Does Right to Manage really solve our service charge problems?

It is not uncommon for leaseholders to be unhappy with their service charges, whether it be because they are too high or they do not feel it is value for money. Leaseholders often believe that exercising their Right to Manage under the Commonhold and Leasehold Reform Act 2002 will solve this problem, but is this really the case?

  1. The RTM company effectively steps into the shoes of the landlord. Therefore the RTM company will be responsible for complying with the contractual provisions of the all the leases as well as overriding statutory provisions. If not correctly undertaken this could result in an inability to collect service charges.

  2. At the point of handover to the RTM company, the landlord is not obliged to return any paid service charges which are disputed. An application to the First Tier Tribunal (Property Chamber) (‘FTT’) for a determination will still need to be made. This in itself can be a long and expensive process.


  3. When leaseholders cannot or will not pay, the RTM company will have to enforce payment without being able to exercise the ultimate sanction of forfeiture. The RTM company will have to fund professional fees to collect service charges. A further problem arises where the leases do not permit recovery of legal costs incurred collecting unpaid service charges.

  4. It is the lease that makes provisions for service charge contributions. Sometimes the split between the lessees is unfair. Sometimes the proportions do not add up to 100%! Where this occurs, the RTM company may have to meet any short fall or account for any overpayment or apply to the Tribunal to vary the leases.

  5. RTM does not give carte blanche to the lessees to do whatever they want. The RTM company can still only legally recover from the lessees what they are permitted to recover by the leases.

  6. The landlord is entitled to membership of the RTM company and will be eligible to attend any members meetings and vote. Where the landlord owns one or more of the flats they will be entitled to more than one vote. Where they have enough flats/votes, this could cause problems where the landlord does not agree with the lessees plans. Furthermore, the landlords contribution to the service charge for unlet units is based on the size of the flat. This fact has the potential to create a problem of under-recovery of service charges.

Exercising the Right to Manage certainly does have its advantages and indeed these can cause leaseholders to overlook matters that should be given careful consideration. RTM is not a mechanism to avoid paying service charges or avoiding undertaking work to the building that is required. Careful thought and professional advice should be sought before embarking on an RTM claim.

Emily Fitzpatrick is Head of Leasehold Enfranchisement, and Kirsty Frampton is a Paralegal, both at Hart Brown Solicitors.

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