Get rid of your Freeholder - Claim your right to manage
The start of the New Year is a good time to plan change and reassess your finances. It's a time when you want to take control of your life and not bury your head in the sand with regards to your job, social life and your property. We all know how to apply for a new job or how to improve our social life but how many of us know how to claim the right to manage our property? Mary-Anne Bowring, creator of www.leaseholdersupport.co.uk tells us how to get the ball rolling.
The 1985 and 1987 Landlord and Tenant Acts and Commonhold & Leasehold Reform Act 2002 have all gradually increased consultation requirements upon Freeholders. Legislation has also granted the right to inspect accounts and records held by the freeholder. One or more lesses can also take the Freeholder to Leasehold Valuation Tribunal and get service charges deemed reasonable, or not, as the case may be to try to curb unscrupulous behaviour.
Why bother, simply claim your right to manage. No longer necessary to prove that the freeholder is at fault or managing the block badly to claim the right to manage. All you need is fifty percent of qualifying lessees to claim your right to manage, which is a much simpler option than challenging the Freeholder.
Firstly, get an idea of who is committed to claiming the right to manage. You don't actually have to live in your flat to be able to participate, nor does it matter if you own your flat through a company. As long as two thirds of the flats in the block are held on long leases and fifty percent or more of the block want to participate then you can get a Participation Agreement in place.
You are then legally required under the 2002 Act to set up a company called a Right to Manage Company. Company formation agents charge between £160 and £300 to form a company for you. It is important to use a specialist agent rather than buy an off the shelf company as the 2002 Act clearly sets out aspects of the company's constitution which are mandatory.
Like any company you will need willing volunteers to stand as officers of the company as it will need Directors and a Company Secretary. It may even be easier to outsource the Company Secretary role as running a company involves legal obligations that need to be fulfilled. All the participants should be issued a membership certificate.
You will have a legal obligation to invite the Freeholder to become a member of your Right to Manage company. The Freeholder then has fourteen days to reply before you can formally claim your right to manage. It is advisable to seek professional help before serving your notice to claim as an invalid notice may result in having to start afresh. Also, you may be leaving yourselves open to the Freeholder running up a bill in dealing with defective notices which you will be liable for.
You may not know the outcome of your claim immediately as the Freeholder has twenty eight days to reply. The Freeholder will have two options: either to accept your right and you can then take over in four months or to reject your right. There are limited grounds which the Freeholder can use to object to your right, the most commonly cited are: Two thirds of the flats are not sold on long leases
Participation notices have not been served on all relevant parties
The building does not comprise self-contained flats
There are non-residential parts of the building that exceed twenty five percent
Assuming the Freeholder cannot find any legal reason that invalidates your claim, management could be yours three months later because the Act states that the right transfers four months from the date of the Section 79 Notice. During this period it's advisable to source replacement managing agents, review contracts with cleaners, gardeners, porters and other services. Unlike freehold enfranchisement there is no premium to be paid to the Freeholder as you are not dispossessing him of his freehold title. However you will still have to pay ground rent to the Freeholder even after the right to manage is established.
Although claiming your right to manage won't solve your short lease issues it does have many benefits. For example:
A share/membership in the company that manages the block
Democratic voting rights over key block decisions
Possibility of being elected as an officer of the RTM Company (Director or Co. Sec.)
Potential cost savings by appointing a cheaper managing agent or self manage Ability to review and set a level of service charge that matches your intentions
One last piece of advice, do ensure that the person who signs a notice is the legal owner and remember you can serve an information notice on the freeholder and or the managing agent.
In the next issue Mary-Anne Bowring will be discussing how to claim your right to manage in a tri-party lease i.e. a Freeholder, a management company and you as a lessee.
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