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Use the right to manage for more control over your leasehold property

As a leaseholder, there may be times when you wish you had more control over your flat. You may feel that the service charges and ground rent are too high or that the building isn’t being maintained correctly. You can either opt to buy your share of the freehold or apply for the right to manage the building. Here, we’ll explain what the right to manage entails and how it compares with buying the freehold.

What is the right to manage?

The right to manage allows you and other leaseholders in your block of flats in Bexley to handle the management of the building. You need to form a right to manage company and then take over the freeholder’s management tasks. You can either deal with the management issues yourself or use a managing agent to carry out the work on your behalf. Whilst you still need to pay service charges, you have control over the companies used so can benefit from more competitive pricing for maintenance works and insurance.

The costs for the right to manage

This is much cheaper than buying the freehold as you don’t have to find the money required for the freehold and you don’t need to pay any valuation fees. You only need to pay the legal costs for arranging your right to manage and the reasonable costs of the freeholder.

Eligibility criteria

The Commonhold and Leasehold Reform Act 2002 introduced the statutory right for leaseholders to establish a right to manage company and take over the freeholder’s responsibility for the building’s maintenance. There’s no need to prove that there was any wrongdoing by the freeholder. There are some criteria that need to be met, though:

At least two-thirds of the flats must be leasehold.
The original leases had to be for at least 21 years.
At least 75% of the building has to be for residential use.
At least half of the leaseholders have to agree to participate.

How does it compare with buying the freehold?

As mentioned earlier, it’s cheaper to opt for the right to manage than it is to buy the building’s freehold. You don’t have to pay the freehold premium, pay for valuations or worry about extra stamp duty charges. It’s also a much quicker process.

Whether you buy the freehold or have the right to manage, you and the other leaseholders have control over the amounts paid out for maintenance works and insurance cover. When you set up a right to manage company, though, the freeholder has a right to be part of it. This isn’t a bad thing as they have a vested interest to ensure the building and land are looked after properly.

Unlike the situation when buying the freehold, you can’t just pay legal fees to extend your lease. To do this, you may incur hefty costs. If you buy the freehold, on the other hand, you can extend your lease to a long term and usually benefit from an increase in your Bexleyheath property’s value.

With the right to manage, you also cannot change the lease terms. This means you still have to abide by any restrictions and ask your freeholder’s permission on specific matters.

Should you invoke your right to manage?

If you and the other leaseholders prefer to handle the management of the building yourselves but don’t have the funds to buy the freehold, then it’s worth considering your right to manage. If you have enough money to buy the freehold, though, there are more benefits to taking this route. On the other hand, if you’re happy with how the freeholder manages the building but have a short lease, consider just extending your lease instead.

For further guidance on each of these options, speak with your mortgage broker in Kent, London or Edinburgh. It’s important to weigh up your circumstances and discuss the situation carefully with your neighbours if you’re considering either buying the freehold or using your right to manage.

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