‘Right to Manage’ – the story so far and proposals for reform
Almost a year ago, the Law Commission published its terms of reference and pledged that the Law Commission's leasehold reform recommendations to government will provide a "better deal for leaseholders".
The Law Commission's residential leasehold and commonhold project aims to improve consumer choice, provide greater fairness, and make the process of enfranchisement easier, quicker and more cost effective.
Commissioner Professor Nicholas Hopkins speaking at the time addressed the complexity of the work and urged caution against quick fixes.
"We know that, for many, reform cannot come quickly enough," he said. "But I would like to sound a note of caution. Hasty and rushed legislative reforms are dangerous - and ultimately in no-one's interest. Enfranchisement is hugely complicated. The rules are the product of over 50 Acts of Parliament, totaling over 450 pages."
Having consulted on enfranchisement, The Law Commission has been on the road to consult on Commonhold ownership and Right to Manage Reforms. The intention is to publish recommendations by the end of the year. These then have to be accepted by Parliament and then the road will continue to legislation. Clearly there will be no quick fix.
So what is Right to Manage (RTM)?
This is a statutory right granted to leaseholders to take over the landlords management functions through a company set up by the leaseholders for this purpose. A useful option where the leaseholders cannot afford to buy the freehold.
When was it introduced and has it been successful?
It was introduced in 2002 and it is estimated that between 5000 and 6000 right to manage companies have been registered since. Whilst undoubtedly it has been well taken up there have been a large number of complaints about the process.
What are the concerns with the current process?
- The procedure was supposed to have been simple but is complicated and small procedural errors can have a fatal impact;
- The preconditions to exercising the rights are restrictive;
- There is a lack of transparency and uncertainty in the process;
- It can be fraught with delays and expense;
- The issue of costs and landlords claims for costs in particular.
What are the proposals?
- A change to the current test of "qualifying premises" which has provided unnecessary scope for argument to relax the rules to make this more accessible and ultimately give more power to the Tribunal;
- To reduce the two thirds eligibility threshold to a half;
- Abolish the requirement to have a minimum of two residential units held by qualifying tenants;
- Allow participation of shared ownership leaseholders;
- Remove the resident landlord exemption;
- Allow RTM in cases of multiple landlords;
- Exempt National Trust properties.
Estates and multi building problems
The current law prevents leaseholders in multiple buildings taking over management through a single RTM company and a single claim. This is the case even where they pay into the same service charge fund or share common property such as gardens or carparks.
This has been criticised from all fronts, though the remedy is a challenge and the Law Commission has acknowledged that they can only look to make the provisions 'less bad' than they are.
Its proposal is to introduce a flexible model of multi - RTM. This would allow the RTM to be acquired over two or more buildings where the leaseholders in those buildings contribute to a common service charge and/or share the same appurtenant property (i.e. car park or gardens).
Problems can arise however where there is appurtenant property which does not serve the building/s exclusively. Currently the management functions over this passes as well with a number undesirable consequences.
It can mean that multiple parties are responsible for maintaining it, non-management or double payments. Also it may happen automatically without the company being aware of it or its responsibility. The proposal is to reverse the position so that the management functions for non-exclusive appurtenant property will not transfer to the RTM company unless basically there is agreement or the tribunal makes a determination.
Notices and information
It is proposed that the process of notices is simplified and the Tribunal is given powers to wave insignificant errors.
The Law Commission recognises that obtaining information by a RTM company can be difficult and should be produced earlier to enable participants to know whether or not they wish to proceed. A prescribed form of 'information notice' listing certain types of information such as insurance claims history, for example, which the RTM company can request from the landlord is proposed.
Proposals also include requiring each party to bear its own costs of any tribunal action and exploring options for the landlord's non-litigation costs
The consultation period ends 30th April 2019.
Views are requested from everyone including leaseholders and future owners. Participants can answer as many or as few questions as they would like.
For more information and to take part, click here.