What is ‘Right to Manage’?
“Right to Manage” is a process that the leaseholders of a building (i.e. those paying service charge to a managing agent) can go through to take back control over the management of their building, i.e. it’s their ‘right’ to ‘manage’ their building if they so wish.
This is an incredibly positive piece of legislation that enables leaseholders to actually control what they’re paying for in their service charge.
Right to Manage allows leaseholders in a block of flats to set up a Limited Company (via Companies House) which will then set the budget for their building, decide what works get done (i.e. any refurbishments, regular cleaning, maintenance and so on), who does them (whether it’s external contractors or just a shared rota between leaseholders), how much everything costs, and who the managing agent is going to be.
Most leaseholders who set up this Limited Company often take it in turns to be Directors of the company and manage the administrative tasks, although sometimes one person often opts to take this on for the long-term. Each group of leaseholders is different and there is no right or wrong way to approach it.
Right to Manage allows people to take back control over effectively what's often people's biggest investment, their property, and make sure that it's properly looked after.
Where did ‘Right to Manage’ come from and why was it put into legislation?
The 'Right to Manage' process came out of consultation that the government had of ways to reconnect leaseholders with the control over the management of their building, especially for those not happy with the management of their building.
It was understood that not everybody could afford to or necessarily even wanted to purchase their freehold which can be quite a complex and costly process.
So, the Right to Manage was a compromise, largely seen as a stepping stone to future freehold purchase.
Right to Manage was subsequently drafted and put into the 2002 Commonhold and Leasehold Reform Act.
Over the years Right to Manage has gradually evolved, and got out there into public consciousness, and onto the radars of leaseholders, often those who were disgruntled with their current building management.
Generally, it's a process that people look into when they've found they're having problems and they're getting frustrated. And after doing a bit of research, they find ‘Right to Manage’ exists and then it’s up to experts like ourselves to guide them through the process and successfully take control of their building.
How do leaseholders benefit from Right to Manage?
The primary benefit of doing a Right to Manage for leaseholders is almost always the ability to control the management of their building, taking it off an underperforming managing agent.
The leaseholders will be able to agree a board of directors and all the leaseholders can take turns in taking part in the management of the building.
That board will then set the budget every year, agree what services are commissioned, agree when works will get done, who does them, and overall make sure that they're getting really good value for money out of the service charge.
The board gets to pick the managing agent and to work with them to deliver a really good result for everybody.
At Urang we have done this for over 100 leaseholder groups, successfully guiding them through the Right to Manage process, who then often appoint our Urang London Block Management team as their managing agent. We then work closely together, having known the issues they faced with their previous managing agent, to ensure we deliver an outstanding management service tailored to their needs.
What does the Right to Manage mean for freeholders?
The Right to Manage process does take control of the management of the property away from the freeholder.
For some freeholders, owning a freehold is a large and serious investment and often they don’t like the Right to Manage legislation. However, it doesn’t have to be a bad thing for freeholders.
Here at Urang, we certainly work very hard on the properties and blocks we manage to have a really good relationship with the freeholders, to keep them informed of what's going on, and to reassure them that the Right to Manage companies (i.e. the company that the leaseholders setup to take control over the building management) are looking after their asset suitably.
There are various things that don't pass to the Right to Manage company run by the leaseholders. For example, if a leaseholder wanted to knock a couple of flats together or make serious alterations to the building, the freeholder still has the right to be consulted in instances like that.
We make sure we have a good relationship with both the freeholder and leaseholder’s Right to Manage company so that situations like that can be dealt with successfully for all parties.
What are the risks involved in a Right to Manage?
Risks to leaseholders:
The Right to Manage should be a fairly risk free process for leaseholders, which should result in them gaining the control they don't currently have over their building, including their budgets, the works that get done on their property, and so on.
Risks to freeholders:
The Right to Manage is often a good result for the freeholders to be honest, because they devolve the responsibility they currently have to the people who are actually paying the charges through the service charge (i.e. the leaseholders in the building).
At Urang, we make sure that the freeholder is kept properly involved so that they know their properties are being well looked after, which significantly reduces the risk of any disputes in the future.
Potential issues between leaseholders vs freeholders?
To date, the Urang Right to Manage team have taken over 100 buildings through the Right to Manage process. We are proud to have been successful every single time.
In a handful of cases, a freeholder has indeed disputed the Right to Manage, and subsequently we have had to go to a legal tribunal to argue the case for the leaseholders. This often happens when the freeholder has claimed that the building isn’t eligible for the Right to Manage. There are eligibility criteria for Right to Manage and it is a good idea to do a quick check, or contact us so we can quickly ascertain if your building qualifies.
However, it is important to note that out of all of these disputed cases, we have so far had a 100% success rate in getting the Right to Manage through the tribunal and legal process, securing the result our leaseholder clients wanted.
Once the freeholder legally has to hand over the management of the building, they generally put all the documents together and have an orderly handover. Of course, here at Urang we work hard to develop excellent and deep relationships with freeholders which means the handovers are often smooth, and carefully managed by us to ensure maximum satisfaction for the leaseholders going through the Right to Manage process.
There are going to be some things that we're going to need to do together when a leaseholder wants to sell their property. There are documents that need the freeholder's consent or when people want to make alterations to their flats the freeholder is still involved.
So, we work really hard to make sure we have a good relationship with the freeholder during and after a successful Right to Manage.
In actual fact, a number of freeholders often react to the news of a Right to Manage being mooted by their leaseholders by working proactively with these leaseholders to improve the management of the building or change the managing agent. This often achieves most of the leaseholders goals, while also keeping the freeholder involved in the management. That's certainly something that we are keen to explore with leaseholders and freeholders where we think it's a viable option.
This goes to show the importance of working with an experienced, specialist Right to Manage team, so if you are thinking about the Right to Manage process for your building, we encourage you to reach out to us so we can get the ball rolling on helping you without you taking on the hassle and potential pitfalls this brings.
What steps are involved in the Right to Manage process?
The Right to Manage process is in actual fact a very straightforward one, if you have experience in successfully guiding leaseholders through the process.
There are certain key steps that have to be followed for the Right to Manage to be valid, and to stop the freeholder being able to challenge the way it's been set up.
The first step is to access the eligibility of your building. The vast majority of buildings qualify for a Right to Manage. However, some building’s don’t qualify, such as
Secondly, if your building is eligible for the Right to Mange, the next step is to get 50% of the building’s leaseholders to sign up to support the process. For example, if there are 10 apartments/units in your building all owned by different leaseholders, you will need to get at least 5 of them to sign up to support the Right to Manage. We find that the best way for leaseholders to get these signatures is to drive this part of the process themselves, although we can and do certainly support at this stage.
From our experience in successfully completing over 100 Right to Manage cases, we find time and time again that it's most powerful if a leaseholder visits, emails or writes to their neighbours and explains the advantages and what they're trying to achieve, and how everybody's going to benefit from the Right to Manage process.
The next step, once we’ve got signed forms from 50% of the leaseholders, is to set up the Right to Manage company via Companies House.
Following this, we have to formally write to those leaseholders in the building who haven’t already signed up and give them the opportunity to sign up before a claim notice is served on the freeholder. We write to everybody. We give them a couple of weeks to respond.
We can then serve a claim notice on the freeholder. The claim notice gives the freeholder one month to dispute the claim, and then three months to handover. The freeholder can only dispute the claim on very technical grounds. So they will have to be disputing whether the building is eligible, or whether the requisite 50% of leaseholders have definitely signed up.
If the process is all done properly, there shouldn't be any grounds for the freeholder to lodge a dispute.
The result is that the leaseholders should get control of the management at the end of the further three months handover period.
What buildings are ineligible for Right to Manage?
Certain buildings aren't currently eligible for the Right to Manage process.
For instance, the building can't have more than 25% commercial space in it. So, if there was a building of, let's say, three floors, and the ground floor was commercial (i.e. a third of the building), unfortunately that building wouldn't be eligible.
Moreover, there's also an exception in small buildings. Where there are four flats or less, if one of the flats is owned by the freeholder, then as things stand, that building is not eligible for the Right to Manage process.
Furthermore, there are a few other issues to do with exactly how buildings are constructed. If part of a development is a 'freehold house', and that's effectively touching the rest of the building, that property may not be eligible.
However, all of these exceptions are currently under review by the government. And the aim appears to be to sweep them all away to allow almost any building with a residential flat/apartment in it to be eligible for the Right to Manage process.
Do you need a solicitor to go through the Right to Manage process?
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.
Whilst there are some technical pitfalls to be aware of, it isn't actually a process that requires a solicitor.
In actual fact, we find that solicitors are often happy to help leaseholders with Right to Manage but they are often not very cost effective.
Instead, we’ve built up our Right to Manage expertise here at Urang and have found that we can navigate all the steps required and take people through Right to Manage in a much more cost effective way without the need for solicitors.
Very, very occasionally, a very specific complex legal point has been raised as a dispute by a freeholder, and we have suggested to leaseholders that they hire a solicitor to give some technical advice to allow us to fight the process at a tribunal.
That being said, out of over 100 Right to Manage processes that Urang have done over almost 20 years, that has occurred on no more than two or three occasions, so it's not something that most people need worry about.
What if you don’t know 50% of leaseholders in your building
An essential part of the process for the Right to Manage is to get half (50%) of the leaseholders to sign up.
Often, people don't know all of their neighbours. This is perfectly normal and in fact, more common than not!
In instances like this, we start with the land registry, making sure that we find out who the legal owners are.
Next, there’s good old fashioned door knocking which often gets the job done swiftly and efficiently!
Moreover, there’s other bits and bobs we can recommend to leaseholders to find those leaseholders to reach the 50% signature rate.
With a bit of perseverance all of our clients so far, out of over 100 Right to Manage processes, have managed to find the 50% of leaseholders.
In most cases, our clients have managed to track down most of the leaseholders in their building to make sure that they're okay with the concept of a Right to Manage and happy to support the process.
What are you taking on if you decide to initiate the Right to Manage process?
Initially, a Right to Manage (RTM) company needs to have at least two directors. There needs to be two people who are prepared to review the budgets every year for the property, and consult with the managing agent over what needs to be done, who to appoint to do various works, and also choose who the managing agent should be.
For a small building, this could be distilled down to a short sort two or three hour meeting every year.
Normally, however, through the year, there are various decisions that needs to be taken and emails that go to and fro, and it makes a big difference to the managing agent to have someone to talk to, to make sure they're on the right track and to check that the purchasing decisions they're making are the ones that the leaseholders would like.
For a larger building, it can involve roughly 4-5 directors meetings a year, as well as reading emails in between due to some of the size of some of the purchasing decisions.
We've generally found that most leaseholders are happy to take it in turns to be a company director, so that one person isn't just landed with this.
Often, we find that one leaseholder drives the Right to Manage at the start, but as soon as the letters are sent out and emails go around, there are often a number of other leaseholders in the building who come forward and are prepared to take their share of the time that's going to be involved.
How much does the Right to Manage cost a leaseholder?
Right to Manage is a reasonably straightforward process, so it shouldn't be particularly costly.
There are a number of lawyers who have offer to help, either for a fixed fee or an hourly rate basis, although we find these are not cost-effective for leaseholders.
Alternatively, a number of companies offer to assist, usually for £100 to £200 per leaseholder.
With Urang Right to Manage, most of our customers choose the option of paying nothing upfront at all, and agree to appoint us as the managing agent at the end of the process. In that scenario, we don't charge anybody anything upfront, and at the end of the process, we just recover our expenses from the leaseholders, which are usually only a few hundred pounds in total.
We also offer to do a Right to Manage on a 'success-only' basis. We'll take all the risk of running the process. If we are not successful, then there wouldn't be any cost for the leaseholders. So far, we have a 100% record so we're not too concerned about making that offer!
Why choose Urang to guide me through the Right to Manage process?
We have established the third highest number of Right to Manage Companies in the UK (based on an analysis of Companies House records since 2002), forming over 120 RTM companies to date, 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.
Due to our experience, we are able to confidently navigate any disputed cases that are taken to legal tribunal. We currently have a 100% success rate with cases that have gone to legal tribunal due to the freeholder challenging the Right to Manage.
Personally, I know that both myself and my team enjoy the result that we know we're going to achieve for our clients (the leaseholders) at the end, where it has a very transformational change for them in how the buildings are looked after.
I want to start the Right to Manage for my building, where do I start?
Book a free telephone consultation with us. You can do this quickly and easily here.
Or just send us a quick message on our webchat feature and we will get back to you as soon as possible.
When we speak, the first thing we'll do is we'll assess your building’s eligibility with you. We'll check out the legal documents, the construction of the building, make sure that it's definitely right for you. And we can also talk you through some of the benefits that you'll be able to potentially sell to your fellow leaseholders.
If your building is eligible, we can then talk you through the next steps and how you might be able go about getting signatures from fellow leaseholders, and how we get the ball rolling!
Want more information?
Want to discuss Right to Manage with Paul? Send us a message using our webchat widget to get the conversation started, or visit our Right to Manage page.