UK: Be Your Own Landlord/Managing Agent!

Last Updated: 22 January 2009
Article by Jon Turner and Anita Gill

Do you, like so many leaseholders, find yourself having continuing difficulties with your freeholder or managing agent?

Are you fed up paying excessive and unjustified 'management charges'?

Do you find it difficult getting important repairs carried out to your building?

Are you getting concerned about the length of your lease?

If so, as a leaseholder, you should be aware of your options.  Either by Collective Enfranchisement or Right to Manage, you can force the freeholder to hand over management of your building to those who are most affected by it – the leaseholders.  Additionally, individual leaseholders do, in certain circumstances, have a statutory right to obtain a lease extension from the freeholder.

Considering the effect of the economy on the housing market, there has never been a better time to look at ways to increase the value of your property by exercising your statutory rights to obtain management of your building and to have the length of your lease extended.

Collective Enfranchisement

This is really the ultimate right for leaseholders.  So long as the building and the tenancies that exist satisfy the statutory qualifying criteria, a successful enfranchisement claim by a group of leaseholders can force the freeholder to sell them the freehold interest in the building.  In doing so, the participating leaseholders not only obtain full management of the building, but can then also grant themselves long leases, say to 999 years.

The price that the leaseholders would have to pay depends on many factors, but vitally on the length of the leases that exist (generally, the shorter the leases, the higher the costs).  The legislation provides the procedure for determining the value and in the event that a price can't be agreed, either party may refer the matter to a Leasehold Valuation Tribunal to determine the price.

Changes to the legislation in recent years has made such a claim more accessible for leaseholders, removing historic restrictions such as residency and personal ownership (as opposed to company ownership).  Accordingly, enfranchisement claims are becoming increasingly popular.  If carried out in an organised, efficient and professional manner an enfranchisement claim can be relatively straightforward and cost effective.  Being able to sell your property with a long lease and a share in the freehold is widely accepted to add real value to your property in terms of the price you can achieve on a sale.

As straightforward as the enfranchisement procedure may first seem, there a many rules and regulations which can 'trip up' leaseholders and it is therefore vital that you have the best legal advice possible.  Campbell Hooper has experience in dealing with all aspects of enfranchisement claims and have a real understanding of both the legal and practical implications, both for the leaseholder and the freeholder.  We have the experience to make the potentially complex process as streamlined and cost efficient as possible.  If you would like more information about the process or even if you just want to establish whether your building could satisfy the qualifying criteria, please do get in touch. 

Right To Manage (RTM)

This relatively recent addition to leaseholder's options is a claim that can be brought by a group of leaseholders subject to similar criteria to that for an enfranchisement claim.  The difference is that the leaseholders do not have to 'buy' anything.  They would not obtain the freehold interest – the freeholder would retain that – but they can wrestle management of the building from the freeholder.  As such, day-to-day repairs, appointment of managing agent, major works, insurance, etc. would all be controlled by the Right to Manage Company that the leaseholders set up (the RTM Company).  The overriding benefit of an RTM claim is that a premium does not have to be paid by the leaseholders to the freeholder – an issue that stops many collective enfranchisement claims from getting off the ground.

An RTM claim would not entitle the leaseholders to a lease extension, nor does it take all control from the freeholder regarding every aspect of management of the building, but considering that the process is relatively inexpensive, this has become a popular choice for leaseholders who want more autonomy in relation to control of the building that they live in.  What's more, selling your property with the benefit of a share in an RTM company is something very desirable from a buyer's perspective.

Campbell Hooper can guide you to bringing a successful Right to Manage claim.  Our experience in finding solutions for leaseholders provides the perfect background for an efficient and cost-effective claim to be brought.

Individual Lease Extensions

A lease is, by its nature, a 'wasting asset'.  As the term of the lease decreases, so does its value.  It is therefore important, in maintaining the value of your property, to ensure that the lease does not drop in terms of years to the extent that it will affect the re-sale value of your property.

If you are unable to satisfy the qualifying criteria for a collective enfranchisement claim (either because of lack of interest by other leaseholders or the building itself not qualifying), it is potentially possible to exercise your statutory right to obtain a lease extension.

Generally, if you have owned the property for at least two years, you can force the freeholder to grant you a new long lease (90 years on top of the current term).  The lease will be on mainly the same terms as your previous lease, but it is usually a prime opportunity for tidying up any problems with your lease or merely to modernise it.

As you do need to have owned the property for two years before you can exercise the right, this can seem a barrier for a prospective purchaser of a property with a shorter lease.  There are however structures that can be put in place to assign the seller's benefit of a right to a lease extension to a buyer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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