By Nicholas Kissen, Senior Legal Adviser
This article originally appeared in The Yorkshire Post in February 2012
If you own a flat in a large block you should be aware that you would have a lease setting out your rights and obligations.
You probably pay ground rent and service charges to your landlord. The management of the building may be satisfactory and the service charges kept to a reasonable level. If not, you and the other flat owners could take over the management of the building,
Exercising Right to Manage or buying the freehold are the two principal ways to take over the management of your building.
Right to Manage: the Commonhold and Leasehold Reform Act 2002 gave flat owners the legal right to take control of their building. It was designed to be inexpensive and straightforward where a series of steps are followed and notices served before acquiring the right to take over the management of a building. Firstly, the building must qualify. At least two-thirds of the flats must be on leases granted for over 21 years. Secondly, half the flats must agree to participate in the process. If there are only two flats both must take part. There is no need to live in the flat to take part. so if you let it out you can still participate. Buildings comprising a mixture of flats and shops also qualify so long as the non-residential area is not more than 25 per cent.
When you have the required number of flats, a Right to Manage Company (RTM Company) must be formed. The RTM Company must invite those owners not already participating to join in. When there is 50 per cent participation, and 14 days after the last invitation notice was sent to flat owners, a Claim notice is sent to the landlord. If all goes smoothly the RTM Company takes over the building not less than four months after the Claim notice is served. if the claim is opposed then the local Leasehold Valuation Tribunal (LVT) can be asked to decide if Right to Manage should be permitted in respect of the building.
From day one of taking over management the RTM Company becomes responsible for undertaking the landlord’s obligations in the leases. This is in addition to running the company in accordance with corporate law and ensuring the building complies with current health and safety regulations.
Collective Enfranchisement: the Leasehold Reform Housing and Urban Development Act 1993 gave flat owners the right to force their landlord to sell the freehold to them, in a process known as Collective Enfranchisement. The qualifying conditions both for the building and for the number of leaseholders are broadly similar to those for Right to Manage. You can approach the freeholder to see if they will sell on an informal basis. If this does not progress a formal initial notice can be served on the landlord with an offer price. The landlord then has at least two months to serve a counter-offer which would then be followed by a period for negotiation. If the price is not agreed an application can be made to the LVT to decide what it should be. Following on from this the freehold can be transferred to the flat owners perhaps in the name of a company they have formed.
When buying the freehold the costs involved should be taken into account. Not only those of your own valuer but also you will have to pay professional fees run up by for certain work including valuation and conveyancing.
Buying the freehold of a building can be a complex process particularly where it is a large block of flats. Expert advice is essential from the start of the process. Input from a lawyer and a valuer can help in anticipating and overcoming obstacles that lie in the way of successfully completing the purchase.