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Leasehold home ownership: exercising the right to manage - Law Society response
The Law Society has responded to the Law Commission's consultation on 'Leasehold home ownership: exercising the right to manage'. The government asked the Law Commission to review the Right to Manage (RTM) legislation and make provisional proposals to make it simpler, quicker and more accessible, particularly for leaseholders.
The RTM was introduced to give leaseholders control over the management of their buildings. However, the current system is seen by many as too technical, slow, restrictive, uncertain and expensive.
The Commission's provisional proposals include:
- relaxing the qualifying criteria, so that leasehold houses, and buildings with more than 25% non-residential space, could qualify for the RTM
- permitting multi-building RTM on estates
- reducing the number of notices that leaseholders must serve, and giving the tribunal the power to waive procedural mistakes
- setting out clearer rules for the transfer of information about management functions, and for the management of property which is not exclusive to the premises claiming the RTM
- requiring each party to bear its own costs of any tribunal action and exploring options for the landlord's non-litigation costs
This consultation constitutes part of the Law Commission's wider review of leasehold and commonhold and has an important relationship with other matters currently under review, or to be reviewed, within government or by the Law Commission.
The issues of unfair leaseholds, enfranchisement, commonhold and right to manage are interrelated, so it is important that the responses to all the consultations are considered in light of the others. The Society has also responded to the Law Commission's enfranchisement and commonhold consultations and MHCLG's leasehold consultation.
The consultation makes provisional proposals for reform of the current RTM legislation and the Law Society largely agrees with the great majority of the Law Commission's suggestions to improve and amend the existing legislation.
The Law Society recognises that leasehold reform is a complex and important task with different interests at stake. We are keen to work with the Law Commission and the government to develop improvements and alternate means of addressing the issues.
The conflict of interests between landlords and tenants and between those who commission works to buildings, and those who pay for them, are problems previously identified by government (the Office of Fair Trading and its successor, the Competition and Markets Authority). Providing leaseholders with a means of exercising the Right to Manage that is more understandable and faster to pursue has an important place in the range of leasehold reforms under consideration and development.
The Society is concerned that the Law Commission appears reluctant to extend the RTM scheme to freeholds particularly as there are so many residential developments with a mix of freeholds and leaseholds.
The Society believes that the tenants should be consulted by the directors of the RTM on all material matters, not just service charges, such as making and enforcing covenants or regulations (e.g. consenting to pets, alterations, etc. where there is a discretion). It is important that RTM is not dominated by just a few people. It is important to remember that the point of RTM is to give all of the tenants control.
What this means for solicitors
This will depend on:
- the results of the consultation
- what the Law Commission decides and how government responds
- how and when the Law Commission's proposals are enacted
- whether the RTM scheme is extended to freeholds and leasehold houses
- how leaseholders and RTM company directors respond
The consultation closed on Tuesday 30 April.
The Law Commission will publish their recommendations to government in a final report.
Read the consultation and a summary on the Law Commission website.