Advantages of Right to Manage

Right to manage is the process of taking control from the landlord over the management functions of your building. There are several advantages to the RTM process.

No need to prove default or poor performance

There is no requirement to prove default or bad management by the landlord and there is no requirement for approval by a court (unlike the RTM under part II of the LTA 1987).

No need to acquire the freehold or another interest in land

The CLRA 2002 makes it easier to acquire an RTM than if the tenants were to try and acquire the freehold (collectively enfranchise) and then manage the building.

The tenants do not have to incur the liabilities or bear the responsibilities of owning the freehold of the building or any other interest in land. The RTM procedure is separate and does not require a proprietary interest in land before it can be exercised.

Many developers now grant much longer leases with terms of 999 years. If this is the case, there is no real incentive to acquire the freehold. Where there is a short residue left on a lease and the block is being badly managed, the tenants can grant themselves lease extensions and sort out the management of the building by acquiring the freehold.

No need to reach agreement with landlord and/or management company

The tenants do not have to reach agreement with the landlord or the management company. If the statutory criteria under the CLRA 2002 are satisfied then the tenants can acquire the management of their own block of flats or development whether or not the landlord or the management company is in agreement.

It is not possible for a landlord or management company to “contract out” and prevent the RTM from arising. Agreements which seek to exclude tenants’ rights to join an RTM company, or which provide for the termination or surrender of the lease if the tenant becomes a member of an RTM company, or which seek to impose any penalty on tenants who join RTM companies or act through RTM companies, are void (section 106, CLRA 2002).

Cheaper than the alternatives

Exercising the RTM will be cheaper than acquiring the freehold. Although there will be legal costs, the tenants will not have to come up with funds to buy the freehold whether by private treaty or collective enfranchisement.

Comparatively quick process

The statute sets out time periods for different parts of the process. If the RTM claim is not disputed, then it is possible that the tenants could be managing their own building within four to five months. Obtaining the freehold from a wavering landlord that is trying to optimise its position can take a long time.

No need to vary the leases to give the RTM company power to manage

Statute sets out all the necessary powers of management so the leases do not have to be varied if they have been properly drafted. The RTM company assumes the management functions on the acquisition date. However, it is important to note that if the leases are defective, the RTM process will not remedy the defects. If the leases are defective, it might be prudent to seek a variation order under section 35 or section 36 of the LTA 1987 or try and get all the tenants to agree to variations of their leases by private treaty.

Written by James Naylor

Partner, Naylor Solicitors LLP.

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