An Introduction to The Right To Manage A Seminar for the Annual Conference of the Property Litigation Association at Keble College, Oxford on 22 nd March 2013 by Christopher Heather, Tanfield Chambers Christopher Heather enjoys all aspects of real property and landlord and tenant litigation, and is particularly known for leasehold enfranchisement and service charge disputes (commercial and residential). He has been recommended by both Chambers and Partners and The Legal 500 in the field of property litigation for several years and was voted Barrister of the Year at the Enfranchisement & Right to Manage Awards 2010. He is a member of the Property Bar Association and the Chancery Bar Association and a contributor to Service Charges and Management: Law and Practice (2009) by Tanfield Chambers. TANFIELD CHAMBERS 2-5 Warwick Court London WC1R 5DJ Tel: 020 7421 5300 Fax: 020 7421 5333 Email: cheather@tanfieldchambers.co.uk 1
What is the Right to Manage? Introduced by the Commonhold and Leasehold Reform Act 2002 Cheaper and simpler than enfranchisement? Does not require fault compare Part 2 LTA1987 Is it a straightforward procedure? A managing agent may still be necessary for most buildings The Right In Practice (1) Management functions under leases s.96 Not in relation to functions with respect to a matter concerning only a part of the premises consisting of a flat or other unit not held under a lease by a qualifying tenant Not functions relating to re-entry or forfeiture s.96(6) Functions relating to approvals s.98 Assignment, underletting, charging, parting with possession, structural alterations or improvements or alterations of use must give 30 days notice to the landlord Other cases 14 days notice to landlord Enforcement of untransferred tenant covenants s.100 But not any function of re-entry or forfeiture s.100 Statutory functions s.102 The Right In Practice (2) Statutory Functions See Schedule 7 Covenants not to assign s.19 LTA 1927 Defective Premises Act 1972 Repairing obligations s.11 LTA 1985 Service Charges s.18-30 LTA 1985 Right to request information on insurance s.30a LTA 1985 Managing agents s.30b LTA 1985 Appointment of manager LTA 1987 part 2 Variation of Leases s.35-38 LTA 1987 Information to be furnished to tenants s.46-48 LAT 1987 Statutory duties relating to certain covenants LTA 1988 2
Qualifying Premises The right applies to premises if They consist of a self-contained building or part of a building, with or without appurtenant property They consist of two or more flats held by qualifying tenants, and The total number of flats held by such tenants is not less that two-thirds of the total number of flats contained in the premises: s.72(1) A building is a self-contained building if it is structurally detached: s.72(2) A part of a building is a self-contained part of the building if It constitutes a vertical division of the building The structure of the building is such that it could be redeveloped independently of the rest of the building, and Relevant services are either provided independently of the relevant services provided for the rest of the building, or could be so provided with the carrying out of works likely to result in a significant interruption in the provision of any relevant services for occupiers of the rest of the building : s.72(3) Relevant services are services provided by means of pipes, cables or other fixed installations: s.72(5) Exclusions See Schedule 6 Buildings with substantial non-residential parts (25%) Buildings with self-contained parts in different ownership Premises with a resident landlord and no more than four units Premises owned by a local housing authority Premises in relation to which rights previously exercised 3
RTM Companies A private company limited by guarantee - s.73(1) Whose articles of association state that its object, or one of its objects, is the acquisition and exercise of the right to manage the premises A company is not a RTM company in relation to premises if another company is already a RTM company in relation to the premises s.73(4) If the freehold of any premises is transferred to a company which is a RTM company in relation to the premises, or any premises containing or contained in the premises, it ceases to be a RTM company when the transfer is executed s.73(5) Membership of the RTM Company 2 categories of members Qualifying tenants of flats contained in the premises s.74(1)(a) Landlords under leases of the whole or any part of the premises from the date on which the right to manage is acquired Articles of Association The articles of association are fixed by regulations A provision of the articles of a RTM company has no effect to the extent that it is inconsistent with the regulations: s.74(5) RTM Companies (Model Articles) (England) Regulations 2009 SI 2009/2767 state that the articles of association of a RTM company shall take the form, and include the provisions, set out in the Schedule to the Regulations: Reg 2(1) Model articles apply in any event, whether or not they are adopted by the company: Reg 2(2). In order for a person other than a subscriber to be a member that person must (a) have agreed to become a member and (b) had their name entered in the register of members: see section 22(2) of the Companies Act 1985. If there was no register of members, then a person could not be a member unless they had subscribed. See Southall Court Residents Ltd & Others v Buy Your Freehold Ltd LRX/124/2007 4
Qualifying Tenants Tenant of a flat under a long lease s.75(2) But not where the lease is a tenancy to which Part 2 of the LTA 1954 applies And not where lease is an unlawful sub-let and there has been no waiver of the breach by the landlord There cannot be more than one qualifying tenant of a flat s.75(6) If there are two or more long leases the tenant of any superior lease is not the qualifying tenant Joint tenants are jointly regarded as qualifying tenant s.75(7) Long Leases A long lease is defined by s.76 Granted for a term of years certain exceeding 21 years, whether or not it is terminable before the end of that term by notice, by re-entry or forfeiture or otherwise A term fixed by law under a grant with a covenant or obligation for perpetual renewal Taking effect under s.149(6) of the LPA 1925 (leases terminable after death, marriage or civil partnership) Granted in pursuance of the right to buy or the right to acquire on rent to mortgage terms Shared ownership leases where the tenant s total share is 100% Granted in pursuance of the right to acquire See also s.77 Section 76 contains a set of gateways, not a stack of sieves (HHJ Mole QC): Corscombe Close Block 8 RTM Co Ltd v Roseleb Ltd [2013] UKUT 081 (LC) The Notice Inviting Participation section 78 To each person who is QT of a flat contained in the premises but who is not, nor has agreed to become, a member of the RTM company Must be accompanied by copy of articles of association Or include a statement about inspection and copying of and articles Statement must specify place and times for inspection and place for ordering and fee for copying Where notice contains a statement about inspection/copying the notice is treated as not having been given if recipient is not allowed to inspect or copy 5
Not invalidated by inaccuracy in any of the particulars: s.78(7) But what are the particulars? See below Notice of Claim s.79 May not be given unless each person required to be given a NIP has been given such a notice at least 14 days before If there are only two QTs of flats, both must be members of the RTM Otherwise membership of the RTM must on the relevant date include a number of QTs of flats contained in the premises which is not less than half of the total number of flats Must be given to each person who is a landlord, party to a lease otherwise than as landlord/tenant or a manager under Part 2 LAT 1987 Copy to each QT Notice of Claim: contents Specify the premises and contain a statement of the grounds on which the right to manage applies: s.80(2) State the name of each person who is both a QT and a member of the RTM company and the address of his flat Particulars of the lease of each such person sufficient to identify it, including date, term and date of commencement of term Name and registered office of RTM company Specify date for counter-notice not earlier than 1 month after the relevant date s.80(6) Specify a date at least 3 months after the date for giving the counter-notice, when the RTM company intends to acquire the right: s.80(7) Notice of Claim: mistakes Not invalidated by any inaccuracy in any of the particulars required by or by virtue of s.80 Particulars includes all of the details required by s.80(2)-(8) but providing the wrong name or registered office of the RTM company is not an inaccuracy so cannot be saved by s.81: Assethold Ltd v 15 Yonge Park RTM Co Ltd [2011] UKUT 379 (LC) Not providing 1 month for the counter-notice is not an inaccuracy: Moskovitz v 75 Worple Road RTM Co Ltd [2010] UKUT 393 (LC) 6
Use of earlier version of form (2003 rather than 2010) is an inaccuracy: Assethold Ltd v 14 Stansfield Road RTM Company Ltd [2012] UKUT 262 (LC) Not invalidated where members of the RTM company whose names are stated on the notice were not the QT of a flat on the relevant date, so long as a sufficient number of QTs of flats were members on that date No subsequent notice so long as one remains in force: s.81(3) Continues in force until right to manage acquired unless withdrawn, deemed withdrawn or ceases to have effect LVT Proceedings If a negative counter notice is given (and an application is made to the LVT) the right to manage does not take effect unless o It is finally determined that the company was on the relevant date entitled to acquire the right to manage the premises; or o The person by whom the counter-notice was given agrees in writing that the company was so entitled s.84(5) If it is finally determined that the company was not on the relevant date entitled to acquire the right to manage the premises, the claim notice ceases to have effect s.84(6) Withdrawal Express by notice s.86 Deemed where a negative counter-notice given under s.84 but either o No application to the LVT under s.84(3) within the time specified; or o Application under s.84(3) is made but subsequently withdrawn s.87 (1) Deemed where o Winding-up order is made, or resolution for a voluntary winding up is passed, in relation to the RTM company o Receiver or manager appointed of the RTM co o Voluntary arrangement proposed o RTM co struck off s.87(4) 7
Costs RTM company liable for reasonable costs incurred by landlord, third party to the lease or manager under Part 2 LTA 1987 in consequence of a claim: s88(1) Professional costs are to be regarded as reasonable only if and to the extent that costs in respect of such services might reasonably be expected to have been incurred by him if he was personally liable for all such costs: s.88(2) RTM company liable for costs of LVT proceedings only if LVT dismisses application that it is entitled to acquire the right to manage: s.88(3) RTM company is liable where a claim notice is withdrawn, deemed withdrawn or ceases to have effect for costs up to that date: s.89(2) Each member (or former member) of the RTM co jointly and severally liable with the company: s.89(3) Information Duty of manager party to give notice of existing management contract to the contractor party and to the RTM Co: s.92 Contractor notice must o Give sufficient details of the contract to identify it o State that the right to manage is to be acquired o State the name and registered office of the RTM company o Specify the acquisition date o Contain such other particulars as regulations require Duty to provide information to the RTM co s.93 Acquisition Date Where there is no dispute as to entitlement date specified in the claim notice: s.90 Otherwise 3 months from o Date when determination by LVT (or appeal) becomes final or o Date when right to manage is admitted by notice in writing Christopher Heather Tanfield Chambers 8