THE COMMONHOLD AND LEASEHOLD REFORM BILL
FACT SHEET No 2 - THE RIGHT TO MANAGE
Although long leaseholders of flats have purchased the right to live in their property, control of the management, maintenance and insurance of the property normally remains in the hands of the landlord. Leaseholders are normally obliged under their leases to meet the full costs of the landlord's functions, but enjoy little control over the quality, value for money or promptness of those services. The Government does not consider it right that landlords should have complete control over management when they hold such a relatively small stake in the building. To redress the balance between leaseholders and landlords, the Commonhold and Leasehold Reform Bill introduces a new right called the Right to Manage (RTM).
The Commonhold and Leasehold Reform Bill provides that: -
- leaseholders will be able to collectively take over the management duties for the building, for example leaseholders will be able to have a greater degree of control over the level of service charges set, be able to appoint their own choice of managing agents, and select their own insurers;
- leaseholders will not have to prove any fault or shortcomings on the part of the landlord in order to exercise the right.;
- leaseholders will not be required to pay any compensation to the landlord for exercising the right.
Qualifying Requirements
The eligibility requirements will ensure that a neither a minority of qualifying tenants, nor a minority of the residents in a block, could take control. The eligibility requirements are as follows:-
- leaseholders must own a long lease (mainly one that was originally granted for more than 21 years);
- where the lease is a shared ownership lease, the leaseholder would have to hold a 100 per cent share of the equity;
- leaseholders must become members of a company which is properly constituted for the purposes of collective management - that will be a private company limited by guarantee which must include the exercise of the right to manage as one of its objects;
- at least two thirds of the flats in the building would be have to be held by long leaseholders, and the participating leaseholders (i.e. those leaseholders that became members of the company) would have to hold the leases of at least half of the flats in the block;
- RTM will apply to any premises containing two or more flats held by qualifying tenants. This includes both a self-contained building and a vertically separated part of a building (for example, a terraced house divided into an upstairs flat and a downstairs flat);
- Premises would also include any associated parts, such as garages or gardens, which are for the sole use of the residents of the block in question.
Exclusions
The following will be excluded from RTM: -
- Properties in mixed residential and non-residential use where the internal floor area of the non-residential parts exceeds 25% of the total internal floor area of the property. (This would apply, for example, to buildings where there are flats above a shop. In such a case, it would not be possible to exercise RTM if the shop forms more than a quarter of the building).
- Any premises which have been converted into flats (or a mixture of flats and other units used as dwellings e.g. bedsits), if the converted building contains no more than four units and the landlord (or an adult member of his family) lives in one those units and has done so for the previous 12 months.
- Any premises where the landlord is a local authority. Local authority tenants already have a separate right to manage (which encompasses all tenants, including long leaseholders). The Government sees no justification for granting an overlapping right which applies only to long leaseholders in such properties.
- Where an RTM managing body loses the management of a property for any reason. In such circumstances, the block in question will be excluded from any exercise of RTM for four years from the date that the body ceased their management duties, unless the permission of a Leasehold Valuation Tribunal is obtained.
- Any property which is already subject to the right to manage.
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