Niki Adkins, specialist lawyer within Frettens Solicitors growing Leasehold Property Team, looks at the various ways in which a leaseholder can take control of the management of their block of flats. Detailing how Right to Manage, Enfranchisement and Enforcement Action works.
Leaseholders taking control of their building
Do you want to take control of your service charge budget and management of your building?
Leaseholders often feel that their building’s finances and management are out of their control as it is ‘managed’ by a third-party investor who has no real connection with the building, other than to collect payments from the flat owners.
The majority of freeholders manage their buildings and financial budgets well, but it can’t be denied that there are a number out there who aren’t so well thought of by their leaseholders.
How to take over management of a block of flats
Disgruntled leaseholders have several options.
1. Force the freeholder to sell the freehold via a process known as ‘Enfranchisement’;
2. Take over the ‘Right to Manage’ of their building;
3. Seek enforcement action against the freeholder to rectify their issue; albeit, this third option doesn’t prevent the freeholder from the same practices in the future.
How does enfranchisement work?
Enfranchisement is a process whereby at least 50% of the flats in a building join together to force the freeholder to sell the freehold to them.
The flat owners thereby (1) enhance their investments and the value of their flats and (2) take over control of their building’s management and finances. In addition, they can extend their leases once the freehold has been acquired, further enhancing the value of their flats.
The price payable for the freehold is governed by the Enfranchisement legislation and our Leasehold Property Team here at Frettens can put you in touch with a specialist valuer local to your property in order to find out how much the freehold is likely to cost.
The flat owners would be responsible for the freeholder’s professional costs, as well as their own.
Our Enfranchisement Guide provides more detail in relation to the process involved.
My colleague Jennifer Smith has written an article about the fees associated with owning a share of the freehold, you can read that here.
I also recently wrote about why lease extensions are still necessary when you own your freehold, which article can be found here.
How does right to manage work?
Alternatively, the flat owners can join together to forcibly take over their building’s management functions from their freeholder; again, at least 50% of the flats would need to join in.
This would include taking over control of their service charge budget, maintenance contracts, the building’s insurance and all other ‘management’ functions under the terms of the flat leases.
The flat leases would stay the same and the freeholder would still own the freehold (and can become a member of the RTM group), but the leaseholders would have far more control.
There is no ‘price’ payable for the RTM process (unlike Enfranchisement), but the leaseholders would be liable to pay the freeholder’s professional costs incurred in the process, as well as their own.
To read the full article, click here.