Category Archives: Right to Manage

Information for leaseholders and freeholders about exercising the legal Right to Manage a property.

Recognised Tenants’ Associations

Leaseholders who want a greater voice in the management of their building may want to think about forming a Tenants’ Association.

A Tenants’ Association can be set up by a group of leaseholders who own leases from the same landlord / freeholder on similar terms.

Forming an Association is a good way for the flat owners to express their collective views to the freeholder and / or their managing agent.

The association could be a company, but does not need to be. It can be a loose collective of people that want to work together to be recognised in consultation on service charge and management issues.

However, in order to be most effective the association needs to be officially “recognised.”

If the association achieves recognised status then the freeholder/landlord must then consult with the association on any plans for major works and notices (such as section 20 notices) must be copied to it. The association can then use its collective voice in any consultations on future works, or major cost items for the building.

There are two ways of obtaining recognition:

1.     Agreement with the landlord

The association approaches the landlord and the landlord agrees to recognise the association. The landlord then confirms this formally in writing. The association is then ‘recognised.’

Any written notification or ‘certificate’ from the landlord recognising the association will continue to be valid unless the landlord/ freeholder gives the association is given six months’ notice withdrawing recognition.

2.     Application to the tribunal

The other way is if a certificate is obtained from the First-Tier Tribunal of the Property Chamber (formerly the ‘LVT’ or ‘Leasehold Valuation Tribunal’). This is much more likely if the freeholder is unlikely to be a willing participant in the recognition of the association.

A certificate is usually granted for a specified period of time (normally four years), but it may be renewed at the end of this time. The tribunal can also cancel the certificate at the end of this period if it considers that there is no advantage for the Association to be recognised.

Who can become a Member of the Tenants’ Association?

Any long leasehold flat owners in the building who are paying variable service charges to their landlord are entitled to be members.

How many flat owners are needed?

As a general rule, the Association will need at least 60% of those flat owners who are entitled to join, to have become members. In other words, if there are 100 flats in the block and all of these are let out on long leases with a service charge, then at least 60 of the flats must join in.

How does the process work?

The formal request for recognition, whether made to the landlord directly or to the tribunal, must include copies of the rules of association or constitution, which should be fair and democratic.

The leaseholders will also have to submit the names and addresses of all of the elected members of the proposed Association with their application.

Can the landlord join?

The landlord and the managing agent are not entitled to become members of the Tenants’ Association. If there are any leasehold owners who do not pay variable service charges, then they can become members of the association, but they are not allowed to vote.

How do we go about forming a Recognised Tenants’ Association?

If you want to form a recognised Association, or to make an application to become one, then the first step is to investigate with your neighbours whether there is sufficient interest to set up an association. You will then need to consider whether to use an incorporated or unincorporated model.

For further information on forming an association, you may need to seek specialist advice. There are some good guides produced by the Federation of Private Residents Associations (FoPRA), or you may be able to get help from LEASE the government advisory body.

Mark Chick 

November 2017

Mark Chick is a solicitor specialising in leasehold issues. To make contact email leasehold@bishopandsewell.co.uk

Should we go for the freehold or exercise the Right to Manage ?

This can be a potentially confusing choice for a collective of flat owners and depends on what exactly the likely participants want to get out of the process. It is important to get this right at an early stage in a collective action so as to avoid a lot of wasted time and effort in the early part of the process.

In short, the answer depends on what you want to get out of the process and what the key motivating factor(s) for pursing some sort of collective action are.

Do you have only management issues?

If your main objective is to deal with only the issues arising out of the management of the block, then the ’Right to Manage’ may be more appropriate.

How long are your leases?

If some or all of the leases in your block are short then there is likely to be a higher capital cost to buying the freehold and also funding non-participating flat owners. This is can be a potential ‘deal breaker’ for a freehold purchase if those taking part cannot (or do not want to) fund the non-participating flat owners and outside funding cannot be found (or is not wanted).

If there are a variety of lease lengths then there may also be issues as those with shorter leases will have to pay more to take part and this disparity may be a barrier to getting a freehold purchase started.

In such a case, then Right to Manage, (possibly followed by lease extensions for those that are interested) could well be the best way forward.

Longer leases, but management an issue?

Normally, if the leases are ‘long’ then there may be less of an incentive to pursue the freehold. However, if the building’s management is an issue then provided that there is a good level of participation and that the capital cost per participant is not too high, then buying the freehold may well be the better option.

This is because the transactional process in terms of cost and timescale may well be similar for freehold purchase and the right to manage. As such, freehold may be a better result as the ownership (as well as control of the landlord functions under the leases will change).

As always these sorts of decisions need to be made on a ‘case by case’ basis however, the above may well prove a useful starting point for discussion. Appropriate advice from a suitably qualified professional should be sought when making any group decision about the relative merits of freehold purchase or right to manage.

I’m fed up with the building management – is there anything I can do?

There certainly is. Collectively you have the right to take over the management of the building using the so-called ‘Right to Manage.’

The qualification criteria are similar to freehold purchase under the 1993 Act but this is a right arising under the Commonhold and Leasehold Reform Act 2002.

Provided that you have 50% or more of the flat owners on board you can serve the relevant notices and then take over all of the management functions held by the landlord under the terms of the leases.

Whilst the landlord retains legal ownership, day to day management and control rests with the flat owners via their ‘Right to Manage’ company.

The procedure involves serving a notice of invitation to participate and then following this up with a notice of claim. Needless to say, the notices must be served correctly to be valid. You will also need to incorporate a ‘Right to Manage’ company to exercise the management functions. All those who will participate need to be members of this company before the notice is served.

It may also be necessary to consider carefully the timescale for the transfer of obligations under ongoing management agreements and you will generally need to have a new property manager ready to take over the landlord’s functions when the right has been exercised.

Like all of these processes, success lies in proper preparation and planning and of course, appropriate professional advice.