Right to Manage – multiple blocks could put you in a bit of an estate

Previously it had been thought that leaseholders in a multi-building estate could act collectively through a single RTM company to take over management of their estate. This would provide a neat and relatively quick solution to issues over poor management, by enabling the flat owners to step into the shoes of their landlord/management company and take over management of their whole estate including communal areas.

However, in Ninety Bloomfield Road RTM Co Ltd v Triplerose Ltd the Court of Appeal confirmed the process applies to individual self-contained buildings, rather than estates containing several buildings. To permit a single Right to Manage claim for more than one building could lead to a situation where leaseholders in one building can outvote leaseholders in another, which could lead to some leaseholders being denied a ‘say’ in the management decisions. Such an outcome would undermine one of the fundamental principles of RTM, that leaseholders should be able to take control of the management of their own building.

This is fair enough, but the outcome will complicate the process for groups of leaseholders wanting to take control of management of their estate, where the estate consists of more than one building. For example, who will maintain and insure the communal areas between the blocks and how will that be paid for?

The case means that groups of leaseholders looking to exercise the Right to Manage over their estate will need to plan the process carefully, and where appropriate, take legal advice before proceeding. In light of this decision, it is possible that responsibility for management of the communal areas will not pass to the RTM companies set up by the leaseholders, meaning they may be unable to completely cut ties with their existing landlord or management company.

What is the Right to Manage?

The Right to Manage is a powerful right given to residential leaseholders by statute, which can be exercised by a majority group of the flat owners in the building. It enables the leaseholders to take over the management of their block from the existing landlord or management company, with the effect that legal responsibility for arranging insurance and maintenance of their building passes to a new company formed by the leaseholders (an RTM company). There is no need to ‘prove’ the existing arrangements are inadequate or are too expensive, although this is often a motivating factor behind RTM. If the procedure is followed correctly, the existing landlord or management company usually cannot object to the lessees taking control.

However, it is important to check the right is available, because there are various criteria which must be met, and the right is not available in every case.