MA consultation launched by the Law Commission in December has considered how ‘right to manage’ legislation can be made quicker, simpler and more accessible for leasehold property owners. The Commission proposed various reforms to current legislation and is now considering responses to the consultation questions raised.
Historically, buildings consisting of many leasehold properties would be managed by either a landlord or a management company who would take responsibility for matters such as maintenance of common structures and areas, cleaning, gardening and window cleaning, onsite facilities, health and safety assessments, accounts and admin. However, disputes frequently arose where residents disagreed on how the building was being managed or how service charges levied on residents were being spent.
The concept of ‘Right to manage’ was introduced by the Commonhold and Leasehold Reform Act 2002. It gave leasehold property owners the right to acquire the freehold of their building, enabling them to collectively manage its upkeep themselves. The RTM is a “no-fault” right, allowing leaseholders to exercise it without having to show that the landlord or managing agent has acted improperly or unreasonably.
However, the current law suffers from a multitude of problems – for example, a right-to-manage company cannot manage multiple blocks on an estate; and premises with more than 25% non-residential space are excluded. Leasehold houses are also excluded under current legislation, despite the fact that substantial numbers of such properties have been sold and suffer from exactly the same issues as those experienced by leasehold flats.
Consequently the uptake on right-to-manage has been slow. The Competition and Markets Authority estimated that in 2014, there were just 4,000 Right to Manage companies. Although the Law Commission estimate that this figure will likely have increased to 6,000 since, this is trivial in comparison to the number of leasehold properties in existence: thought to be approximately 4 million.
The Law Commission made a number of provisional proposals in their Consultation Paper, including:
- Extending right-to-manage to leasehold houses and buildings with more than 25% non-residential space.
- Allowing one right-to-manage company to manage multiple buildings on an estate.
- Reducing how many notices leaseholders must serve in using the legislation, and giving the tribunal power to waive any procedural mistakes.
- Clearer rules on the transfer of information about management functions, and in relation to managing property that is not exclusively used by the freehold.
- New rules that each party will bear its own costs of any tribunal action.
- Consideration of options for the landlord’s non-litigation costs.
These proposals have been generally welcomed by the Law Society, the representative body for solicitors in England and Wales. The Law Society commented that various other matters including unfair leaseholds, enfranchisement and commonhold were interrelated with the Right to Manage, and implored the Government to take a wider view when considering the proposed changes.
The consultation closed on 30th April 2019 and the Law Commission is now considering the responses. You can read a summary of the Consultation paper here.