In leasehold properties, the freeholder will usually appoint an agent to handle the management of the building, including maintenance, insurance, communal utilities and other expenses like surveying work or accountancy.
The costs are divided among the leaseholders in the form of service charges. Right to Manage is a bit of legal protection that allows leaseholders to take control of the building management themselves, usually appointing their own managers.
How does it work?
Not all buildings qualify, but generally if more than half of the leaseholders are in favour and the freeholder doesn’t live in the building, then you should be able to exercise your collective Right to Manage. There doesn’t need to be any wrongdoing on the part of the freeholder or the managing agents.
The process is reasonably drawn out, but in essence, the leaseholders form their own management company, with a board of directors and articles like any other company. All leaseholders must be given the opportunity to join the company, as must the freeholder. You don’t need a solicitor, but using one will make the whole process a lot easier. You’ll also need to cover any costs incurred by the freeholder, including legal and administration fees.
Why you might consider it
When companies buy up a freehold, they’re usually looking for a better return on their investment than simple ground rent. There’s a lot of money in the management contracts, and the higher the service charges, the higher the manager’s fees. If you look into your management company you may well find that they’re connected with the freeholder who appointed them.
Companies like these may sometimes feel like they don’t need to provide particularly attentive service, as they’re in the unusual position of not being accountable to the people who pay them. If you find yourself paying through the nose for poor service, Right to Manage can be a cheaper option than Collective Enfranchisement (forcing the freeholder to sell you the freehold).
Things to think about
If you’re going to pursue Right to Manage, you should realistically be looking for an improvement in service rather than a hefty cost saving. And you’ll need to think honestly about how well you can work with your neighbours.
Before you take the plunge, it’s also worth ascertaining whether your current management company is really all that bad. Request a detailed breakdown of the annual accounts for the building, plus your insurance documents, and take them to some other block management agents for quotes. You may find they’re actually pretty standard.
Taking on the management yourself without an agent might seem a cheaper option, but the building will still need to be maintained, and keeping on top of it could well be a full-time job, particularly if you don’t really know what you’re doing. Block management is usually best left to the professionals, but there are loads of great ones out there, and with Right to Manage, it can be a professional of your own choosing.