RTM option for leaseholders in poorly managed flats.
The leasehold system and its shortcomings continue to occupy a good proportion of the residential property debate in England and Wales. The Government has pledged reform and will be bringing in a ban on new build leasehold houses. But this will not apply to flats and will not help the many thousands of existing leaseholders.
In many cities in England and Wales a substantial number of flats are built and sold on a long leasehold basis. These may be managed by the landlord or by an agent acting on their behalf. If the management is poor, expensive – or both – it can make things very difficult for the leaseholders having to live there. In these circumstances, leaseholders can take matters into their own hands and exercise their Right To Manage.
What is Right To Manage?
Leaseholders have the statutory right to take over the management of their building as long as they meet certain conditions. There is no obligation to prove mismanagement by the landlord or other agent. The Commonhold and Leasehold Reform Act 2002 sets out the criteria for RTM.
While this may have leaseholders jumping for joy it can be a lengthy procedure. And anyone planning to embark on the process should be aware of the following:
- * The Right applies to flats only.
- * The Right attaches as of right i.e. there is no requirement to prove mismanagement by the landlord.
- * RTM does not necessarily mean self management.
- * The RTM Company will have to make long term provision for maintenance and upkeep and will have to ensure compliance with the landlord’s obligations within the lease. Leaseholders will have to take this into account if the objective is to save money on maintenance and repair works.
- * The tenants will need to learn about company procedures or look to engage someone to advise them.
- * The RTM Company will have to appoint officers on an ongoing basis.
- * The RTM Company will be as vulnerable to criticism as was the landlord.
- * There will be a requirement for regular meetings.
- * An understanding of technical issues will be required e.g. budgets, accounts, specification and legal requirements.
- * The RTM Company must remain solvent.
- * Requirements to comply with Housing and Health and Safety Law.
- * There may be difficulties and sensitive issues in dealing with neighbours and fellow leaseholders.
Low take up
It may be indicative of the complexity and cost of the RTM process that take up has been low. In 2014 the Competition and Markets Authority estimated there were just 4500 RTM companies. This month, the Ministry of Housing, Communities and Local Government has asked the Law Commission for recommendations on improving the legislation to improve costs, delays and red tape.
There is more detailed information on RTM on the Leasehold Advisory Service website – https://www.lease-advice.org/advice-guide/right-manage/