Right to Manage – 19 reasons for leaseholders to wait for Leasehold Reform

The Right to Manage (RTM) was introduced in 2002 giving flat owners a no fault right to collectively take over the management functions in respect of their building via an RTM company.

It has provided a very useful alternative to collectively acquiring the freehold as no premium is payable and the process is shorter and arguably less complex. 

However there have been some problems and so the Government tasked the Law Commission to undertake a review of the existing RTM legislation with a view to improving it by making the procedure simpler, quicker and more flexible from the point of view of flat owners. Their recommendations are here https://www.lawcom.gov.uk/project/right-to-manage


So should flat owners wait and see whether these are implemented before making a claim? 

If the recommendations are implemented then:

  1. Leaseholders of houses and flats above shops will welcome the extension of the right to them. If house leaseholders do not want to wait then their alternative is to enfranchise the freehold. 
  2. Leaseholders will welcome the ability to make a multi-building RTM claim and the flexibility around this. 
  3. The process changes limit the ability for landlords to challenge the validity of claims is useful for leaseholders but shouldn’t be a reason to delay making a claim particularly in a straight forward matter. 
  4. The proposed improvement in the provision of management information will help leaseholders particularly for larger blocks but shouldn’t put off flat owners as they can often obtain that information voluntarily between new and existing managing agents. Also it may leave some with wasted costs where they then don’t proceed.
  5. Costs changes are a boon for leaseholders but the exclusion of the obligation to reimburse the landlord’s non litigation costs may not be worth waiting for when compared to hoped for service charge and management cost savings. 
  6. Shared ownership leaseholders will welcome the clarification that they can participate whatever their equity share. 
  7. Leaseholders of Live-work units will welcome the clarity around their rights.
  8. Resident landlords may be upset to have management control taken from them where currently they aren’t exposed to that risk.
  9. The ability to claim control of management in respect of smaller elements of a building then is currently possible may be of use to some leaseholders struggling to obtain participation from the larger building.
  10. The changes around the RTM company itself should enable more claims to get off the ground where freeloading is a problem. 
  11. The removal of the need to give notice of invitation to participate will make the process more efficient, less costly and reduce the risk of litigation. 
  12. Creating clarity around management contracts will be welcomed by all. 
  13. The provisions for potential change around buildings insurance will be welcomed by landlords alike as this is often an issue. 
  14. Extending the right to buildings with only 50% residential element is a boon for those leaseholders. Arguments around the comparative floor areas will remain at the margin.
  15. Improving management quality should increase leaseholders’ confidence and so boost participation and take up of the right.
  16. Landlords will not welcome the reduction in their recoverable costs i.e., being unable to recover their non litigation costs and the onus being put on them now to notify other parties of the claim. 
  17. Cash flow can be a big issue for leaseholders and so knowing the uncommitted service charge fund will be credited on time is a very helpful for them.
  18. Leaseholders needing consent to sell or alter will welcome the streamlining of this process.
  19. Being able to validate a claim and to terminate one is very helpful for leaseholders. 

Mark Vinall, Partner, Ashley Wilson Solicitors LLP


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