Right to manage for leaseholders

The Commonhold and Leasehold Reform Act 2002 introduced the ability for leaseholders to transfer the management of flats from the landlord to a Right To Manage (RTM) Company, set up by the leaseholders. The ownership of the building remains with the landlord.

For leaseholders to take over management of their property, the property must have the following qualifying features:

• Only flats (not houses) qualify.
• At least two-thirds of the flats in the building must be leasehold with a lease of at least 21 years when granted.
• The building must be predominantly (at least 75%) residential.
• If there are less than four flats in the block, the landlord must live elsewhere unless the flats are purpose-built, rather than conversions.
• At least half of the flats in the building must become members of the right to manage company.

It is not necessary for leaseholders to obtain the landlord’s permission in order to transfer the management and it is not necessary for there to have been any problems with the way the property was managed by the landlord. To exercise the right to manage, a formal notice needs to be served on the landlord. The management will then transfer to the right to manage company. The landlord is eligible to become a member of the right to manage company.

It is possible for the landlord to dispute the application by serving a counter-notice to the right to manage company. This must outline the details of why the landlord does not think the company is entitled to management. This can include:

• The building does not qualify.
• The right to manage company is not legally compliant.
• The right to manage company is comprises less than half the flats in the building.

The right to manage company can apply to the Leasehold Valuation Tribunal within 2 months of the counter-notice and the tribunal will then decide if the company can manage the building. The right to manage company will be responsible for:

• Collecting and managing the service charge.
• Maintenance of the communal areas including hallways and stairwells.
• Upkeep of the actual building, for example the roof.
• Managing complaints about the property.
• Decision-making for budgets
• Standards of management
• The overall functioning of the building.

It is not possible for the right to manage company to stop maintaining the building as a way of saving money.

It is important to note that under the Building Safety Act 2022, Right To Manage Companies (RTMs) and Resident Management Companies (RMCs) have building safety responsibilities, as they are considered accountable persons (APs) and potentially principal accountable persons (PAPs) with legal obligations to repair any common parts of the building. Relevant, especially where a building is higher risk (18 meters in height or seven stories and with at least two residential units).

It is the organisation itself that is accountable for building safety, not the individual shareholders or members; however, the directors of the company are APs, responsible and, in certain circumstances, may be held jointly and personally liable. As it is unlikely that any of the company directors have expertise in the area of building safety, it is probable that they will seek professional support and advice and appoint a PAP. Not seeking the support of a competent person, not doing anything, or doing it themselves when the expertise clearly doesn't exist in the organisation could be considered as negligence and lead to prosecution.

The requirements of all PAPs under the Building Safety Act include:

• Storage and maintenance of building information: How it was designed and built, how it may have changed, and how it is maintained and managed. With information on all aspects of fire and structural safety, evacuation, complaints, and incidents, including documents, drawings, reports, and other records. The ‘Golden Thread’ of information, or the ‘Safety Case.’.
• Safety Case Reporting: Preparation of a ‘safety case report’ for their building, which identifies building safety risks (the risk of fire spread in the building and structural failure) and describes how they are being managed. The safety case report summarises the building safety information, or ‘safety case,’ for the high-rise residential building and shows the PAP is taking all reasonable steps to manage identified building safety risks.
• Engaging with residents: PAPs should engage with residents about safety issues. They must prepare a residents engagement strategy whereby residents and owners of residential units in the building can participate in making building safety decisions. This will provide residents with access to more information about the safety of their building, help them to know what changes are being made to their building, how they are consulted on the changes, and how it will impact them. It will also provide effective routes for resolution.

For further information on related topics follow these links Resident Management Companies (RMCs) in high-rise buildings, The role and responsibilities of accountable persons and principal accountable persons, Becoming a director or member of a residents’ management company, and Guidance About flat management companies, RTM companies and commonhold associations

[edit] Related articles on Designing Buildings

• Break clauses in leases.
• Building Safety Index
• Commonhold.
• Community right to bid.
• Community right to build.
• Community right to challenge.
• Community right to reclaim land.
• Flat definition.
• Freehold.
• Lease Negotiations - Tenants Checklist.
• Leasehold.
• Leasehold enfranchisement.
• Localism act.
• Rent review.
• Rent-free period.
• Resident Management Companies RMC.
• Right to build.
• Right to contest.

[edit] External references

• Commonhold and Leasehold Reform Act 2002.
• Leasehold Advisory Service.