LKP is very pleased that today sees the launch of the Law Commision review of the now broken right to manage legislation.
The full press release from the Law Commision is set out below:
Law reform needed to help leaseholders take control of their buildings
Housing Secretary James Brokenshire has asked the Law Commission to look at improving the laws which allow leaseholders to manage their own buildings.
The legislation on Right to Manage is meant to put power in leaseholders’ hands and stop abuse, by allowing some leasehold property owners to take over the management of a building.
But issues with the law have stopped its usage becoming widespread. And those who have taken up the option have found delays, costs and uncertainty.
Now, as part of wider efforts to build a country that works for everyone, Mr Brokenshire has tasked the government’s independent legal advisers with conducting a broad review of Right to Manage and propose reform recommendations which improve its use in practice.
The Rt Hon James Brokenshire MP, Secretary of State for Communities, said:
“This Government is tackling unfair and abusive practices within the leasehold sector every day. Our work with the Law Commission is just one aspect of this.
“Leaseholders wanting to manage their own building should be supported to do so without the fear of uncertain, lengthy and costly court procedures.”
Law Commissioner Stephen Lewis said:
“Putting power in leaseholders’ hands can help them take control of their homes and lead to cost effective, good quality management of shared areas.
“But the law isn’t working as it should be and leaseholders are missing out on their right to manage. We’ll be looking to get to the bottom of why that is, and come up with reform recommendations that work for everyone.”
Taking control of where you live
Under the Commonhold and Leasehold Reform Act 2002 leaseholders have the Right to Manage their building.
To use the right, leaseholders must set up a company and follow certain procedures.
Once set up, the company will be responsible for things like:
- collecting and managing the service charge
- upkeep of communal areas (such as communal hallways and stairs)
- upkeep of the structure of the building (such as the roof)
- dealing with complaints about the building from other leaseholders
But issues with the law have meant that uptake of the right to manage scheme has been low. In 2014, the CMA estimated that there were just 4,500 companies. And those that have set them up have found have found themselves facing further administrative burdens and court procedures in order to acquire the Right to Manage.
As a result, the Ministry for Housing, Communities and Local Government has asked the Law Commission to look at the law and come up with reform recommendations to improve how it works in practice.
The 12-month project will start now and a public consultation on provisional proposals will be launched later in the year.
Further information
In December 2017 the Law Commission announced that it was to start a project on residential leasehold and commonhold as part of its 13th Programme of Law Reform.
The residential leasehold and commonhold project aims to improve consumer choice, provide greater fairness, and make the process of enfranchisement easier, quicker and more cost effective.
In February a call for evidence on commonhold was been published with a full consultation due later in the year. On enfranchisement, the Commission will publish solutions for leasehold houses before summer recess 2018, followed in September by a detailed consultation on a new enfranchisement regime in respect of leasehold houses and flats.
LKP roundly endorses the fact that yet another of the issues we, along with the APPG on leasehold and commonhold reform, had proposed has now been adopted by the government. The sector supported by its ineffectual government quango the Leasehold Advisory Service will no doubt be quick to claim their long-standing support for change.
While RTM was always intended as a “no-fault” right for leaseholders to take control of their site, legal stratagems have repeatedly undermined it.
The CMA 2014 report shows there are just 4,500 RTM sites have been able to take up that right. That data for the CMA report was by LKP and while the figure has since increased the growth has slowed even further following the Court of Appeal Triplerose case where it was somehow decided that an RTM could only manage a single building.
LKP notes with some concern that the Law Commision press release again mentions the word building rather than buildings. There is also potential worry about the fact the commercial element rules are not mentioned along with the contentious matter of underground carparks and appurtenant land. However, it is assumed these will all be included in the 12-month review.
For some, it will be a little controversial that barrister Justin Bates, a man described in the Court of Appeal as “a seasoned warrior in the trench warfare over the right to manage” has been chosen to help work on the review.
Mr Bates was quick to advise he would be part of the project in an announcement to his Twitter followers at 5am on the morning of the Law Commision announcment. He then felt the need to make clear to his clients that he would only be at the Law Commission on a part-time basis and would continue to be available for other work.
LKP looks forward to discussing with Mr Bates his constructive input to the project. We are unaware of him ever having acted for leaseholders in a right to manage dispute.
It would be interesting to learn whether Mr Bates accepts that his argument about a piece of weatherstrip – as a supposed connection between two buildings – should be in future sufficient grounds to argue against an RTM.
Fortunately, this nonsense failed in the No 1 Deansgate case below (although the leaseholders had to be prepared for a full-on Court of Appeal battle before the freeholder backed down):
No.1 Deansgate wins epic RTM battle, as freeholder throws in the towel at the Court of Appeal
Watchdog to review failing leasehold management laws
Legislation that allows leaseholders to manage their own buildings are to be reviewed by the law reform watchdog because schemes are not being taken up.James Brokenshire, the housing secretary, has asked the Law Commission to examine the legislation because of concerns over red tape, delays and cost
Related posts:
Law Commission: no problem employing barrister Justin Bates to reform right to manage, while he sets about stuffing another one …
LKP welcomes Law Commission work on right to manage
Barrister Justin Bates delays ANOTHER right to manage by nearly two years. Corrie and Man United stars among the ‘victims’
The move to commonhold begins
Leaseholders and the sector react to Law Commission reforms to commonhold and right to manage
Ground rents are so valid … to pay out £300m bonuses to Persimmon cronies
RTM reform must allow Leaseholders in multiple blocks on a single estate to apply for RTM as one group, one company. Developers are splitting Leasehold flats into multiple small blocks on an estate and this makes RTM difficult or impossible. For example, if in a block of seven flats the units are owned by, let’s say, four aged disabled people and three uninterested But To Let people, then the four owner-occupiers are stuck . . . unless the government allows them to join with the other blocks, in which there are likely to be Leaseholders capable of seeing RTM through to completion.
Perhaps the Law Commission can also address the scandal of developer/freeholders appointing a managing agent to maintain communal areas of developments leaving the owners of freehold houses with few rights and protections?
Regarding the controversial Justin Bates, much of what he has done is morally repugnant.
That said his role in life is to be morally repugnant if he can find a loophole that wins a case for his client.
It is the system that leads to the antics of Justin Bates that is to blame.
At least Mr Bates is best placed to advise how to put him out of RTM work?
Ironically, I’ve just given up battling the fourth managing agent in a row that our RTMC appointed and have abandoned hope that RTM can be made to work.
Yes there is the scandal of the revised qualification. Many sites like ours have multiple small blocks. We made separate claims that were not contested. All flats have more say in a multi-block RTMC than without RTM but judges are not leaseholders let alone barristers. Our RTMC is now swinging in the legal wind.
But most of all it is the disgusting cynicism of ALL agents contracted with. No respect for their client and hold all the aces, including control over the service charge bank account.
The incompetence, if that is the cause, of agents is scary and always costly.
So why not literally self manage?
Out of 2 dozen flats I remain the only volunteer prepared to do any work after six years existence. Battling agents has been a full time job. If I suggested full self management, I would end up issuing invoices, debt collecting, paying contractors and battling neighbours who believe they are free to do any work they like.
All for free. I was foolish to relieve in RTM. I’d be insane to dispense with an agent all together.
One basic but huge reform would be enshrining in law that RTMCs can hold the client bank account in their name and then mandate their appointed agent. This at a stroke would tame the worst abuses of power by agents from my experience.
I doubt we will still have RTM by the time reforms are made.
RTM reform must take account of the growing power of Housing Association and the way they treat their shared ownership and private leasehold tenants.
London & Quadrant HA has charitable status but has adopted some of the worst features of unscrupulous developers. Namely charging Doubling Ground Rents and hiking up service charges one year after sale.by upto 20%. There is nothing you can do about it because they are so big and powerful .
David Montagu CEO of L&Q must be summoned along with private CEOs to a select committee to face the glare of public questioning.
When oh when is this select committee going to meet
It should be possible to do RTM without setting up a company. A straight majority of leaseholders should be able to remove the existing management company and appoint a new one. The current law is a complicated mess, and a money feast for legal professionals. It should not have to cost a fortune to extend leases, or buy the freehold. Even better, commonhold should be used which works fine in most of the rest of the world, when England and Wales continue with medieval leasehold. Saudi Arabia is allowing women to drive, maybe England and Wales can bin leasehold and move into the 21st century and out of the 18th.
Simon, setting up a RTM company is necessary for many valid reasons and is actually incredibly easy and inexpensive to do. The real issue is the vicarious ways freeholders find to object to a RTM action? In one case because the RTM company did not contain the letters RTM in the name? Another case because overhead perspex between two blocks (to keep residents dry going into their flats) the blocks were to be treated as being connected? And one case where the freeholder objected to the RTM action because two residents had not been served with the participation notices. The failure to serve a participation notice on these residents was admitted by the RTM company on the grounds that they were unable to serve the notices on the grounds that the residents were dead. Fortunately the tribunal (who were unable to contact the two residents to confirm this) allowed the RTM to go ahead.
I agree, setting up the company is easy. Some of us are worried as potential directors suffering a huge personal liability. We would contract out all the servicing to a new managing company who would be required to have adequate insurance in place. It is disgraceful that freeholders can use trivial reasons to frustrate the RTM process. Leasehold is indeed a murky world and should be consigned to the dustbin of history.
I hope the big freeholders, solicitors and surveyors who now benefit from antique leasehold are not able to stop beneficial progress.
No worries on that score Simon. Your company is set up as a limited liability partnership with each member having a £1 share (which is at risk!) And of course you obtain” Director’s” insurance which will cover against losses caused by error or fraud.
After six years being obstructed by four agents rather than helped, I have come to believe the industry sees RTM as a joke, and for one simple reason.
RTM cos have no funds to pursue action against agents who ignore contract terms or codes. D&O insurance is defensive only.
Agents offer no expert advice but need advising of basic law and book keeping. They ensure to try to get cover with the vaguest information…and if things go wrong they have no liability. Good luck with trying to hold an agent’s feet to the fire in my experience.
Even if you can find a couple of volunteer directors these fail to understand that limited liability is not a blanket guarantee for them. RTM directors are unique in that they have all the obligations of directorships while expected to either operate on blind trust or beg and plead for financial data to assist them make prudent decisions.
RTM is broken at core but might just about work if you are prepared to dispense with agents.
A simple time-versus-savings analysis does not to me add up to a sensible way to live your life given the huge weaknesses faced by RTMCs who can or even charge a management fee.
Paddy, good post. Sounds like you are pushing water uphill.
I knew little about the wrinkles surrounding leasehold law 2 years ago, I know a lot more now. I am one of 32 leaseholders in a block who are trying to improve the management. About 13 of us are taking an active interest, many do not, either because they are not bothered, or they do not fully understand all the issues with leasehold. The whole process for communal living has to be made more straightforward, because leasehold is now being seen as mildly toxic for potential flat purchasers.
They need to abolish the arbitrary threshold re commercial floor space (currently it must not exceed 25% of total floor space of the building for leaseholders to qualify for Right to Manage). Developers, especially in London, are building more and more complex mixed-use developments as a way of reducing residential (leaseholder) rights.
David Gade above writes: “RTM reform must allow leaseholders in multiple blocks on a single estate to apply for RTM as one group”.
Where the freehold title of multiple blocks in single estates has been sold to unscrupulous speculators without prior knowledge of qualifying leaseholders right of first refusal (RFR), in criminal breach of s 4, part 1, of the LTA 1987 (as amended by the Housing Act 1996), the majority qualifying leaseholders are entitled to force resale and purchase the freehold title “on like terms” to the original disposal and do so without time limit (that is where s5/s3A notice of entitlement has been ignored).
Thus, where the original disposal was made as a single estate, the subsequent RTM company can only be likewise, and any attempt by the now criminal freeholder to evade this and, thereafter, seek to sell title to the qualify leaseholders on each block separately is a criminal fraud.
As this illegal business has already taken place on a grand scale and continues unabated, it demands investigation.by the appropriate authority forthwith.
Very good point Alec. A housing Ombudsman should be brought in instead of the First Tier tribunal. The legal changes should be driven by the many leaseholders and best practice outside of England and Wales, not the few who profit from the present system. It is easy to envisage ineffectual tinkering around the edges. We need MPs and legislators to be bold enough to take on vested interests. Without being political, Labour would, not so sure about the Conservatives, although Peter Bottomley is doing a good job.
How would a Housing Ombudsman be better than the First Tier Tribunal.
I am a member of a public limited company,admittedly it is an RMC, but as a member I should receive the same rights as any other member of a public limited company.
Why then did Ombudsman Services Property decide I was entitled to receive the statutory accounts as filed at Companies House but because this did not include a Directors’ Report I was not entitled to receive one. The Investigating Officer went even further stating “We would note that it is the service charge accounts which
provide details of expenditure to which you contribute and these are provided to leaseholders when contributions towards service charge funds are requested.”
They totally ignored any rights as a member of a private limited company that I was entitled to. It would appear that Leaseholders even if they are double hatted as members/shareholders as well will be denied their rights.
With thanks to LKP and Michael and many others for their campaigning;
Could I request that if you have any opportunity to influence RTM reform, please could you consider asking for RTM reform to include the word HOUSE?
Sorry to shout the word house… but my colleagues and I feel that if “leasehold houses” were included in RTM, our suffering at the hands of really unscrupulous agents would have been substantially reduced over many years.
This is a good point. It would be a means to escape ‘fleecehold’. Perhaps needs extending to freehold houses, too.
Most leaseholders are not experts in property law and the very idea of going to a first tier tribunal sends the shivers down most ordinary folk.
We need a Housing Ombudsman where professional and their expensive briefs don’t have more power and influence than the leaseholder
Joe, I take it you have never engaged with ombudsmen? What makes you believe that a government appointed ombudsman would be any different from a first tier tribunal? Naivety is alive and well and thriving.
The Law Commission recently held a get-together – invitees only, less than ten per cent of those present represented leaseholders. The overwhelming majority were those with freehold interests.
The Commission recently requested Barrister Justin Bates to join their team considering RTM. LKP report ” He (Justin Bates) has been named in Parliament on a number of occasions, and once amid an accusation of “legal torture” by Sir Peter Bottomley concerning a retirement site in Worthing”. They go on to say that Justin Bates acts for the most enthusiastic monetisers in the freehold game.
There is only one solution to leasehold, ABOLITION.
One of the worst aspects of RTM is that the RTM company cannot threaten forfeiture of the lease if service charges remain unpaid. We have RTM (been a disaster) and a leaseholder who hasn’t paid one penny yet in service charges. Yes solicitors can be instructed and a Court Judgement obtained but a leaseholder can simply ignore the CCJ especially if they already have a broken credit history and don’t give a damn. So service charge arrears can build up indefinitely and there’s nothing effectively the RTM company can do about it. Power to forfeit the lease needs to be available under any new RTM legislation.