Leaseholders often feel that the management of their block is out of their control as it is managed by a third-party who has no real connection with the building, other than to collect payments from the leasehold owners. Leaseholders also have no say in the finances of the block and find that their service charge demands are increasing.
As a Leaseholder you do have options if you and your fellow leaseholders wish to take control of the management of your block.
As the owner of a leasehold flat, you have two basic rights to allow you and the leaseholders to take control of your block of flats:
- Collective Enfranchisement- Where you and your fellow leaseholders force your freeholder to sell the freehold via a process known as Collective Enfranchisement. This is where a group of leaseholders acquire the freehold of their building under the provisions laid down in the Leasehold Reform, Housing and Urban Development Act 1993.
- Right to Manage- where you and the leaseholders can seek to take control of your block through the Right to Manage legislation created by the Commonhold and Leasehold Reform Act 2002.
Collective Enfranchisement
The right to acquire the freehold is known as “collective enfranchisement”. Enfranchisement is a process whereby at least 50% of the flats in a building join together to force the freeholder to sell the freehold to them. There must be a minimum of two qualifying tenants. For example, if you have a block of three flats at least two tenants must make the application.
The leaseholders will need to pay the freeholder for the value of the freehold they are acquiring. The freehold is usually in the name of a Management Company comprising all of the flat owners who wish to join in with the purchase.
The flat owners can increase the value of their flats and take over control of their building’s management and finances. They can also extend their leases for no additional cost other than the legal fees to draft the updated documentation. Once the freehold has been acquired it will, not doubt, enhance the value of your flat.
There are specific criteria that must be complied with in order to qualify for the right to collectively enfranchise.
- The building must be self-contained or part of a self-contained building.
- The commercial element can be no more than 25% of the whole building, excluding any communal areas.
The leaseholders would be responsible for their own professional costs as well as freeholder costs.
Right To Manage
The Right to Manage is a cheap and cost-effective option compared to acquiring the freehold.
A claim for Right to Manage allows you and the other leaseholders to take over certain management responsibilities from the landlord without having to prove poor management. This does not grant you the freehold interest but, if you have problems that come from poor management then this may be the way forward. It is a process which the leaseholders can pursue without permission or authority from the Landlord or Management Company.
There is no need to show fault on the part of a Landlord therefore, successful claims can be made on blocks where there are no problems with management. The Landlord has very limited grounds to refuse the application.
The building must meet certain conditions, and a minimum number of qualifying leaseholders are required to take part.
- A ‘qualifying tenant’ is a leaseholder whose lease was originally granted for an original term of more than 21 years.
- There is no requirement for any past or present residence in the flats, nor any limit on the number of flats which can be owned by one person.
- It can be part-commercial, but the non-residential part must not exceed 25% of the total floor area, excluding common parts.
If successful you and the other leaseholders can manage the building yourselves or pay a managing agent to do it.
However, the Landlord remains the owner of the freehold and he has certain rights and he is entitled to become a member of the RTM Company.
The leases do not need to be varied when the transfer of management takes place, and the management responsibilities are acquired on the acquisition date.
Choosing The Correct Path For Leaseholders
There is qualifying criteria for the Right to Manage process and Collective Enfranchisement. The path you chose will ultimately depend on what you and your fellow leaseholders are looking to accomplish and achieve and the funds you have at your disposal.
There is strict qualifying criteria and time limits which need to be adhered to with both routes and which must be observed by both the leaseholders and landlord. We offer tailored assistance and support to guide you through the entire application process.
What next?
Your next steps for advice and further consultation would be to contact our specialist Block Management team or research more on our Property Litigation page. For a direct query, you can contact Amandeep Uppal on 01384 984 346 or by emailing amandeepuppal@talbotslaw.co.uk
DISCLAIMER
The contents of this blog or any other published by Talbots law cannot be considered as legal advice and should therefore not be acted on without prior consultation with a qualified solicitor or legal professional.