5 ways to fire your Freeholder (or Property Management Company)

5 ways to fire your Freeholder FI

If you want to make a change to the management of YOUR building, here are 5 ways you can get rid of - or fire your Freeholder or Property Management Company.

 

Have you ever found yourself saying something like .....

 

“They do little or nothing to maintain the property – and if they do lift a finger, they charge an absolute fortune for a bad job”?

 

We hear people saying something similar to us regularly. And who are they talking about? The people managing the building where they own a leasehold flat. Someone is not doing their job properly and the leaseholder is seriously unhappy.

 

Many of the leaseholders who speak to us about their current freeholder or agent think they are stuck with such a situation. In most cases they are wrong and in many cases the leaseholder can simply fire the managing agent bringing about change for the better. The question is ... how?

Read Your Lease

The first place to start is by reading your lease. This is particularly important if you want to change the management of your block of flats. Reading the lease will tell you who “they” are. It could be the Freeholder; who owns the block of flats and the land upon which it sits. Alternatively, it could be a Residents’ Management Company [RMC] or a Residents’ Freehold Company. And in either case, there is probably a Managing Agent employed to carry out the actual day-to-day work. Depending upon what the lease says, you need to take the appropriate route and use the correct tools to ensure you bring about change successfully.

 

If you have a ‘tri-partite’ lease (Freeholder / Leaseholder / RMC) you probably have the easiest route to change. Leaseholders who own flats in the block will be ‘members’ or ‘shareholders’ in the RMC – and consequently will have voting rights. These can be used to influence the directors of the RMC – or fire them if necessary at the next AGM or EGM. So, having read the lease, the next step will be to find out about the Company by carrying out a search at Companies House. https://www.gov.uk/get-information-about-a-company

 

There are a few questions you need answers to.

Read Your Lease
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    Who are its Directors?

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    Where is its registered office?

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    When is the next AGM?

Bringing about change doesn’t have to be a negative or argumentative process. Locating the directors and having a pleasant chat with them can often produce positive results – particularly if you are willing to help them make changes happen. All too often leaseholders do not voice their concerns to the directors, and consequently the directors don’t necessarily know there is discontent – particularly where leasehold investors (buy-to-let landlords) are not a resident at the block of flats. So be pro-active and positive – and ask those presently ‘in charge’ if change can happen by agreement.

 

But if the lease indicates that the Freeholder is responsible for management, your route to change will be different. Generally you will have a choice of three;

Change Your Freeholder or Property Management Company
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    Right to Enfranchise

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    Right to Manage

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    Tribunal Appointed Manager

Right to Enfranchise

The very best choice in 99.9% of cases is Right to Enfranchise [RTE] … buying the freehold. This brings you complete control over your destiny and the future of the whole block of flats. Using the provisions of The Leasehold Reform Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002) leaseholders can force the Freeholder to sell the freehold to them. RTE takes the troublesome or incompetent freeholder out of the situation, transferring complete responsibility for everything to the leaseholders (via their specially formed company).

 

To get started down the RTE route leaseholders must first ensure they qualify and the building qualifies. In short, leaseholders must have leases for a term greater than 21 years – and the building must be self-contained (as defined by the Act).

 

If the qualifying criteria are met, the next step is to ensure there’s enough support for the project. ‘50% plus one’ is the minimum number of qualifying leaseholders who must take part … so someone needs to take control and rally support from as many as possible.

 

If you have got enough people, with a good project manager, the process defined by law can be followed to a successful conclusion – usually within a year.

 

BUT ... and it is a big but ... whilst this route to change is the very best (in our opinion), in many cases it is simply not possible – because buying a freehold costs money ... and not all leaseholder groups have the financial means to achieve this goal. Whilst the rules say “yes” the bank balance may say “no”, in which case another route has to be chosen.

Right to Enfranchise

Right to Manage

The next best option is usually Right To Manage [RTM]. This is easier to achieve – and hence is far more popular – as it does not involve ‘buying’ anything. Ownership of the property stays where it is; with the Freeholder, but the management responsibilities defined by the lease are transferred to the leaseholders’ specially formed RTM company.

 

To get started down the RTM route leaseholders must first ensure they qualify and the building qualifies – in a similar way to RTE above. If they do, the next step is to ensure there is enough support for the project. ‘50%’ is the minimum number of qualifying leaseholders who must take part – slightly less than for RTE. If you’ve got enough people, the route defined by law is relatively easy (but very precise) and follows a predetermined timetable. Its simplicity, low costs and reasonable predictability, make RTM a very popular choice for many disgruntled leaseholders.

 

But RTM doesn’t necessarily solve all of the leaseholders’ concerns and troubles. The Freeholder remains in ownership of the property and continues to deal with the non-management duties written in the lease. So, a troublesome Freeholder can still be troublesome – particularly after you’ve got them really upset by taking management away from them. Consequently, think carefully before embarking on RTM. Ask what you want to achieve by bringing about change – and make sure RTM will solve your problem.

Tribunal Appointed Manager

The next route is the one generally chosen when RTE and RTM can’t be followed.

 

You can find out more at; http://www.justice.gov.uk/tribunals/property-chamber.

This route involves a Court process (which is daunting for many) and the need to ‘prove’ mis-management by the Freeholder and/or the Managing Agent. But if your discontent has genuine foundation and there is sufficient evidence to back up your case, ‘proving’ mis-management should not be a problem. All you have to do is convince the First-tier Tribunal (Property Chamber) if you’re in England, or the Leasehold Valuation Tribunal if you’re in Wales.

 

The Tribunal (FTT or LVT) is a property arm of the County Court system. It deals specifically with property disputes – and in particular with leasehold service charges and property management matters. It follows Court processes – but as 99% of its ‘customers’ are non-legal people – it makes a considerable effort to de-mystify those processes, so that the average Joe can get their point across. For the most part they achieve this well.

 

To go down the Tribunal route, you need to ensure you have evidence. You can do this as a single leaseholder, but it is much easier to get through the legal process if you have a group of like-minded leaseholders supporting you. Gathering evidence, collating it properly, serving the required Notices, and presenting your case ‘in Court’ is far easier and more likely to succeed if many are contributing. There is safety in numbers and many hands make light work.

 

As with RTM, you should think carefully about what you want to achieve. This is particularly important when using the Tribunal route – as the end of this route does not give YOU control of the management of the property. If you prove your case, the Tribunal will appoint a Manager to act for it, not for you. This Manager will act independently of the Freeholder and the leaseholders – being responsible to the Tribunal for the professional management of the property.

 

Another thing to consider is that the Tribunal appointed Manager will carry out his duties for a specific period of time; often three or five years. So, leaseholders need to consider what else they need to do during this period if the original situation is not to return at the end of the Manager’s appointment.

 

Perhaps the most important consideration though, is one of courage. Because the process involves a ‘warning notice’, a troublesome Freeholder will get advance warning of your intended course of action – which means they have time to react ahead of you really upsetting them, by taking management away from them. An unpleasant Freeholder can make a leaseholder’s life even more troublesome should they wish – so courage may be needed to stand up to bullying tactics. (But bullying tactics will probably mean more good evidence for your case.)

If you'd like to talk to someone to help you clarify your thinking or to answer any specific questions you may have as tohow this pertains to your particular situation (the nature of a leasemakes virtually every situation aunique one), you can get in touch here.

Best wishes,

Jamie

Jamie Fisk
BW Residential Ltd

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