There is no premium payable to exercise your management rights; unlike extending your lease or coming together to jointly buy the freehold you can take control without needing to pay a premium. If you’re experiencing high service charge demands or your freeholder is carrying out either unnecessary or inappropriate repairs at your cost, this could be the best solution. Forming a Right To Manage Company takes control away from the freeholder and may allow for some big savings possibly even increasing the saleability of your property.

What are the main benefits of forming a Right to Manage Company?

In a word, control.

Flat owners are normally best placed to deal with the management and maintenance of their block. Having control means that things get done when they should and in a manner determined by you.

Most leases contain provisions requiring the consent of the freeholder. This can include sub-letting, assigning or selling the lease and making alterations to the flat. The right to approve and give consent passes to the Right to Manage Company. Although the company must keep the freeholder informed, and give notice of consents given, you get to decide whether to grant consent or not.

There could also be significant savings. A third party freeholder may not fully have the interests of the flat owners at heart and has no incentive to get the best possible prices. Seeking quotes from your own trades people and service providers allows you to seek out the best prices for things such as gardening, cleaning and maintenance. Having the choice of buildings insurance provider allows you to shop around for the best policy to suit your needs and pocket.

Are there any drawbacks?

Taking over management does not cure all ills within your block and flat. You will still have to pay maintenance and a share of the building insurance. You will also still have to abide by the restrictions and rules of your leases. Being the manager does not give you or any other participating flat owners the right to breach the leases. Rules concerning noise, anti-social behaviour, owning pets, sub-letting/holiday lets, playing musical instruments, hanging out washing or running a business from your flat will still apply.

You will also have all of the responsibility of a freeholder. That includes keeping up with the cleaning and maintenance of the block as well as arranging insurance. You will be in charge of the service charge so will be tasked with collecting and accounting for the same. In addition, you will now have a Right to Manage Company to maintain and will have to file annual accounts and a confirmation statement with companies house. Two or more flat owners will become company directors and they will be tasked with most of the responsibilities.

The enforcement of the obligations under the leases becomes the responsibility of the Right to Manage Company. The Company must ensure flat owners comply with all covenants and must alert the freeholder to any breach.

Forming a Right to Manage Company does not give you all of the powers a Freeholder has. You will still need to pay ground rent to your freeholder and the Right to Manage Company cannot extend or vary your lease.

Our service does not end when you take control. We work with our clients to assist with the smooth running of their block and Right to Manage company. We are always on hand to assist with post completion questions or issues whether these arise in the first weeks or years down the line.

If self management is not for you, we are happy to recommend local managing agents to relieve the burden of freehold ownership.

What about money already paid to the freeholder?

Where the freeholder has collected service charges in advance but not yet spent them, the remainder is meant to be held in a trust account. The freeholder is obliged to hand over all the unspent sums including any reserve account or sinking fund. Any monies that you have already paid should be returned to you.

Who can exercise the Right to Manage?

Residential leaseholders can collectively exercise the Right to Manage. You need at least 50% of the flat owners to participate. Other flat owners cannot stop the majority from taking over management but nobody can be forced to join the Right to Manage Company. The Right to Manage is exercised by a Right to Manage Company owned and controlled by the participating flat owners. Any qualifying flat owner that does not participate will not be a member of the Right to Manage Company. They will have no direct say in the management of the block but are entitled to join the Right to Manage Company at any time. The freeholder is also entitled to be a member and have a voice too.

In order for you and your block to qualify, you have to meet the following criteria:

• The block must be a self-contained building (or part of a building);
• Two or more of the flats must have long lease (initially granted for 21 years or more);
• The total number long leases must be not less than two-thirds of the total number of flats in the block;
• A flat owner can participate regardless of the number of flats they own in the building;
• Not more than 25% of the building can be non-residential/commercial;
• (other criteria may arise in unique circumstances). 

Are there any restriction?

The Right to Manage does not extend to any non-residential parts of the building or any non-qualifying flats.

Some blocks do not qualify. The Right to Manage cannot be exercised against a local housing authority or resident landlord.

Where the immediate landlord of any qualifying tenant is a local housing authority, you cannot take over management.

To fall within the resident landlord exemption all of the following would need to apply:

• The premises must be other than a purpose-built block (for example a converted house); and
• They must comprise not more than four flats; and
• One of the flats must be occupied by the freeholder or an adult member of their family as their only or principal home for the last twelve months.

Checking eligibility is a complex area of law and is the first step in the Right to Manage process. If you are unsure whether or not your block qualifies, contact us for an initial consultation.

Do we really pay nothing to the Freeholder?

Unlike extending your lease or buying the freehold, you do not pay compensation to the freeholder. You do, however, have to pay their legal costs.

How much does it cost?

The cost can vary greatly and depend upon several factors including the number of flats in the block, the number of flat owners participating and the number of management contracts in place. Generally speaking, the biger and more complicated the block, the higher the legal cost. More participants, however, mean that the cost per flat owner can be lower.

What is the process?

Where can I get more information?

We are happy to offer advice on the law and the procedure and always offer an initial consultation for free. Contact us to discuss your eligibility and costs. We can put you in contact with a specialist valuer to establish how much your freehold purchase is likely to cost.

For further useful information, you may wish to visit the government funded website The Leasehold Advisory Service.

I have a complex leasehold framework or situation.

Everyone’s situation is unique but some legal frameworks are more complex and challenging than others.

Some residential leases are structured on the basis of three tiers with the freeholder (the landlord) at the top, the head leaseholder (usually a management company) owning an intermediate lease and the individual leaseholders (the flat owners) on sub-leases. A head lease can make life easier for the freeholder but may cause flat owners issues when taking over management.

Other leases are complicated by third parties to the lease. This could be a third party management company, a residents’ management company or even a residential association.

Having more than two parties (instead of simply a landlord/freeholder) can push up your legal costs and add extra complications. We are specialists with experience in dealing with all types of leasehold frameworks. We will guide you through the process using plain English. You will always be kept up-to-date and your file will be handled by a partner with years of experience in collective enfranchisement. We will always be at the end of the phone throughout the process.

For a free no obligation initial consultation call 01202 79 89 17 or email contact@ghwc.co.uk.