. The leaseholders then decide how and who manages the property and what the service charge amount will be.
Qualifying criteria
Flat owners (leaseholders) will qualify for the Right to Manage (RTM) if:
- At least two thirds of the flats in the building are on qualifying lease agreements
- Each lease is for a term of 21 years or more
- There are at least two flats within the building
- The non-residential use of the building does not exceed 25 per cent of the total floor space
- 50 per cent flats owners (leaseholders) within the building are in favour of Right to Manage
How long does the whole process take?
From the date you have at least 50% of leaseholders in agreement to go ahead with right to manage it will take approximately 4 to 5 months.
- A new limited company needs to be registered with Companies House
- Every leaseholder needs to be formally contacted in writing and invited to join the new right to manage company
- Once a reasonable steps have been made to contact each leaseholder the freeholder is then served legal documents, informing them of the right to manage process being carried out. The legal document will state a date of when management of the property will move to the new limited company and this must be at least 3 months from the date the notice is served
- The leaseholder will have 1 month to appeal. Even if the freeholder does not respond to the served notice then right to manage will happen on the date document on the notice
What does it all cost?
To ensure the right to manage process is successful and ensure there is no reason for the freeholder to appeal you must employ a solicitor who has expertise in Right to Manage. The leaseholders who pursue the right to manage process will need to cover their legal costs and the reasonable legal costs of the freeholder.
Typically a solicitor will charge £40 per flat with a minimum charge of £500. The freeholders solicitor will typically charge between £800 and £1,500, depending on the size of the block.
Very occasionally, the landlord will issue a counter-notice, denying the leaseholders the right to takeover on the specified acquisition date. In this instance, the RTM company would have to take the case to the Leasehold Valuation Tribunal in order to progress the process. In doing so, the RTM company would incur the cost of booking the case, and further costs of engaging legal advice.
How can Purco Help?
The cost is the biggest stumbling block to the Right to Manage process. Nobody likes handing money over to fund a process that might not even be successful. Also, it’s almost impossible to get every leaseholder to agree to contribute. You may find that it’s also extremely difficult to contact every leaseholder, especially if they are a landlord, which can result in some leaseholders effectively subsidising the legal costs of others. In this situation most Right to Manage drives can fizzle out and unfortunately end.
We completely understand this barrier, and so does your freeholder and your existing management company. To overcome this Purco would appoint a solicitor and cover all the legal costs of the Right to Manage process to completion. In return Purco will, along with the leaseholders, manage the property for the first year. After the first year the leaseholders have Right to Manage and can then choose who manages the property and how it’s managed. The first year is potentially the most difficult. We will guide you though this, cover legal costs, and then when you fully understand all aspects of managing the property leave to to make an informed decision on how to continue managing the property.
We hope you like working with us though and want to keep us on board. Every property where Purco have funded the legal costs we have been invited back after the first year to continue managing the property, and we’re really proud of that!