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Druces Private Wealth

Right to Manage

Druces Private Wealth

Right to Manage

The Commonhold and Leasehold Reform Act 2002 gave tenants of blocks of flats the right to take over the management of their building, without having to buy the freehold.

The main reason to consider taking advantage of this is to ensure the effective management of your building (particularly in cases where it is not desirable or practicable to acquire the freehold). Exercising the right enables tenants to remove the existing managing agents and replace them. What it does not do is to allow them to extend their leases (which they could do if they acquired the freehold of the building. See Collective Enfranchisement.)

The qualifying criteria are:
• The building must be a self-contained block of flats (which includes converted buildings as well as purpose built).
• The building must have no more than 25% non-residential use.
• Two thirds of the flats must be let to qualifying tenants. (Namely, a tenant who holds a flat under a long lease, i.e. for a term of more than 21 years.)
• The qualifying tenants of flats comprising 50% of the total flats in the building must participate.

The process begins with the formation of a company by the tenants and it is this company that will take over the right to manage.

The company serves a Claim Notice on the landlord, to give notice that it wishes to take over the management of the building. Where there is no objection from the landlord the company should take over the management of the building on a date set out in the Claim Notice. However, where the landlord objects, then the matter may have to be referred to the First Tier Tribunal, which could delay the process.

The law lays down time limits for various stages of the process and, in most cases, the earliest period within which the right to manage can be acquired is four months from the date the Claim Notice is given.

The costs involved for each participating tenant depend on a number of factors, including the size of the building, number of intermediate landlords and the number of participating tenants. Clearly, the more tenants that participate the less the costs will be for each. In addition to the legal costs, the tenants may have to pay other fees including an accountant, surveyor, new managing agents and sometimes counsel, should a barrister’s opinion be required. You would also be liable to pay the reasonable costs the landlord incurs. If you instruct Druces, we will provide a costs estimate of our own and keep you informed of the costs at each stage of the process.

By way of preparation it is normal for a residents’ committee to be formed and for one or two key tenants to drive the matter forward. It is also recommended that tenants enter into a binding agreement for participating tenants to be bound to the process.

This is necessarily only a general summary of the procedure and you should not act (or refrain from acting) without taking advice on your specific case.

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