A Beginner’s Guide to Right to Manage Company Formation

The right to manage is a legal right awarded by the Commonhold and Leasehold Reform legislation which came into force in 2002.

Its purpose is to give leaseholders more control over where they live. This could be for several reasons, including the desire of leaseholders to take over the management of their property due to a bad landlord or simply because the leaseholders own most of the value of the property and they want to decide how it should be managed, too. In order to acquire the right to manage, the leaseholders must go through the process of right to manage company formation. This company is then used to manage the property and the previous management of the building – usually the landlord – is also entitled to membership of the company. There is no need to get a court order to invoke the right to manage and you don’t need to get the landlord’s permission to seize control, either. However, the 2002 Act lays down a process that you need to follow and you will need to complete the right to manage company formation prior to serving your landlord with a Notice of your intent.

It is important to consider who would actually be managing the property following the completion of the right to manage process. This does not necessarily have to be done by the leaseholders because the right to manage is simply a transfer of the responsibility for management. This means that tenants can hire an outside company to take care of the day to day management on their behalf and this is often seen as preferable, due to the specific skills and experience needed to successfully manage a block of flats.

Before undertaking the right to manage company formation, leaseholders will need to consider the responsibilities that come with doing so. Forming a company of any kind obliges those involved to learn about company procedures or at least hire someone who can advise on those subjects. Leaseholders will also need to make a long term commitment to the company and serve as company directors – as well as landlords of the property once the process is complete. The company officers will also be responsible for keeping the company afloat, so it is important that all leaseholders make their payments on time and observe all their responsibilities.

Overall, obtaining the right to manage requires a commitment from everyone involved, but it ultimately gives leaseholders more control over their affairs and is, as such, a positive thing to do that can produce very good results for everyone involved.