Right to Manage and Enfranchisement are two commonly used tools by leaseholders to gain more control over their building. Anne Albritton, Associate and Leasehold Specialist at Frettens, discusses both RTM and enfranchisement; comparing the two and weighing up their pros and cons.
What is RTM?
The Right to Manage allows leaseholders to take control of the management of their block under the Commonhold and Leasehold Reform Act 2002.
Anne has previously written about the Right to Manage, giving a more in-depth look into what it is and how it works. You can read the article here.
What is enfranchisement?
Enfranchisement allows leaseholders to purchase the freehold of their building under the Leasehold Reform Housing & Urban Development Act 1993.
Lease enfranchisement or Right to manage – Which is best?
The key difference between right to manage and enfranchisement is that under right to manage the leaseholders would have control of the management of their building without having to purchase the freehold.
Benefits of RTM over enfranchisement
As mentioned, if leaseholders only wish to take control of the management of their building, then acquiring the right to manage would be sufficient and means that the leaseholders do not have to pay a premium for the freehold. As a result, the right to manage procedure is often a more affordable option.
Benefits of Enfranchisement over RTM
Purchasing the freehold would give the leaseholders the ability to manage the block with the addition of some extra benefits.
As shareholders in the freehold company, the leaseholders would be able to grant lease extensions and vary the lease so the ground rent payable is reduced to a peppercorn (nothing at all).
It is important to note that if the existing leases at the building state that the management of the building is allocated to a certain company, then purchasing the freehold will not automatically give the leaseholders the right to manage the building.
A separate right to manage claim would be necessary to allow the leaseholders to manage the building.
To read the full article, click here.