Right to Manage
The second major right granted to leaseholders under the Commonhold and Leasehold Reform Act 2002 was that of the Right to Manage, introduced in s71 (Part 2 Chapter 1) of the Act in September 2003 and hailed as a great right as it was the most radical attempt at addressing the problems caused by negligent and incompetent managing agents. It’s a ‘no-fault’ process allowing leaseholders to either replace their own managing agent 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.
Whilst the positive elements of RTM are promoted, there is particular difficulty attached to two of its requirements: s100 (enforcement of tenant covenants) and s101 (tenant covenants: monitoring and reporting) of the Commonhold and Leasehold Reform Act 2002.
These two sections need the RTM Company to ensure no breaches of the lease are being committed and to report to the freeholder any that occur. Whilst the company gets enforcement powers to sue for debts, seek injunctions for breaches such as repairs or nuisance and gets the right of entry into a property for the compliance of covenants, it becomes decidedly complicated when a) there is no freeholder and b) flats are sublet in breach of the subletting covenant. There are also the legal issues surrounding the accessing of rented flats.
The freeholder is also entitled to voting rights as this is a ‘no fault’ process and it was considered that freeholders should not be penalised in terms of the management of the building. Thisof course can come with its own issues if the freeholder is part of the problem!
There is criteria that has to be met for both the building and the leaseholders, and a company that has to be established, which can be read here.