We have highlighted in bold a few points that need your attention urgently before the statutory notice can be served.
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1 Lndn, DX: Victria THE RIGHT TO MANAGE The purpse f this utline is t explain The Right t Manage. It is t highlight a few imprtant aspects f the right t manage s that flat wners are fully aware f the right which they nw have t manage their wn building (subject t certain criteria). What is the Right t Manage? With mst buildings which are divided int flats the freehld wner is usually respnsible fr carrying ut repairs t the building, insuring the building and cllecting a service charge. Nw flat wners have the right t take ver the management respnsibility themselves. This is particularly useful if a freehlder is neglecting management respnsibilities r charging disprprtinately high fees fr ding s. What is the advantage f applying fr this right? Quite simply the flat wners gain cntrl ver the management f their building withut the capital cst f acquiring the freehld. The main disadvantage f exercising the Right t manage as an alternative t freehld enfranchisement is that each flat wners lease cntinues t becme shrter and will need t be extended at sme pint (at capital cst t that flat wner). Als grund rent cntinues t be payable. We have highlighted in bld a few pints that need yur attentin urgently befre the statutry ntice can be served. This infrmatin sheet is nt meant t describe r give a full interpretatin f the law r cver every case. Yu will need t cntact us with particular queries relating t yur matter. Overview The Cmmnhld and Leasehld Refrm Act 2002 prvides the right t manage ( RTM ) fr flat wners t frce the transfer f the Landlrd s management functins t a special cmpany set up by them, the Right t Manage Cmpany. The RTM is nly available t flat wners. It is nt available t huse wners hlding a lease f their huse. The prcess is relatively simple. The Landlrd s cnsent is nt required. N curt rder is necessary. Bad management des nt need t be prved. A payment is nt payable t the Landlrd. Hwever, yu have t pay the Landlrd s csts fr the csts incurred in respnding t the Ntice and prviding the infrmatin sught. Yu will f curse incur fees with yur wn advisers. Cpyright Ashley Wilsn Slicitrs LLP 2009 Page 1
2 Lndn, DX: Victria Qualificatin Criteria The building must be self cntained (r if part f anther building be capable f being re-develped independently). The building must include at least tw flats. At least tw thirds f the flats must be let t qualifying flat wners (meaning a flat wner wh has a Lease riginally granted fr mre than 21 years the nrmal scenari being that yu hld yur flat n a 99 year Lease). Flat wners d nt need t live in their flats t qualify. The building can cntain cmmercial parts i.e. shps, but they must nt exceed 25% f the ttal internal flr area f the building. Owners f at least half f the ttal number f flats in the building (nt half the number f participating Flat wners hlding flats) must be members f the RTM Cmpany. The right perates n a building by building basis s with an estate with several blcks each blck will need a separate RTM Cmpany and t serve a separate Ntice. The RTM can nly be exercised by and RTM Cmpany with sufficient numbers f the qualifying Flat wners as members. The Prcedure Flat wners frm an RTM Cmpany and registered it at Cmpanies Huse (each f the flat wners becme members f that Cmpany which is limited by guarantee as ppsed t shares being issued). Yu need t decide n the address f the registered ffice and wh are t becme the initial Cmpany Directrs and Cmpany Secretary. This nrmally takes tw weeks. The RTM Cmpany serves a Right t Infrmatin Ntice (if needed). The Landlrd has 28 days t respnd. This is necessary where wnership f the freehld title r ther reversinary interest is unclear. The RTM Cmpany serves an Invitatin Ntice upn each f the flat wners in the building wh have nt already becme members f the RTM Cmpany inviting them t becme members f the RTM Cmpany. Yu cannt ignre particular flat wners Yu have t specify whether yu intend instructing a management cmpany t act fr the RTM in carrying ut its management duties s yu need t decide at this stage whether yu wish t d this and if s prvide the management cmpany s cntact details t be stated in the ntice. Cpyright Ashley Wilsn Slicitrs LLP 2009 Page 2
3 Lndn, DX: Victria The RTM Cmpany serves ntice exercising the RTM (nt less than 14 days after service f the abve invitatin t participate). In this ntice the Landlrd must be given at least ne mnth t serve a cunter- Ntice and the prpsed date fr takever f management must be at least three mnths after that cunter- Ntice reply date making a ttal perid f fur mnths at least. The RTM Cmpany r the Landlrd can serve a Ntice requiring access t the premises fr inspectin (if needed). The ther party has t respnd within 10 days. The Landlrd may serve a cunter-ntice accepting r disputing the claim. Where nt accepted the prcess can be delayed while an applicatin t the Leasehld Valuatin Tribunal is made. Landlrd must serve Cntractr Ntices and Cntract Ntices n the date specified in the RTM Ntice as the date fr the transfer f management t the RTM Cmpany (r as sn as reasnably practicable after that). The RTM Cmpany can serve a ntice requiring management infrmatin etc frm the Landlrd giving the Landlrd at least 28 days t respnd. This can be served befre the date management is t transfer but the Landlrd is nt bliged t prvide the infrmatin befre that transfer date. Liability fr the Landlrd s csts f dealing with the prcedure each member f the RTM Cmpany is liable jintly fr the Landlrd s reasnable csts arising frm the service f the Ntice and the exercise f the Right t Manage. Absent Landlrds this will nt prhibit yu frm exercising the right. Yu can apply t the Leasehld Valuatin Tribunal (LVT) fr an rder entitling the RTM Cmpany t acquire the RTM. Yu first have t take all reasnable steps t find the missing Landlrd i.e. advertise in press lcal t the last knwn address fr the Landlrd and yu must put the ther Flat wners in the building n ntice f yur intentin t apply fr the rder. The LVT may require yu t carry ut further investigatins befre it will grant the rder. Withdrawal f the RTM Ntice yu can withdraw befre the management transfers t yu but yu will be liable fr the Landlrd s csts incurred t that date. Once the right t manage has been acquired the Landlrd is entitled t membership f the Cmpany. There are cmplex rules as t the vting rights the Landlrd acquires which are designed t reflect the percentage which any flats r cmmercial parts f the building held by it bear in relatin t the building as a whle. Pints t nte 1. The RTM Cmpany will be required like any ther Landlrd t cmply with the Gvernment apprved cde f management practice i.e. that prduced by the Ryal Institute f Chartered Surveyrs (RICS). Yu cannt ignre the bligatins n the Landlrd s part in the flat wners Leases t repair and insure the building. Cpyright Ashley Wilsn Slicitrs LLP 2009 Page 3
4 Lndn, DX: Victria Althugh cmpliance with the abve cdes is nt mandatry failure t d s is ne f the grunds which justify an applicatin t the Leasehld Valuatin Tribunal t appint a new manager r t end the right t manage. 2. In anything but the smallest blcks it is recmmended t strngly cnsider appinting Managing Agents. Yu must specify in the Invitatin t Participate Ntice t the ther flat wners in the building whether yu intend appinting a Management Agent. We recmmend that yu shuld interview a few cmpanies befre deciding. Fr a standard guide t the frmatin and running f Residential Management Cmpanies see Running a Flat Management Cmpany (4 th Editin) by Nigel Cx published by Jrdans ( We als suggest yu read Hw t Manage Yur Own Blck f Flats by Jhn Cumming and Richard Hickie published by the Cllege f Estate Management O The fficers f the RTM Cmpany have all the nrmal respnsibilities f Cmpany Directrs as well as the respnsibility fr implementing the Cmpany s bligatin t carry ut the Landlrd s functins fr the prperty. Cmpanies Huse have n their website useful infrmatin setting ut directrs and secretary s bligatins and explaining hw the Cmpany functins. Yu will need t have regular (but nt necessarily frequent) meetings. Cmpanies Huse prduce several free explanatry leaflets i.e. (a) Directrs and Secretaries Guide (GBA1) (b) Annual Returns (GBA2) (c) Reslutin (GBA7) (d) Accunts and Accunting Reference Data (GBA3) Cntact the Registrar f Cmpanies, Cmpanies Huse n ( 4. The RTM Cmpany must remain slvent s yu will have t fund the shrtfall where the flat wners dn t pay up n time. Yu shuld set up a fighting fund well in advance f the date yu are t take ver management t help fund initial expenses such as insuring the building and appinting essential cntractrs (the effect f the Right t Manage Ntice is t sever n the takever date any existing cntracts the Landlrd has i.e. insurance f the building/cntract fr the maintenance f a lift). We advise that yu cllect funds prir t starting the prcedure s that yu limit the risk f the RTM immediately failing due t inslvency n the transfer date. Cpyright Ashley Wilsn Slicitrs LLP 2009 Page 4
5 Lndn, DX: Victria 5. Cntact details fr nn participating Flat wners it is essential that yu prvide cntact details fr nn resident flat wners wh are t be served with the Invitatin Ntice as they must be served with a cpy at such different address as they have ntified yu f previusly. The imprtance being that the Landlrd ften uses bad service f the Invitatin Ntice as grunds fr setting aside the Right t Manage Ntice subsequently s it is essential that the Ntice is prperly served and will help yu if yu can btain evidence frm each served Flat wner f satisfactry receipt by them f the Invitatin Ntice. Yu must nte as members f the Cmpany any Flat wners wh respnd t the Invitatin Ntice asking fr membership. 6. Obtaining infrmatin frm the Landlrd it is essential that yu cnsider carefully what infrmatin yu need frm the Landlrd n the date f the transfer f management t effectively run the building frm then n yurselves. A few items we request as standard frm Landlrds are set ut belw. Please cnfirm at this stage if there are any ther items yu believe the Landlrd will hld which will be helpful t yu. a. The current arrears psitin (service charge, insurance and grund rent). b. The insurance arrangements fr the building. c. Hw the building is presently managed. Where the building is managed by an agent the name and address f the Managing agent. d. Details f all cntracts presently in frce fr the maintenance f the building r fittings and fr the prvisin f services. e. The verall state f repair f the building and any identified requirements fr majr wrks repairs r imprvements including cpies f any recent survey reprts Yu may want t instruct yur wn survey befre the Right t Manage takes effect s that yu can get n and start the statutry cnsultatin prcedure fr majr wrks that need t be undertaken urgently. 7. Gathering management infrmatin as the Landlrd is nt bliged t supply full replies t the requested management infrmatin until the date f handver it will help if yu liaise direct with them r their Managing Agents during the prcess t try t btain as much infrmatin as pssible direct. This will als save yu csts f requesting the same via slicitrs. Anything yu think yu need but can t btain yu shuld cnfirm fr inclusin in the Infrmatin Ntice t be served n the Landlrd (if needed). The Landlrd has a statutry bligatin t prvide the infrmatin requested where it is reasnably required in cnnectin with the exercise f the right t manage but is nt bliged t vlunteer infrmatin s yu need t be as clear and precise as pssible in the Infrmatin Ntice we serve fr yu (if required). Cpyright Ashley Wilsn Slicitrs LLP 2009 Page 5
6 Lndn, DX: Victria 8. Plans and budgets yu are nt required t prduce r submit t the Landlrd any business plan r budget r actin plan fr maintenance but if is sensible t d this perhaps in cnjunctin with yur new Managing Agent and t invlve the members in the decisin making prcess. 9. Reserve fund the Landlrd is bliged t hand ver all unspent sums including the reserve fund t the RTM Cmpany n the date yu take ver management. Again it will help us mve handver and t limit yur csts if yu can try t investigate and agree this figure with the Landlrd prir t the management being transferred t the RTM Cmpany. If a dispute ccurs then the LVT can be asked t decide the matter. 10. The management functins acquired all duties reserved t the Landlrd under the Lease including all functins regarding prvisin f services repairs maintenance imprvements insurance and management. This can include respnsibility fr (dependent n the exact terms f the flat wners leases): a. Repairs, redecratins and maintenance f the structure f the building and cmmn parts including cyclical maintenance f plant and facilities i.e. lifts and central heating bilers (depending n the wrding f the Lease). b. Imprvements t the building. c. Prvisin f services i.e. lighting t cmmn parts heating cleaning and maintenance care taking and prterage. d. Arranging insurance fr the building. e. Cllectin f service charge and prvisin f accunts and ther statutry infrmatin. f. Cmpliance with all statutry requirements relating t the management and fabric f the building. g. The day t day management f the building. h. Apprvals and enfrcement f the cvenants under the Lease. The exact bligatins f the Landlrd yu are taking n will be specified in the Flat wner s Leases f their individual flats. The Landlrd retains the right t cllect grund rent direct and t exercise the ultimate sanctin f frfeiture f a flat wner s lease fr nn payment. The Landlrd retains the management f any nn residential parts f the building r any nn qualifying flats i.e. thse held by the Landlrd in the freehld title r which they hld separate Leases. Cpyright Ashley Wilsn Slicitrs LLP 2009 Page 6
7 Lndn, DX: Victria The pwer t issue apprvals i.e. fr subletting r assignment f the Lease r t make alteratins t the flat passes t the RTM Cmpany. The RTM Cmpany must befre giving such apprval put the Landlrd n ntice f the applicatin (30 days ntice is required fr apprvals relating t assignment, subletting, parting with pssessin, making structural alteratins r imprvements t a flat). Other apprvals require 14 days ntice. The RTM Cmpany des nt require the specific cnsent f the Landlrd s if it des nthing in respnse t the ntice then the RTM Cmpany can grant apprval. If the Landlrd bjects then the RTM Cmpany wuld have t g t the LVT befre being able t give the apprval. 12. The RTM Cmpany has t keep the Landlrd infrmed f all breaches f the Flat wner s Leases. It is bliged t review Flat wner s cmpliance with their cvenants and t take steps t remedy any breaches. Any nn remedied breaches must be reprted t the Landlrd. 13. Terminatin f the RTM this ccurs: a. By agreement with the Landlrd. b. Thrugh cllapse f the RTM Cmpany i.e. if it becmes inslvent r is struck ff by Cmpanies Huse. c. Thrugh the appintment f a manager (either flat wners in the building r the Landlrd can apply t take ver and run the building). Grunds fr an applicatin include the RTM Cmpany being in breach f its bligatins under the Lease, demanding unreasnable service charge r failing t cmply with an apprved cde f management practice. Our aim is that this infrmatin helps yu exercise the Right t Manage smthly by anticipating future prblems i.e. by dealing with them prir t starting the prcedure. Whatever yu d as flat wners yu will need t satisfy yurselves that there is a grup amng yu wh have sufficient interest in the lng term interests f the building t take n the management respnsibility. N-ne can assume that if they sell their flat their buyer will want t take ver their respnsibility. Having said that the fact that the building is managed by the flat wners may enhance the sale price f any flats being sld (r at least make it less likely that a sale culd fall thrugh as a cnsequence f increasingly high service charges r management fees). Cpyright Ashley Wilsn Slicitrs LLP 2009 Page 7
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