March 23, 2017

Getting right to manage … right

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The Right to Manage came into existence as part of the 2002 Commonhold and Leasehold Reform Act. The government of the day saw RTM as a simple right to allow leaseholders rather than landlords to control the destiny of the site.

Why your site needs RTM

It will over time give you the lowest costs for the level of service you want and is very likely to add to the value of your home.

The logic of why any site not controlled by the leaseholders through an RMC of a share of the freehold should have RTM is fairly clear. A landlord has no interest in the success of a site once the properties have been initially sold. Their liability is to ensure the terms of the lease are met and their income derives from whatever profits accrues from ground rents. The reality is of course a good number of landlords make additional income from providing the insurance, owing the property management company, doing dodgy deals with suppliers and inventing large administrative charges.

The idea that the landlord or managing agent somehow pays for part of the site is also a common misunderstaniding. The only circumstance where this happens is where they also own one of the leases. You pay for everything. Yes it says the landlord will keep the site in good repair but it also says the landlord will collect all the money for doing this from you and your fellow leaseholders.

Why do landlords dislike RTMs

From previous reports on the web site readers will know some landlords do all in their power to stop an RTM. It could be they genuinely think they somehow do have an interest in ensuring the building well looked after or it could just be it’s the extra money they make.

The benefits of RTM is that nobody is making a profit from the services you have, the managing agent is working for the leaseholders and their best interest is in ensuring the building works well.

Again some landlords will claim an RTM will look to cut corners to save money in the short term but if that were true why is it so many new buildings have their servivc charges set too low. To help the long term future of the building or maybe to help sell the flat in the first place?

The idea that a landlord somehow has a long term interest in the building is a common myth some in the sector promote. Were a building has a 999 year lease the truth is the building will be long gone before the landlord reclaims the site. Even with shorter 125 years leases often used in the retirement sector provided the leaseholder acts before there is less than 80 years to run a lease extension can always be added at low cost. So in almost all cases the landlord is never going to take the building back

Important note on length of lease and lease extensions

Almost all properties have the right to have their lease extended for a cost. If the property is a house or bungalow the Leasehold Reform Act 1967 gives the right to extend by 50 years at a time. In the case of a flat the extension if for 90 years under the Leasehold Reform Housing and Urban Development Act 1993 (the potentially huge advantage of doing this via the tribunal is that the lease extension is that the cost is set at a rate which causes the ground rent to be reduced to a peppercorn). Check the length of your lease and please remember you need to extend it before there is less than 80 years left to run. Once a lease is below 80 years to cost of extending goes up dramatically and you or the person who buys your home in the future will not be able to get a mortgage which will have a dramatic impact on the value.

Do RTMs go wrong

Sometimes an RTM can fail but there should be no reason for doing so. Sometimes the wrong agent can be appointed sometimes there is a dispute about how to run the site. However running an RTM should take less effort than it does to run a residents association. Unless a site is small the first thing any RTM should do is appoint a professional agent to do the work. Under almost all circumstances the agent’s advice should be taken on what’s best for the building –they are the experts. If the new agent does not work out then change them. The agent works for the RTM so can be removed at the end of the contract (which should be no more than a year) or before the end of the contract if they have breached the conditions of the contract. Under all circumstances do not think the best option might be to go back to being managed by the landlord.

The one and only thing an RTM should never do is allow itself to fail. We were contacted by a site a while ago where the directors had done just that. They had written to their member’s explaining if no one wanted to come forward to help the board they would close the company. Nobody came forward so they folded the company and landlord took over the site. When that happens the leaseholder’s have then lost their right to form a new RTM for a number of years. What can we do asked a leaseholder – too late.

Why not just ask the landlord to change our agent

In both the residential and retirement sector we are seeing some landlords encourage those sites who are unhappy with their existing agent to move to a new company the landlord happens to know. Perhaps a company run by people with previous experience at the top of major property management companies which the landlord used to own. Companies where you may even recognise the names of those directors.

There is of course a very good reason why a landlord would far rather you go to a company they recommend and why under all circumstances they would rather you did not go RTM for the reasons set out above.

Which brings us to Peverel/FirstPort. Over the years we have written many articles about their poor management and things like collusive tendering or insurance commissions. Readers are invited to consider to what extent those problems sat with Peverel/FirstPort and to what extent they came out of the fact they worked for the landlord and was at various points owned by them.

The reality is we know of at least some sites who have appointed FirstPort to work for their RTM and have succeeded. When they work for the landlord he is the client and they have to work to his best interests which is why you need an RTM

Who will stop you taking RTM

The problem with trying to take RTM is that you are often faced with a professional lobby campaign against you by the agent, the landlord and maybe even the house manager. You may be accused of all sort of things by those who have a vested interest in keeping things as they are. You will almost inevitably be faced by some leaseholders who are scared or do not want to see they have been overcharged in the past.

The options of how to get to RTM

There are three main routes to RTM. Unfortunately, the one company who cannot help is the existing managing agent because they work for the landlord who will not welcome them acting for you. Even if you want to keep your agent you will need to find a company to help you.

The options

1)  To collect the money to pay a solicitor or surveyor to take on the technical work. Sadly the law as currently drafted is mechanistic and technical so it’s very easy to make a mistake. These mistakes will be ceased on by landlord’s barristers and may cause your claim to fail. You need the lawyer to make sure everything is right – but even they can still get things wrong. You will also have to select your managing agent as the process moves forward

2) Appoint a company who specialises in RTM. These sorts of companies either charge a fee per flat or ask for a “good faith deposit”. Some of these companies recover their costs via a fee from the appointed managing agent. Which of course means you can only choose from a limited list of agents willing to agree this sort of contract. It also means the managing agent is going to have to indirectly charge you extra to recover those “fees”

3) Find an managing agent who you think will do a good job. One with experience of RTM. Find out if the agent will agree to a one year contact in exchange for them doing the work in helping get the RTM going. Many agents are willing to do this and to cover a number of your costs as it’s a good way to get new business. You will still have things like court fees and company setup charges to pay for.

Our view would be that option 3 offers you the most flexibility. Option 2 may or may not be attractive but remember you will pay the fees one way or another. Most importantly remember that the managing agent who offers the cheapest fees or the RTM arranger who offers the lowest charges is not going to get you the best value for money. Optoin 1 is potentially the most expensive but should ensure you comply with the law -but as we have reported you need to find the right solicitor.

When RTM is not allowed

The RTM legislation has a number of limitations which may prevent or make more complex the process.

1) A site must not have more than 25% commercial content. Surprise surprise a number of new sites are built with 26% commercial element.

2) Leasehold houses do not qualify to be part of the process.

3) Multiple blocks now have to apply for separate RTM’s following a flawed judgement in the court of appeal.

4) Blocks must be physically separated. Readers will not some of the more fanciful claims that a building was joined and cannot form an RTM.

Comments

  1. Michael Epstein says:

    Without doubt you are right to point out that Peverel/Firstport do manage some developments to a good standard.
    However, this is largely at the expense of other developments that were connected freeholder appointments, where resources have been diverted away from them.
    It should also be remembered, that some funds used to finance the contracts to manage new developments are derived from the price fixing scandal.
    Had Peverel/Firstport taken full responsibility for their actions (including not escaping OFT fines) it is very doubtful they would still be trading.

  2. Michael and CARLEX

    Please, Please, name any development that Pev/Port have managed to a good standard?

    In a reply to me from Carol Crowe the director of ex Peverel now Firstport, she has again refused to solve long standing historic failures by the Area Manager, who from 2008/09 until he was removed in April 2015 oversaw the works carried out including responsibility for the Service Charges we have paid. The reason given for his removal (source informed) had been, not for incompetence or allowing cheating of us residents by allowing duplication of Service Charges, but that he had been suspended for stepping on a senior managers toes and comments he made to some of his staff?

    CARLEX stated:

    Why not just ask the landlord to change our agent?

    In both the residential and retirement sector we are seeing some landlords encourage those sites who are unhappy with their existing agent to move to a new company the landlord happens to know.

    Chas asks: who is this meant to be?

    Perhaps a company run by people with previous experience at the top of major property management companies which the landlord used to own. Companies where you may even recognise the names of those directors?

    There is of course a very good reason why a landlord would far rather you go to a company they recommend and why under all circumstances they would rather you did not go RTM for the reasons set out above.

    Chas Says:

    This is where we at Ashbrook Court have a Peverel Company as Landlord who employs their sister company as Managing Agents who then repay them by giving them the excessive commissions received from the Insurance Company who is also a sister company?

    CARLEX stated:

    Which brings us to Peverel/FirstPort. Over the years we have written many articles about their poor management and things like collusive tendering or insurance commissions. Readers are invited to consider to what extent those problems sat with Peverel/FirstPort and to what extent they came out of the fact they worked for the landlord and was at various points owned by them.

    Chas Asks:

    Yes when control is bought by Holding Companies owning both the Landlord and Managing Agent and in some cases they owned the Freehold, corruption may be inevitable as now we find more duplication of costs that the Directors refuse to acknowledge.

    CARLEX stated:

    The reality is we know of at least some sites who have appointed FirstPort to work ,for their RTM and have succeeded. When they work for the landlord he is the client and they have to work to his best interests which is why you need an RTM.

    Chas Says:

    (Yes RTM would be the right way foreword.)

    Why has ARMA not reflected this by allowing ex Peverel Companies to become ARMA-Q???

  3. Peverel Retirement as was, is one of the number of commercial residential property developments mentioned in the Firstport webpage as has been informed by Jonathan on About Peverel

    We need to qualify what was posted therefore can anyone post the name and how we can check this information so we can be precise in mentioning those Peverel Companies ( that was) who are not singing off the same Hymn Sheet.

    Peverel (as was)

    “The group manages a large number of commercial and residential property developments. There are historical issues within this portfolio, which have given rise to some disputes and claims under the management contracts that govern them.

    Chas asks:

    How do we check these Management Contracts that shows Governing Principles of Intent and where the Blue Book was and is a Contract Document which was changed unilaterally by Peverel Retirement so they could duplicate administration charges that increased our Service Charges without bilateral agreement?

    Continued from Jonathan as seen on About Peverel;

    Whilst significant progress has been made in addressing these claims, and management continue to assess them on their merits, they can take many years to emerge (Chas says our historic claims began in 2008/09) so management recognise the need for a provision of £4,634,473 at the year end (2013: £9,437,068). This is expected to be utilised over a period of up to five years.”

    (Erm, we won’t deal with historic claims but we settled £4M of them last year!)

    At Ashbrook Court they refuse to investigate as we have shown them proof that we were Price Fixed which means that they also lied to the SFO and OFT the Police and us elderly residents who many have now passed away.

    Still they refuse???

  4. Sebastian, I phoned you over a week ago are you still on the same number as I am still waiting for a call as and when you have time?

    Thank you, chas