As the number of people in privately rented accommodation increases, the ability of tenants to manage their homes in a way that works for them is becoming increasingly important. The Right to Manage (“RTM”), which landlords cannot contract out of, was introduced to give tenants of flats more control if they are dissatisfied with the way a landlord or property manager is managing the services in their building.
How does it work?
Under the Commonhold and Leasehold Reform Act 2002, the RTM applies to premises that:
• consist of a self-contained building or part of a building;
• contain two or more flats held by qualifying tenants; and where
• the total number of flats held by qualifying tenants is not less than 2/3 of the total number of flats in the premises.
Qualifying tenants are those who have long leases of 21 years or more from the date of grant.
Certain premises are excluded from the RTM. They include premises owned by local housing authorities and buildings where more than 25% of the internal floor area (excluding common parts) is non-residential .
The RTM must be exercised through a private company limited by guarantee set up by the qualifying tenants (the “RTM Company”), which must give notice to each qualifying tenant inviting them to participate in the RTM. The RTM Company then has to serve a claim notice on anybody who is:
• a landlord under a lease of the whole or any part of the premises;
• any party to those leases that is not a landlord or a tenant; and
• a manager appointed (under Part II of the Landlord and Tenant Act 1987) to act in relation to the premises or any part of them.
On the date that the claim notice is given, the number of qualifying tenants that are members of the RTM Company must be at least half of the total number of flats in the premises. If a person given a claim notice disagrees that the RTM Company is eligible to acquire the RTM, it will need to serve a counter-notice; the RTM Company may then apply to a tribunal for determination of its right.
If the RTM Company acquires a RTM of the premises, it will assume management functions in relation to services, repairs, maintenance, improvements, insurance and management. This excludes landlord functions in respect of re-entry or forfeiture and matters relating only to flats not held by qualifying tenants.
Worthwhile? Possibly not.
For a group of tenants willing to act together and with the right skillset, this can be a great way to ensure quality management of shared areas and services and expenditure on services that are important to them. However, the Law Commission has commented that take up is limited and those who have done so “have found delays, costs and uncertainty” in the statutory process for acquiring the RTM. Stumbling blocks identified include the prescribed form of notices, difficulties in managing additional parts of properties used by others (e.g. access roads) and the inability for one RTM Company to manage multiple blocks on the same estate. At a time when mixed use development and redevelopments are finding favour (with residential development above retail and leisure assets, for example) it is arguable that the exclusion of buildings with more than 25% of commercial space deprives an increasing number of flat tenants of the right to manage their building.
Given these problems, it might be unsurprising that the take up of the RTM scheme has been slow since 2002. However, with the Law Commission looking to publish a consultation paper by the end of 2018 with a view to “making the procedure simpler, quicker and more flexible”, it may well be that landlords will face more RTM claims in the future.