Right to Manage Company Formation FAQ

What is the first step in exercising the right to manage property?
You must get the support of at least 50% of your fellow tenants before you can proceed with the right to manage leasehold property. If you are successful in doing this you can move on to right to manage company formation. In order to proceed with a right to manage action and creating a right to manage company, you should seek legal advice. This is not only to ensure that you are eligible, but also to help you set up such a company from scratch.

The right to manage company that you create must be registered at Companies House and the tenants must decide amongst themselves as to who will be registered as directors of the company or the company secretary.

What is the difference between the right to manage and enfranchisement?
The right to manage property is a statutory right awarded to ‘qualifying’ tenants in certain circumstances. It allows them to take control of the building in which their flat is situated. The tenants therefore control the maintenance and development of the building without actually acquiring the freehold interest from the landlord.

Enfranchisement (often referred to as collective enfranchisement )  is also a statutory right awarded to ‘qualifying’ tenants in certain circumstances. It gives tenants the right to join together and force the landlord into selling his/her freehold interest in the building to them. After buying the freehold, the tenants can then use this newly acquired interest to award themselves long leases (999 years) without ground rent. This increases the value of their flat.

What happens if my landlord opposes the right to manage?
Your landlord must have a legally valid reason in order to oppose your right to manage. As it is a statutory right your landlord’s consent is not needed. Reasons which your landlord would be entitled to issue a counter-notice are those such as; not enough tenants have consented to the right to manage, the building has less than 75% residential use and your company might not comply with the law.

If the landlord does issue a counter-notice, you can take him/her to the Leasehold Valuation Tribunal to get an order enforcing the right to manage action. This will however create substantial additional costs and if the landlord is successful at the Tribunal, you will be liable for his/her legal fees. This is why it is important to seek advice from experienced right to manage solicitors who will be sure of your eligibility to apply for the right to manage.

How shall I organise and commit the other tenants?
It is important for all tenants involved in the right to manage process that they are committed to the cause and are willing to be organised. It is a good idea to set up a tenant committee and nominate a couple of members to be in charge or allocate roles such as a Chairman and Secretary. It can also be a good idea to invite a solicitor to your first committee meeting so that any questions that tenants may have on the process can be answered.

If the right to manage process continues, it is recommended that tenants sign an agreement to confirm their commitment to the company. Instruct a solicitor to draw up a comprehensive agreement which all tenants can sign and have a copy of.

Bear in mind however that when a tenant sells his/her flat, the new buyer may not necessarily want to be involved in the right to manage company.

When does the Right to Manage end?
There are no time limits on your rights to manage, but there are circumstances in which right to manage companies stop being entitled to exercise the right to manage your building, namely:

  • Where all leaseholders and the right to manage company wants to give up exercising the right to manage.
  • Where the right to manage company becomes insolvent or is wound up.
  • Where the company stops acting as a right to manage company (eg if the company is used, under the enfranchisement process, to buy the freehold of the building).

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