Right to Manage (s71)
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.
Right to Manage Companies are constructed as companies limited by guarantee because it was thought to be the most appropriate vehicle when the right was created. Companies who use it do not trade and it can’t be formed by share capital under s5 of the Companies Act 2006. This renders it unsuitable for commercial enterprise and therefore less likely to become insolvent. The incentive for members to become involved is commitment to the company’s objectives rather than profit as with shareholder companies.