Right to Manage: Criteria
Right to Manage was introduced in s71 (Part 2 Chapter 1) of the Commonhold and Leasehold Reform Act 2002 in September 2003. It was hailed as a great right for leaseholders because it is a process that allows leaseholders to replace current managing agents with one of their own choosing, with no premium payable and without needing to go to court to prove ‘fault’ on the part of the freeholder. Smaller developments can choose to self manage.
RTM has certain criteria for both the building and the leaseholders to meet and not all buildings are capable of being subject to the Right to Manage. Whilst they must include at least two flats and can be part commercial (which must not exceed 25% of the total floor area) they must come within the definition of ‘premises’ contained within s72 of the Commonhold and Leasehold Reform Act 2002 so they must:
- Consist of a self-contained building or part of a building, with or without appurtenant property;
- Contain two or more flats held by qualifying tenants and;
- The total number of flats held by such tenants is not less than two-thirds of the total number of flats contained on the premises.
A building is a self-contained building if it is structurally detached but according to Justin Bates, Barrister at Arden Chambers, whilst determining whether a building is detached should be an easy test to apply, because it requires nothing more than good eyesight to see if one building touches another, LVT’s appear reluctant to adopt such a simple test. Instead they are developing a line of cases where the focus is not on whether there is any touching at all but what is the nature and extent of that touching. If the touching is not ‘structural’ then the building is self-contained.
Unfortunately for leaseholders this increases the costs of Right to Manage because the professional input of a surveyor is likely to be necessary in order to determine whether the building is actually self-contained as per s72(3) of the 2002 Act which is defined as requiring:
- The part of the building to constitute a vertical division of the building;
- The structure of the building is such that the allegedly self-contained part could be developed independently of the rest of the building and;
- Either s72(3)(c) where the relevant services (by means of pipes, cables or other fixed installations) provided for the occupiers of the part are provided independently of the relevant services provided for the rest of the building or s72(4)(a) the relevant services could be so provided without involving the carrying out of works likely to result in a significant interruption in the provision of relevant services for occupiers of the rest of the building under s72(4)(b).
- At least two-thirds of the flats must be let to ‘qualifying tenants’ which means leaseholders whose leases were originally granted for an original term of more than 21 years. The required minimum number of qualifying tenants must be equal to at least half the total number of flats in the building.
- There is no limit on the number of flats that can be owned by individual leaseholders and there is no requirement for any past or current residence in the flats;
- A lease is a long lease if it is granted for a term of over 21 years and whether or not it is (or may become) terminable before the end of that term by notice given by or to the tenants, by forfeiture, re-entry or otherwise;
- It is a term fixed by law under a grant with a covenant or obligation for perpetual renewal (but is not a sub-lease created from a long lease);
- It takes effect under s149 (6) of the Law of Property Act 1925 (leases terminable after a death or marriage);
- It was granted in pursuance of the Right to Buy conferred by Part 5 of the Housing Act 1985 or in pursuance of the Right to Acquire on rent to mortgage terms by that part of the Act;
- It is a shared ownership lease, whether granted in pursuance of Part 5 of the Housing Act 1985 or otherwise, where the tenants total share is 100% or;
- It was granted in pursuance of that part of the Act and effected by s17 of the Housing Act 1996 (the right to acquire).