By Cassandra Zanelli, Solicitor at Taylor and Emmet and Ibraheem Dulmeer, Legal Advisor with the Leasehold Advisory Service
June 2016
The Right to Manage (“RTM”) is a popular method by which leaseholders can take responsibility for the management of their blocks. With exercising the RTM, it makes no difference if the landlord’s management has been good, bad or indifferent. However, there are certain costs implications which are overlooked by leaseholders who decide to invoke the RTM process. We aim to highlight these in this article.
Practical Costs
The RTM is exercised by a limited company, not by individual leaseholders. Therefore, there are costs for forming a RTM Company.
The RTM process will require information to be downloaded from the Land Registry. The overall cost will depend on the number of flats within the block, each title costs £3.00.
There will be postage costs associated with serving: (a) the notice inviting participation on all qualifying leaseholders who are not already members of the RTM Company; and (b) the notice of claim not only on the landlord (and any intermediate landlords, management companies etc.) but also copied to any qualifying tenants.
Photocopying costs (for example company documents, if these are being served with the notice inviting participation) should be borne in mind.
Claim Notice Costs
To clarify, the notice of claim must be served on: the landlord, any intermediate landlord, any parties to the lease other than the leaseholders (e.g. management company named in the lease) and a manager who has been appointed under the Landlord and Tenant Act 1987.
Once a claim notice has been served, the RTM Company is liable for the reasonable costs of the aforementioned parties. Even if a landlord admits that the RTM Company is entitled to acquire the RTM, the RTM Company will still be liable for the reasonable costs of the landlord.
Tribunal Costs
If a landlord RTM Company’s entitlement to exercise the Right to Manage, the RTM Company can make an application to the First-tier Tribunal (Property Chamber) or the Leasehold Valuation Tribunal in Wales (“the Tribunal”) for a determination.
If a Tribunal determines the RTM Company is not entitled to acquire the right to manage the premises), the RTM Company is liable for any costs incurred.
What’s the difference between Dismissal and Withdrawal?
The legislation is specific in the RTM Company’s liability for costs if the Tribunal dismisses an application by the RTM Company for a determination that it is entitled to acquire the RTM. But what about the situation where an RTM Company, having made an application to the Tribunal subsequently withdraws it?
The Upper Tribunal recently considered the RTM Company’s liability for costs following their withdrawal of the application. Essentially, the withdrawal of an application does not bring that application to an end. The application ends only when the Tribunal formally dismisses it. When the Tribunal dismisses the application, the RTM Company’s liability for the landlord’s cost is “triggered”.
Conclusion
Given the technicalities of the RTM process it is prudent for the RTM Company to seek professional advice and guidance.
Forewarned is forearmed. It is important before embarking on the Right to Manage, that RTM Companies are aware of their potential costs liabilities, not only in relation to their own costs, but also their liability for the costs of other parties.
