Right To Manage – Are You a Good Fit?

Darren Bagnall of Flat Living Insurance discusses the challenges of Right to Manage.

Property Management is well known for being a challenging, multi-faceted role- and that’s for the professionals.

When leaseholders choose to proactively take charge and volunteer to manage their own buildings, they must carefully consider the scope of the role involved.

Here we’ll be discussing the challenges of the role, the sort of personalities and backgrounds that can be useful when approaching property management tasks, and how to go about becoming a Director if you decide it’s the job for you.

Firstly, What is Right to Manage?

Part of the Commonhold and Leasehold Reform Act 2002, Right to Manage allows leaseholders to take over the management responsibilities for their building via a collective company. Leaseholders have to meet certain qualifying criteria but the landlord does not need to consent and no previous mis-management needs to be proven – it is the leaseholders’ right as long as they meet the following requirements:

• The building must be made up of individual flats; at least two thirds of which must be leasehold.
• The leasehold flats must have had a lease of more than 21 years when they were granted.
• At least 75% of the building must be residential.
• If there are less than 4 flats in the block, the landlord must live elsewhere (unless the block was purpose-built).

A minimum of 50% flat ownership is required for RTM management takeover; no specific minimum number of company members exists. No qualifying leaseholders can be refused a seat at the table, they must all be invited to join the company, as must the landlord of the property.

How Are Company Directors Appointed?

Usually, a Right to Manage Company will be headed up by 3-5 Directors who share the responsibilities for managing the building with the support of their fellow company members. There is no legal requirement for the directors to be residents in the building, but it’s advised that at least the majority are so that day to day experience of living in the property can be utilised in decision making.

 RTM legislation doesn’t require a ballot. Instead, Directors are usually selected simply by a show of hands at an initial meeting or at an AGM. If for any reason a ballot is required (if the results are marginal or if there is suspicion that residents are being swayed in an underhand way), then this can be done. Secret ballots aren’t possible under the legislation as the Landlord has the right to know the names of everyone who is a part of the Company.

Once elected, Directors must complete the AP01 form to update Companies House.

Who Would Make a Good Director?

While no qualifications are required, the wide range of tasks and the skillset needed to make a great Director can be daunting. Of course, you’ll always be working as a team, but as the Director, the buck ultimately stops with you. Oversight across all the legal requirements will be needed, so at the top of the list is organisation.

Without an organised approach, things may well fall into chaos fairly quickly… There will be deadlines to meet, contractors to juggle, resident complaints to handle and service charges to collect. An organised Director is key to keeping on top of things.

Next on our list is communication. You’ll need to be something of a ‘people person’ as you’ll be dealing with contractors and residents consistently. You may well experience some friction with your fellow leaseholders and/or company members when difficult decisions needs to be made, so a calm and confident (and fairly tough-skinned) demeanour is key.

Soft skills covered, let’s think about the hard skills that would come in handy.

Company accounts and service charge collections fall to the Directors, so an understanding of accountancy would be very beneficial. Experience in property management would obviously be a fantastic attribute, but staying on top of legislative changes is the key.

Directors must actively research to avoid industry pitfalls and adapt to changes effectively.

Any experience of health and safety would also be a bonus as this can be a minefield for new Directors and their teams- as would detailed experience of the insurance market.

All of the above would be useful regardless, but if you or your fellow leaseholders don’t feel like you fit the bill perfectly, there is always option two…

Appointing a Managing Agent

Self-Management doesn’t have to mean doing everything yourselves. You can choose to appoint a Managing Agent of your choosing to handle the day-to-day with your oversight instead. Bear in mind, the buck will still stop with you , so genuine oversight and management of the relationship is needed.

A quick online search will lead you to multiple Managing Agents in your area- we would advise you to check reviews and shortlist at least 3 to invite to tender.

Always arrange for an on-site visit before expecting a quote. They should want to see the building in-person, as well as get a feel for the residents of the block. If possible, arrange this meeting with the individual Property Manager who would be taking on responsibility for your block as it’s important to get on with them- you will be in close contact!

Some questions to ask would be:

• What arrangements do you have for general maintenance inspections?
• How do you promptly address minor repairs and within what timeframe?
• How do you collect service charge funds and what banking arrangements do you have? How do you handle interest in relation to these funds?
• How do you select contractors?
• What arrangements are to be provided for emergency, out-of-hours callouts?
• What commissions would you earn from any contracts resulting from the services provided to us?

A good Managing Agent will be only too happy to respond to these questions with simplicity and clarity.

It’s also a good idea for you to visit other properties managed by your shortlisted agents. Check the overall maintenance and state of decorative repair and, if possible, chat to a resident or two to get a feel for their experience.

After selecting a Managing Agent, they may offer their own contract or use an RICS standard option.

Once received, seek your own independent legal advice before accepting and signing.

Flat Living Insurance provides specialist insurance policies for blocks of flats and apartments. For more information or a quote, please contact a member of the Flat Living Insurance team on 0333 577 2044.