What is a Leasehold Management Company?
(Last Updated: 29/05/2024)
28/06/2023
19
5 min read
Key Takeaways
- A leasehold management company takes on the roles and responsibilities of the landlord
- It is possible to get rid of a leasehold management company if you can prove poor management, or you qualify for the 'Right to Manage' or for Collective Enfranchisement.
- Members of a management company have relatively little power over day to day management of the building.
The Leasehold and Freehold Reform Act 2024 was passed on the 24th May 2024, but is not yet in effect and the date for this is not yet clear. We will update our content as and when the finalised legislation is published. Read more - Expected changes
If you own a leasehold you will be familiar with the basics: the freeholder owns the entire freehold and the leaseholders must pay a mandatory service charge to the freeholder, who must use the funds to carry out their obligations under the lease, including maintenance and upkeep of the building and common areas.
What are the responsibilities of the leasehold management company?
In many cases, the freeholder will appoint a leasehold management company to handle their responsibilities as landlord, which generally include:
- Maintaining the structure, walls and roof
- Maintaining communal hallways, pathways and car parks
- Cleaning, gardening and window cleaning
- Onsite facilities: gates, lifts, smoke/fire alarms
- Risk assessments: Fire and H&S
All property management companies are also responsible for:
- Preparing annual accounts
- Invoicing and collecting service charges
- Building and Public Liability Insurance
- Company secretarial responsibilities
- Dealing with sales of leaseholds and breaches of lease
- Chasing and collecting arrears
What is the difference between management company and freeholder?
The freeholder owns the building, and is responsible for its management, maintenance and repair. If they appoint a management company, they pass on those responsibilities to this separate legal entity who will become a third party in the lease.
What is the point of a leasehold management company?
It is simply an outsourcing of the management role. The leasehold management company are responsible for managing the service charge and delivering the services. The freeholder is relieved of the responsibility of managing the building and the leaseholders have a dedicated management company, who is ideally more responsive and available than they may find if dealing directly with the freeholder.
Can you get rid of a management company?
Unfortunately not all management companies are created equal. If you have a bad management company or simply want to take more ownership of the management of your building, you have three options as a leaseholder.
Apply to Tribunal to appoint a new manager
If you are able to prove poor management you can apply to tribunal to let you appoint a new leasehold manager; for example, the service charges are unreasonable, or there has been a breach of the approved code of management practice.
You must first serve a Section 22 Notice to the landlord, which gives them an opportunity to resolve the issue themselves. You will not be able to submit your dispute to Tribunal if you haven't completed this stage. Get in touch if you would like specialist legal support with your Section 22 Notice, or any part of the Tribunal process.
This option can replace a bad manager with a better one and does not require the leaseholders to take on any additional responsibility. Likewise, you will not gain any additional control.
Exercise your 'Right to Manage'
If you qualify for the Right to Manage (RTM) you can take over the management of certain responsibilities yourselves by forming an RTM Company, or by participating in a Resident's Management Company (RMC). As an RTM Company, you can appoint a leasehold management company of your own choosing. (We recommend you appoint a professional management company if there are more than 6 dwellings, as it can involve a lot of extra work). You may even choose to keep the existing management company, under your own direction.
At least two thirds of the flats must be let to 'qualifying tenants'. This means their lease must have been granted for an original terms of more than 21 years. They do not have to have ever lived in the flats and can own any number of properties. The total number of participating qualifying tenants must represent at least half the number of flats.
No more than 25% of the total floor area (excluding common parts) may be non-residential.
You cannot be eligible for the right to manage if:
- The immediate landlord of any qualifying tenant is a local housing authority.
- The Resident Landlord Exemption applies:
The premises are not a purpose built block; and there are no more than 4 separate flats; and one of the flats is occupied by the freeholder or an adult family member as their principal home for the past year.
In larger estates: each building or block must qualify separately and serve an individual notice for each qualifying building.
This option comes with responsibilities and a certain level of control over the management of the building. You will still have to answer to the landlord and your fellow leaseholders, as well as meet your statutory and contractual obligations.
Collective Enfranchisement
Collective enfranchisement is the purchase of the freehold by some or all of the leaseholders. Like the RTM, you must qualify for the right to buy the freehold. For multi-dwelling buildings, you and the other participating leaseholders purchase the freehold together and each own a share of the overall freehold.
Things work differently if you want to buy the freehold of a leasehold house. It is possible that you may own the freehold and still be subject to management under a freehold management company.
This option gives you collective ownership and control of the building and how you choose to manage it. It comes with the greatest power and responsibility. You will not have a landlord to answer to but you must cooperate with the other shareholders to meet your statutory and contractual obligations to your fellow leaseholders.
Free initial leasehold advice
Arrange a free consultation with one of our experienced conveyancing executives on:
- Lease extension.
- Purchasing the leasehold, freehold or share of freehold.
- Selling a leasehold property with a short lease.
- Extending the lease at the same time as you sell.
We specialise in lease extensions and have RICS valuers for the premium/negotiation and solicitors for the section 42 notice and formal or informal extension. Request a tailored quote for:
- RICS Lease Extension Valuation or L2 Homebuyers Survey.
- Serving of the section 42 notice or section 13 notice on the freeholder.
- Negotiation with the freeholder (with the support of your RICS valuer).
- Completion of the legal work, including deed of variation.
- Application to Tribunal to determine the premium.
- Vesting order for absent landlords.
Frequently Asked Questions: Leasehold Management Company
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Written by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
Reviewed by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
