What Is The Right to Manage?
The right to manage enables leaseholders of a flat, subject to certain criteria within the Commonhold and Leasehold Reform Act 2002 (the Act), to take over the management functions of their building through what is known as a right to manage company (RTM).
Leaseholders who acquire the management functions through the RTM company are effectively able to control the day to day management of their flats, including; organising repairs and maintenance of the common parts, collecting service charge payments and arranging insurance of the block. Management functions, once with the RTM company, can be delegated out to a managing agent if required.
In order for leaseholders to qualify for the right to manage, the building must be made up of flats; at least two-thirds of the flats in the building must be leasehold (with leases of more than 21 years) and at least 75% of the building must be residential. Any number of the flat owners in the building can set up the RTM company but at least half of the flats in the building must be members of the RTM company before it can actually take over the management.
Legal Update
The recent decision by the Upper Tribunal (Lands Chamber) in Q Studios (Stoke) RTM Co Ltd v Premier Ground Rents No 6 Ltd and another [2020] UKUT 197 (LC) (19 June 2020) interestingly, clarifies what types of property owners will be able to exercise their rights to manage.
In this case, the block of accommodation was a purpose-built student block of flats in Stoke. The building comprised a number of “studystudios”. These were large enough for a bed, a desk, shower, toilet, a fridge and a two-ring hob for cooking. In addition, there was a communal lounge, cinema area, laundry room and an office for an onsite manager. It was argued that the “studystudios” were not separate dwellings since the leaseholders occupied not only the “studystudio” but also the communal facilities.
The main issue that had to be addressed by the Upper Tribunal was whether an individual studio, could satisfy the meaning of a “flat” within the Act and therefore, be subject to the right to manage provisions. The Act defines a “flat” as something which is “constructed or adapted for use of the purpose of a dwelling, and “Dwelling” is further defined as “a part of a building occupied or intended to be occupied as a separate dwelling”.
The Upper Tribunal held that the “studystudios” had the necessary space and facilities to be a dwelling and so were flats for the purposes of the right to manage legislation.
Here, the communal facilities and ground floor reception area did not diminish the individual studio’s primary purpose of a separate dwelling. This is an attractive decision for those qualifying leaseholders looking to facilitate the management functions of their flat. It is important to note here, the Upper Tribunal, once again, has taken an objective approach relying heavily on the interpretation of the physical characteristics of not only the flat but, the communal and recreational facilities in reaching their decision.
It is clear that this case not only paves the way for leaseholders of student housing to consider the right to manage, depending on the specific facts of each case, but this will also apply to other living spaces with communal facilities within the real estate market.
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