The Management Company in the original lease can be a party to the newly extended lease.  Its management will continue during the extended term. However, the Management Company cannot be compelled to discharge any obligations after the original term ends.  Whether the management company continues after the original term depends on if it is controlled by the leaseholders.  If not, a management company is unlikely to agree, especially if the start date of the new obligations is many years hence and there are no or few previous  lease extensions.  If the Management Company does not agree to discharge obligations after the the original lease term ends, the leaseholder must ensure that another party will do so. 

(B) The Landlord

The Landlord can take on the management for those leaseholders extending their leases.  Even if the original lease does not make express provision for service charge payments, the new lease must deal with these points to give effect to the continued management after the original term expires.

In this case, the wording of the new management and service charge provisions must be carefully considered  because they may not take effect for 70 years or more. On the first lease extensions of a large block, the Landlord may need some persuading to take on management responsibilities because the obligations may not commence for many years.

(C) A New Company

If most (if not all) leaseholders are extending their leases at the same time then they can take on the management company’s obligations during the extended term through a separate,  newly formed management company .  This ensures that the management is not lost after the expiry of the original term. This is the best option for leaseholders to gain control of the management if the management company is notcontrolled by them.  The management obligations must be carefully drafted. This option can be combined with the Right to Manage so that the leaseholders commence the building management immediately.

In summary, where a management company is a party to the original lease, the importance of considering management duties is paramount.  The management company is not obliged to join the new lease and if provision is not made for management of the block, then the management responsibilities will be lost after the expiry of the original term and the extended lease will be seriously defective.  

It should be emphasised that nothing in this article relates to the situation where there are only two parties to the lease, the Landlord and the leaseholder.  In these circumstances because of Section 56 of the Act the Landlord is compelled to continue its management obligations after the original term.