Right to Manage

What is a right to manage claim?

A right to manage claim is when a group of flat owners jointly make a claim to acquire the right to manage their building from their landlord. The claim is not fault-based, which means that the claim can be made against the landlord whether or not they are carrying out their obligations under the leases and consequently there are very limited ways that a landlord can object to a right to manage claim. On completion of the right to manage claim, each flat owner that participated in the claim will become a member of the right to manage company which will run the management of the building.

Why should I participate in a right to manage claim?

Once the management has been acquired by the right to manage company (whose members are the participating flat owners) the company will collectively have control over the management of the building which will be more clearly defined in the leases of the flats in the building. Each participating flat will have a vote in respect of the management decisions which will typically include arranging buildings insurance, determining service charges and arranging any necessary major works.

What is the cost of participating in a right to manage claim?

There is no premium payable to the landlord for the right to manage, therefore the total cost of participating in the right to manage claim will be comprised of the following:-

  1. Your share of the participating flat owners’ costs – this will include the cost of your solicitor, plus any applicable disbursements, for example, Land Registry fees, Tribunal fees, bank charges, stamp duty, etc.
  2. Your share of the landlord’s reasonable costs – this will include the reasonable costs of the landlord’s solicitor in connection with investigating the claim, serving a counter-notice and dealing with the legal administrative procedure, plus any of the landlord’s disbursements in connection with the right to manage procedure. It is important to note that you are not responsible for the Landlord’s costs in connection with any Tribunal proceedings unless the Tribunal finds that the right to manage company was not entitled to exercise the right to manage claim in which case they are entitled to recover their reasonable costs in connection with the Tribunal proceedings.

How long will it take to acquire the right to manage?

We usually estimate that the procedure will take 4-6 months from the service of the right to manage notice to completion of the claim provided that the right to manage is not disputed by the landlord.  However, if the participating flat owners prefer to have more time to prepare to take over the management of the building they can propose a date to take over the management which is further in the future.

How does the Building qualify to participate in a right to manage claim?

To qualify for a right to manage claim the following conditions must be fulfilled:-

  1. the claim must be made in respect of a self-contained building or a self-contained part of a building (which can be severed vertically from the rest of the building); and
  2. the building must contain at least two flats; and
  3. at least two thirds of the flats must be let to qualifying tenants (where their leases must have been originally granted for a term of at least 21 years); and
  4. the commercial space must not exceed 25% of the internal floor space in the building; and
  5. at least 50% of the flats in the Building must participate in the claim.

How do I qualify to participate in a right to manage claim?

To participate in a right to manage claim you must be a long leaseholder of a residential unit (rather than a business or commercial unit). This means that your lease must have been granted for an original term of at least 21 years (regardless of how many years are left on the term).

What is the procedure for a right to manage claim?

Once the participating flat owners have instructed us, we will arrange to form the right to manage company. The right to manage company must then send an invitation notice to any qualifying flat owner which is not currently participating in the claim, inviting them to participate in the right to manage claim. The right to manage company must give at least 14 days for these flat owners to respond to confirm if they would like to join in with the claim. If they do wish to join the claim, then they must be added as a member of the right to manage company.

The right to manage procedure is then commenced when the right to manage company serves a formal notice on the landlord claiming the right to manage. The right to manage company must provide a deadline which is at least a month from the date of the claim notice by which the landlord must respond with their formal counter-notice. The right to manage company must also propose a date to acquire the right to manage (also known as “the acquisition date”) which is at least three months after the counter-notice deadline.

The landlord may respond in the following ways:-

  1. Admit that the right to manage company has the right to manage or not respond with a counter-notice at all. This will happen in the majority of cases, and the right to manage company will proceed to acquire the right to manage on the acquisition date as set out in the claim notice.
  2. Dispute that the flat owners have the right to manage the building. The right to manage company can then apply to the Tribunal for a declaration that they are entitled to manage the building and the application must be made within two months of the date of the counter-notice.

Prior to the acquisition date, the right to manage company can serve an information notice on the landlord which requests specific information about the management of the building. The landlord must respond within 28 days of the notice (although this is subject to the proviso that they do not have to respond before the acquisition date).

Following the acquisition date, we will register the company’s right to manage against the freehold title at HM Land Registry.

Are we required to give the Landlord membership in the Right to Manage company?

If the landlord requests membership in the right to manage company, the right to manage company is required to give the landlord a vote for every flat that he owns in the building and if does not own any flats in the building, the right to manage company is required to give the landlord one vote.

What happens to the service charges that we have already paid?

The landlord must transfer all service charges that have not been spent to the right to manage company on the acquisition date or as soon as after that date as is reasonably practicable.

Which specific management functions and responsibilities does the right to manage company take over?

The right to manage company will take over all the management functions and responsibilities that are specified in the leases (save for a few particular functions and responsibilities outlined below that remain with the landlord). Typically, this may include the responsibility for the repair and maintenance of the building, the buildings insurance, levying and collection of service charges and the day to day management of the building.

The right to manage company also takes on the responsibility for:-

  1. Approvals of covenants – however, the right to manage company must give notice (14 or 30 days’ notice depending on the specific approval requested) to the landlord of the request for consent. If the landlord objects then the right to manage company cannot grant the consent until the landlord withdraws their objection or the matter is determined by the Tribunal.
  2. Enforcement of covenants – however, the right to manage company must keep the landlord informed of any breaches of covenant and any breaches that have not been remedied must be reported to the landlord so that they can proceed to enforce the covenant through the forfeiture provisions (if they wish to do so).

Which specific management functions and responsibilities stay with the landlord?

The landlord specifically retains:-

  1. the right to collect the ground rent; and
  2. the right to exercise forfeiture to regain possession of the flat; and
  3. the management of any non-residential parts of the building (for example, commercial units).

How can LEASE Law help me with my right to manage claim?

LEASE Law are specialist solicitors who can act on your behalf in respect of the legal requirements for making a right to manage claim. In the vast majority of cases, we are able to offer a fixed fee for acting in respect of the participating flat owners.

The work that we will carry out for the participating flat owners includes investigating the title to the building, preparing and serving the claim notice on the landlord, receiving the counter-notice from the landlord (if any), preparing and serving the information notice and registering the right to manage at HM Land Registry.

Please contact Jade Wilson (jade@leaselaw.co.uk or 0204 511 9100) or Joanna Botley (joanna@leaselaw.co.uk or 0204 511 9101) for a no obligation discussion about your potential right to manage claim.