Are you considering the “Right To Manage”?
Having the ability to choose your management company offers so many benefits at next to no risk and very little effort, please read below to see whether you would like us to help.
What will it cost?
The costs involved in Right to Manage acquisition can be split into two groups:
- Your direct costs – The cost of administering the process.
- We recommended that a solicitor administer and oversee the whole process, as it virtually ensures that acquisition will progress without legislative infringements. We can obtain a costing indication once we have more information about your site.
- The landlord’s reasonable costs for which the RTM company are responsible – These are difficult to precisely predict but can reach £1,500 to £2,000.
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 First Tier Tribunal in order to progress the process. In doing so, the Right to Manage Company would incur the cost of booking the case, and further costs of engaging legal advice.
The responsibility for meeting all of the associated costs lies with whichever parties initiated the Right to manage process, not necessarily ALL Leaseholders.
Although the Right to Manage Company should receive uncommitted service charge monies from the previous managing agent, they cannot be used to pay the landlord’s reasonable costs.
Is self management for you? Let’s look at the next steps
Step 1 – Ensure your block qualifies
This is typically a cut and dried process for most blocks – in order to qualify, your block must meet the following criteria:
- Your building must be in part self-contained, and include at least two flats – part of a building is self-contained if it has a vertical division, could be redeveloped independently and has, or could have, its own services.
- At least 2/3rds of the leaseholders must have leases longer than 21 years.
- No more than 25% of the block may be used for non-residential use – excluding car parks and common areas connected with the flats.
- N.B. there are some issues relating to crown land / housing association owned properties. We suggest you contact us if you think either of these could be relevant to your block.
Step 2 – Create a Right to Manage (RTM) company
The RTM company is the actual body that takes on the management responsibility, this has to be a limited company. This is a relatively straightforward process when carried out by a company formation agent. We advise that all company-founding leaseholders are made directors of the RTM company in smaller blocks, and that larger blocks have a minimum of three directors. We can advise you depending on the actual number of units in the development.
At this stage it is recommended that Right to Obtain information is undertaken to ascertain the status of the management of the building. This will include previous and current financial records and balances, together with contracts and specifications. It is considered wise to do this to ensure that you are aware of the financial position of the company before you make the commitment to obtain RTM.
Step 3 – Secure participating leaseholders
In order to progress with acquiring the Right to Manage, at least 50% of leaseholders in the block must be willing to become members of the Right to Manage Company. Generally, come this point in the process, this figure will already have been met, as leaseholders will often hold an informal meeting to discuss the prospect of undertaking the Right to Manage. A notice to participate must be issued to all as-yet-unparticipating leaseholders, who then have fourteen days to respond. The form and content of this notice is dictated by legislation.
Step 4 – Serve a claim notice on the landlord
Assuming at least 50% of leaseholders are willing to become members of the Right to Manage company, a formal notice must be submitted to the landlord informing them that the company intends to acquire the Right to Manage.
This is a critical step, in that any infringement of the legislative technicalities can potentially stall the Right to Manage process. The form and content of the notice is dictated by legislation. The claim notice must contain
- Details of the premises in question
- Full names and addresses of each qualifying tenant who is a member of the RTM company
- The name and registered office of the RTM company
- A specified date for service of a counter-notice (a notice of response entitled to anyone who is issued with a claim notice), this must be no earlier than one month on from the date that the claim notice was issued.
- A specified date, no less than three months after the date for the service of the counter-notice, on which the RTM company intends to acquire the Right to Manage.
Once the claim notice has been served, the landlord has one month in which to respond. If no response is issued, it is deemed that the landlord has consented to your acquiring the Right to Manage.
If the landlord contests your claim, they will be required to provide the reasons for their dispute. If, having heard the landlord’s contention, the leaseholders still wish to proceed with acquisition; they will need to take their landlord to the First Tier Tribunal (property). The First Tier Tribunal – Property will assess whether or not the leaseholders do, indeed, have the Right to Manage.
However, in reality there is little with which the landlord can reasonably take issue, other than if your building has not qualified under the criteria outlined in Step 1.
Step 5 – Prepare to take-over management of your property
Once leaseholders have obtained consent to acquire the Right to Manage, they usually have around three months in which to prepare for handover ahead of the ‘acquisition date’. We recommend that leaseholders do the following in this time:
- Discuss the level of service required to the building and development, e.g. create a list of required works and frequency.
- Issue a Section 93 information request to the landlord for important information associated with the block. This ensures that leaseholders have at hand all pertinent information with which to run their block after having acquired the Right to Manage. This is effectively the ‘file’ containing existing documents/planned expenditures and financial situation.
- Select relevant contractors to ensure that they are in place to provide services from the date of Right to Manage acquisition.
- Arrange for insurance to be put in place as of the date of Right to Manage acquisition.
Please note that the landlord is required to hand over all uncommitted service charge funds on the Right to Manage acquisition date or as soon as practically possible thereafter.
The benefits of the Right to Manage should hopefully be fairly clear by now – essentially, it’s all about getting more control over the management of your block and hopefully, saving money and improving service.
- Any costs incurred in the set up of the company will be typically be recouped as a result of savings made from wrestling control from the previous managing agent
- The intention would be to instruct local contractors, as opposed to large scale nationwide companies, as local contractors are invariably able to be more competitive on a local level.
- Leaseholders frustrated with dealing with a previously incumbent managing agent can choose a more competent managing agent.
- Leaseholders who form a Right to Manage company, and engage a managing agent, invariably secure reduced charges on services as they are incentivized decision makers.
- Leaseholders, through their chosen managing agent who is acting on their behalf, are actively looking for the best value for money in the services that they enlist.
- With the Right to Manage, leaseholders employ their managing agent directly, and consequently have more direct contact with their managing agent.
However, with control comes responsibility…
The RTM company, and therefore the directors of the RTM company, are responsible for the following:
- Undertaking the landlord’s obligations in the block’s leases as if they were the landlord.
- Maintaining the building so it does not deteriorate.
- Operating the RTM company in line with company law.
- Ensuring the block is maintained & serviced in line with the lease and current Health and Safety regulations.
There is very little that can prevent a Right to Manage acquisition from progressing without any complications. The Right to Manage is now nothing more than a regulation process, and with experienced professionals handling your Right to Manage transition and negotiating the legislative and administrative steps along the way, you can be virtually assured of success. This provides you with the power and the authority to determine the direction you wish your development to take and puts you in control of the purse strings.
With owners making the decisions it is likely to enhance the general ambiance and structure of a development ensuring that the asset will achieve greater resale and rental values, after all who doesn’t want to live in a well cared for home.
Right to manage is a straight forward process which puts the power squarely in your hands and lets you decide what to improve, how much to spend and when to spend it!
Why Choose Letters Block Management?
Transparency is paramount for an effective working relationship between management companies and their clients. All too often this is the area that larger companies pay least attention to. The industry seems to view Leaseholders not as customers but superfluous annoyances to be tolerated. Our view is somewhat different, as we see Leaseholders as an integral part of the relationship. We are local, so in addition to our planned visits can be on hand to react to the many fluid situations that can occur at site, together with being able to meet with residents/ Directors to discuss ongoing plans and maintenance, keeping everyone involved and, more importantly, in charge.
Like everyone, we believe in delivering great value, we charge fair, sustainable fees for our service and understand that it is important to provide breakdowns of how and where your money is being spent.
With choice comes responsibility and it is important that communication between the Directors and your chosen managing agent is constant, clear and at all times correct. The obligations on you as leaseholders, your chosen Directors and the managing agent are strict and ever changing so it is important that you receive clear guidance about the implications of constantly changing legislation and how this may affect your development and its continued structure and improvement.
Taking control gives you the ability to be self determining and enables you to make the choices affecting a major asset and possibly your lifestyle. It has been shown over time that by maintaining a development and creating a pleasant ambience, property values and rents are stronger, making it doubly important to ensure the people affected are the ones making the decisions.
So what are the risks? Absolutely none, you can be as involved as much or as little as you please. Appointing Letters allows you to “call the shots”, we have some leaseholders whom are heavily involved and others who, largely, leave us to do what we do. However, we always work within pre-agreed limits and everyone is kept informed at all stages and are given the opportunity to voice their opinions.