The 'Right to Manage' - not the only answer?

Search it on the web and you might be forgiven for thinking that Right to Manage (RTM) is the new panacea for resolving property management issues. Numerous new businesses advertise RTM as the quickest way to rid your development of bad management practice and reduce costs. But look closely at the small print and you may find that the only beneficiaries are the managing agents who will either charge on a per unit basis for the service or expect a management contract in return.

On paper it seems sensible to take control of management but do not under-estimate the value of having a third party landlord to bash; the dynamics become very different when it is your neighbours who have the control. Do not also be fooled into thinking that RTM is simple - it can be complex and is rarely achieved without costly legal assistance.

So let’s look at the facts. RTM requires 50% or more of the occupants to sign up. On larger schemes, particularly those with absentee owners, this is not always easy and can be exceptionally time consuming. Those who choose not to sign up will still benefit from any efficiencies, but bear none of the costs. Flat Living Magazine estimates the costs to be £100-£300 per flat and in addition, the freeholder/landlord can recharge his reasonable costs. How are the costs of RTM contained, particularly if the landlord resists and pushes the matter to a LVT?

Some owners will be required to become directors of the new company. These responsibilities should not be taken lightly.  Even if there are individuals with the appropriate knowledge and experience, it will still require their time and commitment. You will not necessarily know whether these individuals are qualified and genuine or whether they have their own agenda until it is too late.

Using RTM to control the services will potentially result in a freeholder/landlord who is forever uncooperative or at very least unhappy. Remember the freeholder/landlord will be entitled to a vote as well.

I would advocate that reaching agreement in partnership with the freeholder to change your managing agent is most likely to be the quickest and most effective way of bringing about a change in the quality of services received. Your freeholder/landlord does not generally wish to deal with RTM actions and will almost always prefer to address the threat of RTM by enforcing improvements in the service received or agreeing to a change of managing agent. Equally leasehold owners do not always wish to inherit the attendant responsibilities and liabilities that come with RTM.

Because RTM is a ‘no fault’ right, it represents a powerful threat to achieve the standards that you require and to create a partnership. The point is that you don’t need to go through with it to achieve change.

Why do I know this? Because in such circumstances we have worked with residents’ groups at major developments to deliver exceptional services for both landlords and owners without the need for Leaseholders to go to the time and expense of completing the RTM process . In each case, rather than RTM, we approached the landlord with a proposal on behalf of residents to end existing arrangements. Our experience is that both parties are usually happy to do this and to address the concerns of each. A beneficial relationship is established and the pain of RTM is avoided.

Of course the handover from the old agent is not always easy – but that part does not change regardless of the method used to get there.