An increase in collective enfranchisement & right to manage actions (‘RTM’)

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An increase in collective enfranchisement & right to manage actions (‘RTM’)

21 Aug 2015

Following an increase in the number of claims being made for collective enfranchisement and RTM claims, here, Kuits’ Litigation Team explains what they are and the criteria involved to help those making or defending a claim.

A collective enfranchisement claim means an attempt to compulsorily acquire, at a price, the freehold to a building. An RTM claim allows leaseholders within a building to take over the management functions from the landlord (or its managing agent) without having to pay for it (except costs).

There are qualifying criteria for both.  These are that the building must contain at least two flats, with each lease being granted for a term of more than 21 years.  In a building consisting of just two flats, both leaseholders must participate; otherwise, at least two-thirds of the total number of flats within the building must have qualifying leases, with at least half of the leaseholders participating to bring a claim.

There is no minimum period of ownership, the building must be made up of flats only (houses do not qualify) and there is no need for the leaseholder to actually live in the flat.

Upon bringing a successful collective enfranchisement claim, the leaseholders will be entitled to acquire the freehold and any intermediate leasehold interest. Any freeholder/landlord will receive compensation to be calculated in accordance with statute.

If an RTM claim is successful, then the management functions will be transferred to the RTM company, which is a specially created company limited by guarantee.  Leaseholders do not need to prove that there has been poor management of the building or pay any form of compensation to the landlord.

The reasonable costs of the landlord/freeholder will be paid by the leaseholders.  In collective enfranchisement claims, these costs are limited to the investigation of the claim, the cost of obtaining a valuation report and the cost of preparing the Deed of Transfer on completion.  In RTM claims, leaseholders must pay the landlords reasonable costs in dealing with the investigation of the claim and the preparation of any counter notice.

For advice on making collective enfranchisement and RTM claims or defending them, please contact us on 0161 832 3434.

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