The Commonhold and Leasehold Reform Act 2002 provides a right for leaseholders to force the transfer of the landlord’s management functions to a special company set up by them – the right to manage company. The right was introduced, not just as a means of wresting control from bad landlords, but also to empower leaseholders, who generally hold the majority of value in the property, to take responsibility for the management of their block.
The right to manage is available to leaseholders of flats, not of houses.
The process is relatively simple. The landlord’s consent is not required, nor is any order of court. There is no need for the lease-holders to prove mismanagement by the landlord. The right is available, whether the landlord’s management has been good, bad or indifferent.
The right is exercised by the service of a formal notice on the landlord. After a set period of time, the management transfers to the right to manage company (the RTM company) which has been set up by the leaseholders. Once the right to manage has been acquired, the landlord is also entitled to membership of the company.
However, there are important issues to consider and a substantial amount of work to be done before service of the notice, if the takeover of management is to be successful. This leaflet sets out the issues and the practical operation of the right, from first considerations to full management of the building.
Preparation
Perhaps the very first consideration should be what the lease-holders want to achieve by taking over the management of the building.
Clearly, it makes sense for the leaseholders to take general control of the upkeep of their most valuable assets – the flats – but to do so will bring with it duties and liabilities. In acquiring the power to make approvals and to enforce of the covenants of the leases, the leaseholders become wholly responsible for all decision-making in terms of budgets and reserve funds, standards of management and provision of services, repairs and major works, and with the overall function of the building.
Whatever the motivation, there are a number of basic issues which should be considered prior to taking any action.
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