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Niall Brady

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Every time you get your service charge bill you feel annoyed and frustrated by it, as you really can’t see where the money is going. The building isn’t clean and you’ve asked the freeholder three times to fix the front steps. Yet somehow, every time you pay the bill, you put it to one side and put a lid on your resentment. After all, the freeholder is in charge and there isn't much you can do about it. You simply don’t have the time or the energy to enter into a dispute with them. Does that sound familiar? If so, you might not have heard of your Right to Manage your building, along with other leaseholders. Under this right, you have the ability to set up an RTM company which takes over the management responsibilities from the freeholder. The main factor that makes it so appealing, is that it is a right, and as such your freeholder cannot challenge it (apart from in limited circumstances, which we always check at the outset). The application is a process, that is all, and no dispute is involved. In fact, you don’t even need to be dissatisfied with your freeholder to apply, although of course it is often dissatisfaction with their service that leads leaseholders down the RTM path.&nbsp; One thing to point out that is not always clear is that this does not force you to do all the work yourselves; on a day-to-day basis- the RTM company can, and usually does, appoint a managing agent to run matters.&nbsp; The benefits of Right to Manage are significant, especially where a building is being managed badly, or at too high a cost. RTM ensures that the leaseholders’ concerns are prioritised. This means that the people who are most affected by the management are the ones who direct it and their specific issues arising from living in the building can be addressed. Even a diligent freeholder, especially one who owns more than one building, is not going to have the same understanding of some of the issues as the owners and residents.&nbsp; As all leaseholders can become members of the RTM company, they have a say in the appointment of the managing agent, and indeed changing managing agent if they fail to perform. A freeholder will not necessarily have your best interests at heart, and being a member of the RTM company provides a line of direct accountability to the leaseholders. Those who wish to be more involved can also choose to become a volunteer director.&nbsp;&nbsp; Right to Manage is very cost efficient. Application and set-up costs are limited, and there is no premium payable to the freeholder, unlike in the case of a freehold purchase or lease extension. One of the main reasons that leaseholders are frustrated by their freeholder’s management of a building is the sense of spiralling costs and a lack of value for money. By using an RTM company, leaseholders are able to set service charges at a reasonable level and achieve better value for money from contractors. There can be more transparency - even where repairs or maintenance are by their nature expensive a sense of ownership of those costs will make a huge difference to how you and your neighbours feel when you make the payment.&nbsp;<blockquote>The benefits of Right to Manage are significant, especially where a building is being managed badly, or at too high a cost.</blockquote>

Helen Oakland

Your Building Manager doesn't care about you?

Use Right to Manage as a stepping stone.&nbsp; Your lease term is fairly short, you have had enough of dealing with your freeholder and their managing agent. You have even saved up enough money to afford the premium to buy your freehold. However, just when you think you are getting your property finances back on track your solicitor and surveyor tell you that it could take years, to agree matters with the freeholder. That is just too long to wait.&nbsp; One option that might be worth looking at is using Right to Manage as a stepping stone on the road to purchasing the freehold. Right to Manage and freehold purchase are usually seen as alternatives but, where the end result of a freehold purchase is a long way off or not guaranteed, Right to Manage can be a first step to taking back control, buying you time whilst you wait for your freehold purchase to come through. Just a thought!&nbsp; Buying the freehold can cost thousands of pounds, and also tends to be a time-consuming process, involving price negotiations with the freeholder. By comparison, exercising the Right to Manage is a much more affordable option- as there is no premium payable to the freeholder, and as the process is non-adversarial, costs of the application are low. Lastly, a quick comment on extending your lease, as this is something else that you are to likely come across in your research. For a premium, most leaseholders will have the right to extend the term of their lease, which can be important if the remaining term is under approximately 80 years. This will not, however, have any bearing on the management of the building and the freeholder will continue to manage it. Whilst it depends very much on the circumstances of each particular building, freehold purchase is these days often similar in cost to lease extension and the preferred route for many.<blockquote>Right to Manage could be a first step to taking back control of your building, buying you time whilst you wait for your freehold purchase to come through.</blockquote>

When purchasing your freehold is going to take forever.

In an ideal world most of us would want to own our home free from anyone else and in its entirety. However, with the best will in the world, a flat in a block with flats is always going to involve some form of relationship with others. The framework of that relationship, however, can be structured in different ways.&nbsp; The two main options available to a leaseholder who is trying to make a change are the purchase of the freehold, along with other leaseholders (this is known as collective enfranchisement) and the exercise of their Right to Manage. The main legal distinction between the two is simple- when you buy the freehold you do just that, and your freeholder will drop out of the picture. With Right to Manage the freeholder remains as a party to your lease, but you and the leaseholders take over the control of the management of the building. The freeholder still has a role and a financial stake in the building, but it is diminished from a practical day-to-day perspective. Your lease term will continue to reduce.&nbsp;Right to Manage (RTM) is a legal right that allows flat leaseholders in England and Wales to take over the management of their building from the landlord. This means that they can choose who will manage the building, how it will be managed, and how service charges are spent. RTM gives leaseholders more control over their building and can help them to improve the quality of services provided, reduce costs, and ensure that their rights as leaseholders are respected. It also gives them a greater say in decisions about major works or changes to the building. The differences and advantages of both routes are set out below. The first thing that is likely to strike you is that Right to Manage is by far the most affordable solution. Buying the freehold can cost thousands of pounds, and also tends to be a time-consuming process, involving price negotiations with the freeholder. By comparison, exercising the Right to Manage is a much more affordable option- as there is no premium payable to the freeholder, and as the process is non-adversarial, costs of the application are low. Please see our Fees &amp; Charges section for more specific information.&nbsp; One thing that should not be overlooked is the personal emotional investment that leaseholders make in these decisions. A freehold purchase, whilst ultimately rewarding, can in some situations be emotionally draining and time-consuming. This is not necessarily the case, but should be borne in mind when deciding how to proceed. What your long-term priorities are will influence how much emotional energy, as well as money, you are prepared to invest.&nbsp; Whether you chose to buy your freehold or go down the RTM route is ultimately up to you and your fellow leaseholders. Whilst there are other factors that apply and everyone will have an individual preference, the relative cost of each process is likely to have a large bearing, particularly where you are trying to persuade your neighbours to part with their cash. Naturally, some people will be more bothered by the current management situation than others, and an expensive freehold purchase may not always be an easy sell, or indeed a possibility for many.&nbsp; Lastly, a quick comment on extending your lease, as this is something else that you are to likely come across in your research. For a premium, most leaseholders will have the right to extend the term of their lease, which can be important if the remaining term is under approximately 80 years. This will not, however, have any bearing on the management of the building and the freeholder will continue to manage it. Whilst it depends very much on the circumstances of each particular building, freehold purchase is these days often similar in cost to lease extension and the preferred route for many.&nbsp;<blockquote>The first thing that is likely to strike you is that Right to Manage is by far the most affordable solution.</blockquote>

Right to Manage is cheaper than buying your freehold.

The September 2022 report by the Financial Conduct Authority has shone a spotlight on the lack of control that leaseholders have in determining their buildings insurance and the commission that is paid thereon. As the report highlights, there is a lack of transparency, and it is worrying that many leaseholders are not even aware that these commissions exist at all.&nbsp; The most shocking finding of the FCA report was that it's common practice for freeholders to share a comission with their broker, which can be as high as 60%. A cost which is passed directly onto the leaseholders. Unsurprisingly, the report finds that this creates a situation where not all managing agents are motivated to act in the best interests of the leaseholders who ultimately pay for the insurance.&nbsp; While not all leaseholders are faced with this situation, there is another way for them to end up paying more than they should for their building insurance. The Leasehold Knowledge Partnership, a well-known leaseholder advocacy group, recently identified a number of large building managers with their own in-house insurance companies that are highly profitable. Some making profits of 40%. In this case, there may be no comission, but the leaseholder is still paying a huge profit margin for the benefit of the building manager. Again, the likelihood of the building manager to act in the best interests of the leaseholder is not likely to be as high as it should. The only way to really stop it is for leaseholders to take control of their building. With Right to Manage (RTM) the insurance company would quote directly to the RTM company set up by the leaseholders to manage their own building. Any savings would go to the leaseholder and not the freeholder or their building manager. With right to manage the leaseholders get control of their building and its costs, putting an end to any hidden costs they have been burdened with. With control over their building, they can negotiate contracts with builders, insurers, and other service providers, giving them a voice where they had none before.<blockquote>The most shocking finding of the FCA report was that it's common practice for freeholders to share a comission with their broker, which can be as high as 60%. A cost which is passed directly onto the leaseholders.</blockquote>

The Hidden Cost of Building Insurance for Lesaseholders 

Have you heard about Right to Manage (RTM)? If you live in a block of flats it’s something that you should be aware of because it can give you more power over your home and block and could potentially save you a lot of money. RTM was introduced by Parliament under the Commonhold and Leasehold Reform Act 2002, to allow leaseholders who were unhappy with their freeholder or their property manager to collectively take control of their building from the freeholder and appoint their own building manager. What is Right to Manage? Right to Manage is a statutory right enabling leaseholders to take control of their building and manage it themselves, or more likely appoint their own managing agent, rather than being managed by a freeholder appointed agent. This means that leaseholders can replace their building manager and banish hidden costs like commissions and have greater control over the running and maintenance of the building. There are certain rules around which buildings are eligible for Right to Manage and these can be quite complex, but the basic requirement is for a building that doesn't share any services with another building, has less than 25 % commercial space, has two or more leasehold flats, 75% of the flats are on long leases, and 50% of the leaseholders want to go ahead. You can check whether your building qualifies with our free pre-qualification screening at miblox.co.uk It's worth checking the Leasehold Advisory Service website for the full requirements. How does Right to Manage benefit leaseholders? Many leaseholders don’t own their building or control their service charge or building manager. They are largely at the mercy of their freeholder, who in a lot of cases, is a corporate entity set up to profit from lease extensions and commissions. The leaseholder is not the priority of the building management here. Right to Manage gives leaseholders a voice and empowers them with control over their property. This means they can replace their freeholder-appointed managing agent, control their service charge, and banish hidden insurance commissions and other "costs" that were previously paid for by leaseholders out of their own pockets. They also gain control of the maintenance program for their building. Why is Right to Manage not more widely known? While there is a webpage on Gov.uk with the relevant information, the government doesn't promote Right to Manage very heavily. An industry has grown up built around finding ways to generate money for freeholders and their agents at the expense of leaseholders. City funds have been created with the purpose of buying up freeholds and generating money from them. A recent FCA report highlighted that freeholders are often paid commissions by insurance brokers, sometimes up to 60%, passing that cost onto leaseholders who have no control over what they're paying. Some freeholders have been known to leverage costs onto the leaseholder as small as answering a letter. This leads to a situation where there is no commercial benefit within the established industry to highlight this statutory right. How can leaseholders go about taking advantage of Right to Manage? The standard way is to find a property solicitor, but it is not a popular activity for them due to the length of time it takes, the amount of paperwork it generates and the need to chase numerous leaseholders. Many large management companies use it to get new buildings onto their portfolio, but there is a real chance of the leaseholders jumping out of the frying pan and into the fire if they don't get their choice of partner correct. Many of these agents will do the Right to Manage for free with the proviso that the building is managed by them for the next couple of years at least. You may also want to find out more about how it works and see if it's right for your building. The Leasehold Advisory Service is a government run service which is invaluable for information regarding this. Check there before making any decisions. Also check out the FAQ on miblox.co.uk for more details. What is mi-blox That's why we created mi-blox, a platform that automates and simplifies the RTM process enabling leaseholders to take control from the start. It will tell the leaseholder if their building is eligible and guide them step by step through the process. All the legal documentation is generated directly in the platform using the information provided by the leaseholders. All they have to do is sign and post it. And we're working on enabling the leaseholders to communicate with each other within the platform to turn their building into a community.<blockquote>Have you heard about Right to Manage (RTM)? If you live in a block of flats it’s something that you should be aware of because it can give you more power over your home and block and could potentially save you a lot of money.</blockquote>

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