Wednesday 30 November 2011

Watch out for the Right to Manage scams!

‘Right to Manage’, introduced through the Commonhold and Leasehold Reform Act gives flat owners the right to collectively remove their manager or take on management directly from their landlord. It is in many ways a landmark piece of consumer legislation and somewhat unique in that ‘no fault’ needs to be proved and landlords cannot resist it if it is correctly utilised – even when there is a clear contract in place. As a protection it should be an effective threat to ensure that owners get fair, compliant and transparent property management services.

However, with increased understanding of the legislation and increased use come, inevitably, opportunities to find loopholes and to abuse the process. This legislation is particularly helpful in this respect since for some it offers something that, on the face of it, is attractive, but for most appears complex and difficult to achieve.

Principal opportunity for scammers is that there can only be one RTM Company and anyone can set it up easily. Once created you may have to pay a fee to get ownership back for the leasehold owners or you may be forced to utilise the services of the agent - now registered as director and secretary of your RTM Co. The costs of doing this are low and the agent need not be in a particular hurry once it is set up.

Unscrupulous agents have set about finding any residential development they would like to manage and then creating their RTM Co.s and then just waiting. Others have even actively pursued opportunities by contacting the registered owners directly indicating that they have set up the RTM on behalf of other unspecified owners and that they should sign up to ensure that RTM is possible. Once they have the requisite 50% they can take on management as part of the deal. At this point there will also be a fee. We have seen these charged at up to just below the statutory consultation limit of £250 per unit. They will then expect a management contract as well, after all, they still have control of the RTM Co. The final indignity is that, although they may be a registered director of the RTM, they have no responsibilities for the company since you have to be a qualifying owner to vote and take part.

Notwithstanding, this legislation is designed to be instigated by leasehold owners and not by third parties who are looking to make a quick buck from the process. Assuming your building qualifies it is not difficult to undertake RTM – the difficulty is getting the requisite support from neighbours.

Make certain that residents are in the driving seat. Do the groundwork first – see if you can avoid it altogether by talking to your landlord and, if not, interview and select the right manager first (one with proven track record with similar managements and real expertise in RTM) and then go through the process in control of the costs and outcome. Incidentally – if you select the right manager to manage he may well undertake RTM in exchange for the management – i.e. for nothing.