Tenants of flats acting through a right to manage (RTM) company can apply to take over the landlord’s management functions regardless of whether his management has been good or poor. The covenants in the leases do not change as a consequence of the exercise of the right. Accordingly the RTM company will have the same obligations that the landlord would otherwise have had. The RTM company will be required, like any other landlord, to act in accordance with a government approved code of management practice such as that produced by the Royal Institution of Chartered Surveyors. In addition to the obligation to repair, maintain and provide the services for the building the RTM company will acquire the enforce the covenants in the leases. The right to manage can extend to “appurtenant property” such as gardens, garages etc that are let with or usually enjoyed with the premises.
Certain qualifying conditions must be met.
The building occupied by the tenants must:
- be a self-contained building or be a part of a building which part is capable of independent development;
- contain two or more flats that are held by qualifying tenants (a qualifying tenant is, principally, a tenant whose lease was granted for an original term of more than 21 years); and
- the number of flats held by such qualifying tenants must be not less than two thirds of the total number of all the flats in the premises.
A building is a self-contained building if it is structurally detached.
A part of a building is a self- contained part if it constitutes a vertical division of the building and that the part could be redeveloped independently of the remainder of the building and the services are either provided independently to occupiers of the rest of the building or could be so provided without carrying out works likely to result in a significant interruption in the provision of such services. Services means those provided by pipes, cables or other fixed installations.
Some premises which fulfil those conditions are nevertheless excluded from the right to manage. In brief, they are:
- premises where the sum of internal floor area of non– residential parts exceeds 25% of the internal floor area of the whole premises;
- premises that contain separate self-contained parts where the freehold of those parts is owned by different persons;
- non-purpose built blocks of flats where the building contains not more than four units and the landlord or an adult member of his family lives in one of those units as his only or principal home and has done so for the previous twelve months;
- premises where the landlord of any of the qualifying tenants is a local housing authority;
- premises where the right to manage has already been acquired and continues to be exercisable. Where an RTM company ceases to be responsible for the management of premises (other than where that company acquires the freehold) then a party cannot acquire the right to manage within a period of four years from that date except with the consent of the First-tier Tribunal.
Qualifying tenants of at least half the total number of flats in the premises must become members of the RTM company. If there are only two flats in the premises, the qualifying tenants of both flats must become members. It is worth noting that there is no residence requirement and there is no limit on the number of flats that can be owned by one tenant. A business tenant cannot be a qualifying tenant.