Guidance
Buying a property, retaining a property and ultimately selling a property is arguably the most important financial decision that many people will make. The reality for many homeowners in the UK is that properties will be bought on a leasehold bases. Leasehold is a form of property ownership where one party buys the right to occupy land or a building for a given length of time. Leaseholds differ from freeholds where the ownership of a property is purchased outright and can be held indefinitely or passed on to others.
Owning a leasehold property can come with some nasty surprises. Leaseholders usually pay a monthly or annual charge to property management companies appointed by the owner of the freehold (the freeholder also known as the landlord.) Service charges are paid by residents to cover essential maintenance and repair work. Complaints against property management companies can include excessive service charges, lack of transparency surrounding the cost of work, work not being completed or being done to a substandard quality and aggressive debt recovery practices if residents dispute, or refuse to pay a service charge.
Alarmingly, these concerns are ones shared by some of the most vulnerable in society. Many elderly people who live in private retirement developments pay management companies charges for things such as insurance, a warden and a 24-hour emergency call-out service and other maintenance and repair work.
Faced with immediate problems however, what can you and the other residents do? In the first instance it is always preferable to contact your landlord or property management company directly to resolve the issues. Better communication between all parties concerned can often resolve minor disputes and mis-understandings.
However should this not provide adequate resolution, further action can be taken by contacting the Leasehold Advisory Service (LEASE). LEASE is funded by the Government to provide initial advice and information on a range of residential leasehold issues.
LEASE can be contacted at:
Maple House
149 Tottenham Court Road
London
W1T 7BN
Phone number: 020 7383 9800
Fax: 020 7383 9849
Email address: info@lease-advice.org
However, if you feel that persuasion and negotiation are not going to address your concerns properly you and the other affected leaseholders could decide to take matters into your own hands and exercise your "right to manage" (RTM).
RTM was introduced through the Commonhold and Leasehold Reform Act 2002. Essentially it allows qualifying groups of leaseholders to form a company (RTM company) to take over the day to day running of their block of flats. If leaseholders are unhappy with the service being provided by the current property management company RTM provides a mechanism for removing the power of the freeholder to appoint a property management company thereby giving leaseholders far greater control over the day to day management of the flats.LEASE have produced a comprehensive guide on the Right to Manage to assist leaseholders and inform their decisions on RTM.
Leaseholders can either manage the properties themselves or arrange for a property management company to take over this task. This is not a decision to enter into lightly. Forming a RTM company comes with many responsibilities. It requires both skill and time. For example the RTM company will need to ensure that all legislation, codes of practice and insurance requirements are followed, establish accountancy procedures for the block and have excellent people skills to deal with disputes and complaints. The worst case scenario would be for one under-performing property management company to be replaced with an ill-equipped under-prepared new regime.
There are two government-approved code of management practice that a RTM company will need to adhere to. One is produced by the Association of Retirement Housing Managers (ARHM) this code refers specifically to purpose-built retirement property. The other is produced by the Royal Institution of Chartered Surveyors (RICS).
It is worth considering instructing a property management company to deal with all of these issues. The Association of Residential Managing Agents (ARMA) can assist with this process. ARMA is the leading trade body in England and Wales that focuses exclusively on matters relating to the property management of residential properties. Whilst membership of ARMA is not compulsory for property management companies, members that do join agree to comply with the organisations objectives and code of practice.
ARMA can be contacted at:
The Association of Residential Managing Agents (ARMA)
178 Battersea Park Road,
London, SW11 4ND.
Telephone: 020 7978 2607
Fax: 020 7498 6153
Email: info@arma.org.uk
Consumer Focus Investigations & CF Labs have developed an online tool to assist consumers who are considering taking over control of the management of their flats. The tool will guide you through the qualifying conditions in the Commonhold and Leasehold Reform Act 2002, to establish whether you and your fellow leaseholders might be able to exercise your RTM. Before using this online tool it is essential that you have already made contact with the other residents in your block to find out how many leaseholders are of a similar mind to you
By answering a series of YES/NO questions, the online tool will guide you through the legal qualifications for the RTM and provide you with an answer to whether your particular group of qualifying leaseholders would qualify to form a RTM company under the Commonhold and Leasehold Reform Act 2002.
Before you start you will need some important information such as:
- How many flats there are in your block.
- The length and type of lease you and each of the leaseholders who want to form a RTM company currently have. This is important as you will need to establish the number of qualifying leaseholders
There are three notable exclusions to the Commonhold and Leasehold Reform Act 2002:
- The right to manage is not available to leaseholders of houses, just flats.
- The right to manage under the Act is not available to local housing authority tenants.
- The right to manage is not available to premises where RTM has already been exercised. For example in any block where the RTM company has lost the RTM for any reason, this block will be excluded from exercising RTM for four years.
If your landlord is a local housing authority (given the meaning under Section1 of the Housing Act 1985) the following legislation may be applicable to you, specifically in circumstances where leaseholders are part of a residents organisation that includes and represents secure tenants of the local authority :
- The Housing (Right to Manage) (England) Regulations 2008 or the Housing (Right to Manage) (Wales) Regulations 2008. The regulations provide a regime for the taking over of management functions from Local Housing Authorities.
- The Housing Act 1985 sets out the general power for local housing authorities to reach arrangements with third parties to manage their housing stock.
- The Leasehold Reform, Housing and Urban Development Act 1993 gives the legal framework for resident organisations that wish to manage their homes by setting up a Tenant Management Organisations (TMO).
Further useful organisations and links for local housing authority tenants are:
Disclaimer: The right to manage online tool and associated guidance has been produced for information only and is not to be treated as legal advice.
Anybody using information contained in the tool or guidance does so entirely at his or her own risk. Consumer Focus accepts no responsibility or liability whatsoever for the way in which this information is used.
All information contained in the tool and guidance may become out-of-date and inaccurate over time. Consumer Focus makes no commitment to update the information.
