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Before the 1980’s there were only two parties to a lease: the freeholder (lessor) and the leaseholder (lessee) but when leaseholders got ever-increasing rights, freehold ownership was not nearly so attractive as it had previously been. So developer landlords introduced the tri-party lease, a lease with three parties to it: the freeholder, the leaseholder and the management company. Historically the company is limited by shares.

In this situation, the RMC will act as a maintenance trustee and if it is party to the original lease then it’s obligations will be set out according to the lease terms. This will make a contract between itself and the landlord unnecessary as its contractual rights lie directly with the leaseholders. On the other hand, if there is simply a landlord/lessor and a leaseholder/lessee in the lease but another party is carrying out maintenance duties than they are merely the agent of the landlord. If the tri-party lease says that the freeholder must also appoint a managing agent, then that must too be complied with.

The sting in the tail for leaseholders however is a big one. The developer/freeholders keep the freehold and carry out a minimal amount of work such as collecting ground rent (their investment income) and placing buildings insurance (where they make money on commissions). The RMC on the other hand is required to carry out the more complex and time-consuming elements such as service charge collection, (under which the demands have to comply with statutory requirements), suing leaseholders for non-payment, dealing with nuisance leaseholder issues such as keeping pets against the lease terms, erecting satellite dishes, subletting breaches, car parking issues, unauthorised alterations, noise created by DIY work at unreasonable hours, etc and all under the guise that they have been put on a more level footing with the freeholder!

Today, due to the rights that have been granted to leaseholders since the 1980’s, Resident Management Companies take some additional forms such as those established by collective enfranchisement (leaseholder group action to purchase the freehold, becoming the freeholders themselves), compulsory acquisition of the freehold (where the freeholder has been in breach of its obligations over a period of time) and share of the freehold.

Another type of RMC is where the leaseholders have used legislation is that of Right to Manage replacing the current managing agent with one of their own choosing. Although it has has the acronym of RTM Co rather than RMC, it still comes under the RMC umbrella.

 

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