Are you a leaseholder or freeholder looking to understand how to appoint a managing agent for your property?

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Whether you're a Freeholder, exploring the Right to Manage (RTM) or already have a Residents' Management Company (RMC) with the right to appoint, it's important to understand the options available to you.

Below, we will break down the legal rights and procedures for appointing a block managing agent, including insights on share of freehold, RTM, and RMCs, so you can make informed decisions for your property management needs.

The management of residential blocks involves various legal structures, each with specific rights and procedures for appointing a block managing agent. Understanding these structures is essential for both leaseholders and freeholders to ensure compliance with legal nobligations and effective property management.

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1. Appointment by the Freeholder

The freeholder, also known as the landlord, retains ownership of the building and land. In traditional leasehold arrangements, the freeholder has the authority to appoint a managing agent responsible for the property's upkeep and management. This appointment is typically outlined in the lease agreements, which may grant the freeholder the power to manage the property directly or delegate this responsibility to a managing agent. In some cases, leaseholders can also be the freeholder of the building through a share of freehold arrangement (to clarify, this means that leaseholders may collectively acquire the

freehold, often via a company, which then acts as the landlord. In such cases, leaseholders typically become both shareholders of the freehold company and leaseholders of their individual flats). The share of freehold gives leaseholders the same rights as a freeholder, including the right to appoint a managing agent.

Legal Basis:

• Lease Agreements: These contracts often specify the management arrangements, including the appointment of managing agents by the freeholder.

Considerations:

• Leaseholders and Freeholders should review their lease agreements to understand the management structure and any rights they may have concerning the appointment or removal of managing agents.

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2. Appointment by Leaseholders through the Right to Manage (RTM)

Introduced under the Commonhold and Leasehold Reform Act 2002, the Right to Manage (RTM) allows leaseholders in a building containing flats to take over the management of the property without the need to prove mismanagement or obtain the freeholder's consent. This right is exercisable through the formation of an RTM company.

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Eligibility Criteria:

• Number of flats: The building must have at least two flats
• Leasehold flats: At least two-thirds of the flats must be owned by long leaseholders
• Support: At least half of the long leaseholders must support RTM
• Non-residential space: Non-residential areas, such as shops, cannot make up more than 25% of the building's floor area (TBC)
• Self-contained: The building must be structurally detached, including underground car parks and gym facilities

Procedure:

Right to Manage is a legal process in as much as the steps to go through it are set out in statute, in the 2002 Commonhold and Leasehold Reform Act – the steps have to be followed for the RTM to be valid.

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At Urang, we have established one of the highest number of Right to Manage Companies in the UK (based on an analysis of Companies House records since 2002), which has helped to transform 1,000’s of leaseholders who can now benefit from controlling the management of their buildings and have their say on what they are paying for their service charge.

Considerations:

• The RTM company assumes responsibility for the management functions previously held by the freeholder.
• Leaseholders should ensure compliance with all legal requirements during the RTM process to avoid disputes.

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3. Appointment by a Residents' Management Company (RMC)

An RMC is a company, typically limited by guarantee, formed by leaseholders to manage the building collectively. Each leaseholder usually holds one share or guarantee, ensuring equal control over the company's decisions, including the appointment of managing agents. The RMC can only appoint a managing agent if the right to do so is specifically granted to them, either through the lease agreements of the leaseholders or by an arrangement made with the freeholder.

Legal Basis:

• Rights in the Lease

The lease agreements between the freeholder and the individual leaseholders may include provisions that grant the RMC the power to manage the building or appoint a managing agent. This right is often built into the terms of the lease when an RMC is established. If the leaseholders form an RMC and the lease allows the RMC to manage the property, then the RMC can appoint a managing agent to perform the management duties. For example, the lease may specify that the RMC has the right to take control of certain management functions, such as collecting service charges, managing repairs, and appointing a managing agent to handle the day-to-day operations of the property.

• Agreement with the Freeholder

If the lease does not specifically grant the RMC the right to appoint a managing agent, then the freeholder must agree to delegate that power to the RMC. This could be as part of the initial setup of the RMC or through separate negotiations between the RMC and the freeholder.

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If there is no explicit clause in the lease that grants the RMC the right to appoint a managing agent, and no separate agreement with the freeholder, the RMC would not automatically have the right to appoint a managing agent.

4. Leaseholders Appointment by Tribunal Application

In certain circumstances, leaseholders may need to apply to the First-tier Tribunal for the appointment of a managing agent, especially in situations where there is a dispute with the freeholder or when management functions are not being properly handled. However, this should generally be seen as a last resort after other avenues for resolving management issues have been exhausted. A tribunal application can be a useful recourse for leaseholders who have exhausted other means of resolving management issues or are unable to reach an agreement with the freeholder or other parties.

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When to Apply to the Tribunal:

A tribunal application may be necessary in the following situations (not limited):

• Mismanagement or Neglect: If there are serious issues with how the property is being managed (such as inadequate maintenance, unreasonable service charges, or neglect of repairs), leaseholders can ask the tribunal to step in and appoint a managing agent to take over responsibilities.
• Disputes Between Freeholder and Leaseholders: If there is a dispute between the freeholder and leaseholders regarding the management of the property, and attempts at agreeing has failed, a tribunal can intervene to ensure a fair and impartial decision is made.

How to Apply for a Tribunal Appointment:

1. Submit an Application: Leaseholders must submit an application to the First-tier Tribunal (Property Chamber), providing evidence of the issue at hand. This may include documents such as lease agreements, correspondence with the freeholder, or records of mismanagement.

2. Tribunal Hearing: A hearing will be held where all parties - leaseholders, freeholders, and any other relevant stakeholders - can present their case. The tribunal will review the evidence and decide whether it is appropriate to appoint a managing agent.

3. Tribunal Decision: If the tribunal decides that it is necessary to appoint a managing agent, it will issue an order specifying who the managing agent should be and the scope of their responsibilities. This decision is legally binding.

Legal Basis:

• Section 24 of the Landlord and Tenant Act 1987: This legislation allows leaseholders to apply to the tribunal for the appointment of a managing agent if the freeholder is not fulfilling their obligations.
• Commonhold and Leasehold Reform Act 2002: This Act also enables tribunals to become involved in the management of properties under certain conditions, particularly with regard to disputes over management responsibilities.

Considerations:

• Costs: It’s important to note that while the tribunal process is designed to be accessible and relatively low-cost, there may still be legal fees involved. Leaseholders should be prepared for the possibility of costs related to the application process.
• Legal Advice: It is often advisable to seek legal advice when applying to the tribunal, particularly if the situation involves complex legal arguments or if there are disagreements about the appointment of a managing agent. Legal professionals can assist with the application and ensure that the necessary documentation is provided to support the case.

The First-tier Tribunal can be an important tool for leaseholders who are unable to resolve property management issues through other means. However, applying to the tribunal should be considered as a last resort after other methods, such as direct negotiation or informal dispute resolution, have failed. Leaseholders should carefully assess their options and seek legal advice if needed before proceeding with a tribunal application.

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Conclusion

The appointment of a block managing agent in the UK is influenced by the property's ownership and management structure. Freeholders, RTM companies, and RMCs each have distinct rights and procedures for appointing managing agents, as defined by lease agreements and statutory provisions. Staying informed about current legislation and potential reforms is crucial for all parties involved to navigate the evolving landscape of property management effectively.

Have questions or need assistance? Our team can guide you through the process of establishing whether you have the right to appoint a managing agent.

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