I have been dealing with ever increasing numbers of cases involving failed Right to Manage (RTM) companies. For those not in the know, long residential leaseholders can exercise RTM in certain circumstances, taking away from their landlord the right to exercise any "management functions" in respect of their block of flats (maintenance, repair, cleaning, gardening and the like – in essence, what makes up the annual service charge). RTM cannot be acquired where the landlord is a "housing authority"(e.g. local authority).
It often appeals to tenants who think the grass must always be greener, particularly when their block appears poorly managed. Sometimes it can work, other times it doesn't. Tenants often enter into such arrangements with the best of intentions only to find one of their fellow tenants isn't quite so good at property management as they made out, or to discover that infighting brings down the who arrangement. Just as frequently, they discover that the real reason why their landlord wasn't "properly" managing their block is because they simply didn't have the funds due to so many tenants failing to pay their service charge.
RTM stems from the powers at section 71 onwards in the Commonhold and Leasehold Reform Act 2002. In a recent case I have been advising on, I had to consider the situation where leaseholders purported to exercise RTM, but in fact failed to properly acquire RTM because their memorandum and articles of association did not comply with the statutory requirements laid out in the Act. In reality, the RTM company, by its agent (which agent had initially induced the tenants into applying for RTM in the first place!) purported to manage the block for four years before my landlord client discovered the error. The legal fallout from such situations is immense. The Act simply does not provide for what should happen in such a situation. A race by the agent to reacquire RTM is now being met by demands from the landlord for all the records of management to be immediately handed back. Perhaps this time the tenants will consider more carefully whether they really want RTM or not, having had a rather mixed experience so far.
RTM can work. But when it goes wrong it can create an almighty headache for all concerned. Landlords must very carefully check whether RTM companies are entitled to exercise the right at an early stage. But equally, tenants need to consider whether it really can work, particularly in mixed residential and commercial developments where infighting between different agents all purporting to manage common areas is all too common. Sometimes it’s better to have just one person (your landlord) to moan about…!
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