If you’re the landlord of a property that contains two or more flats, where your tenants have long leases, you need to be aware of the Right to Manage.
What is the Right to Manage?
Right to Manage is a statutory right that features in the Commonhold and Leasehold Reform Act 2002. It enables leaseholders to transfer the management responsibilities of their building from the landlord to a Right to Manage (RTM) company. Right to Manage can be exercised by tenants no matter whether the landlord’s management has been good or bad, it does not require an order of the court, or the landlord’s consent.
Does my property qualify for the Right to Manage?
Right To Manage applies to properties that contain at least 2 flats, and at least two-thirds of those flats must be owned by qualifying tenants. If you own the freehold of a semi-commercial property, no more than 25% of the property can be in non-residential use to qualify for Right To Manage.
Are my tenants eligible to apply for Right to Manage?
To be eligible to apply for Right to Manage, the leaseholder must be a qualifying tenant. This is essentially a tenant who has a long lease of more than 21 years, from when the lease was originally granted. To apply for Right to Manage, at least half of the qualifying tenants (equal to at least half the total number of flats in the property) must participate.
How do my tenants apply for Right to Manage?
In order to apply for Right to Manage, the qualifying tenants must first appoint an RTM company. This company will be responsible for the management of the property rather than the tenants and will remain in place no matter whether the qualifying tenants leave the property at a later date. To gain the Right to Manage, the RTM company must obtain Articles of Association (these are documents prescribed by law that specify the purpose, duties, and responsibilities of the RTM company) and register a Memorandum of Association (a legal statement signed by the qualifying tenants agreeing to form the company).
Once the RTM company has been appointed, a Notice Inviting Participation must be issued by the participating qualifying tenants to invite all other qualifying tenants to become members of the RTM company. This notice must be accompanied by a copy of the Articles of Association (or at least where it can be found) to inform qualifying tenants of the management functions that the RTM company will be responsible for. This notice must be served in writing, either in person or by post.
The final step for the participating qualifying tenants is to serve Notice of Claim on the freeholder. This must take place from 2 weeks (14 days) after the Notice Inviting Participation has been served. This is the formal notice that outlines when the RTM company will take over the management of the property.
What happens when I’m served a Right to Manage notice?
If you are served a Right to Manage notice, it is possible to challenge it by serving a counter-notice within one month of receiving the notice. You can only do this if you dispute the validity of the claim, rather than disputing the claim itself. If you do this, the RTM company has 60 days to apply to the First-Tier Tribunal to determine whether or not the claim is valid.
If you do not serve a counter-notice, the RTM company will automatically take over the management of the property from the date specified in the Notice of Claim. At this point, you’ll need to inform the RTM company of any existing contractors working on the property, as well as informing those contractors of the new situation.
If you are served with a Notice of Claim, there is still a way to be involved in the management of the property. Once the membership is transferred to the RTM company, you are entitled to become a member of that company.
For more information on Right to Manage, or if you’re thinking about selling your freehold, send us an email via our contact form or speak with one of our experts on 01245 227 920.
Further reading: ‘A Landlord’s Guide to Enfranchisement and Collective Enfranchisement‘. Find out how this can affect you as a freeholder.