Things to know before buying leasehold - Part 3

We continue to receive a huge number of enquiries from buyers and new owners about leasehold properties. Sadly it seems few people are available to help with the purchase process, and fewer still are willing to have a conversation about potential concerns, pitfalls and problems associated with leasehold ownership. We have therefore prepared a 7-part series to give some more information and insight for those that own, or are considering acquiring, a leasehold property.

Decision making and responsibilities

Communal living comes with many tricky aspects, and one of the most challenging is trying to deal with each task and query in a manner that is fair and equitable for everyone involved. With such a potentially broad range of individuals, personalities and even cultures invested in the management of an estate, this can be more problematic than it might initially appear.

What is my role?

In most cases, individual owners will be members or shareholders of a Residents Management Company (RMC) or Right To Manage (RTM) company. This means that each owner has an equal vote in the running, decisions and actions of the company. This vote is usually exercised during Annual General Meetings (AGM) or Extraordinary General Meetings (EGM). These meetings are typically focused on larger or more contentious matters, whereas the day-to-day running of the building is dealt with by those in charge.

While it can be frustrating for some that are not involved, having a small group of people to run a large building and group of owners can be much more efficient than consulting with everyone for every decision. Such a setup would prohibitively delay many small solutions, such as approving a minor repair or agreeing a new electricity contract. Sadly it is often the case that it is difficult to achieve a clear majority on most issues and votes, even for apparently clear cut matters, which risk paralysing the company through indecision and stalling essential works. It also means that some owners can be less involved, for instance if they do not have time to commit or lack the knowledge or experience to assist with specific subjects.

For these reasons, a small group of people will be responsible for managing the building and ensuring ongoing maintenance is completed.

Who is in charge?

The Directors of the RMC or RTM are in charge of daily responsibilities. While they must act in accordance with any AGM vote by the members, they normally have a wide range of freedom to exercise the powers of the company on a daily basis. This covers anything from arranging contractors, instructing specific repair works, the approach to be taken in relation to a specific issue, or appointing legal experts to undertake litigation or recover debts from owners.

The Directors can be voted in, either by the existing board of Directors (often referred to as co-opted) or by the members during an AGM. Co-opted Directors will typically be confirmed by the members vote an the next formal meeting. Any member can apply to become a Director, and generally owners and Directors alike will welcome the additional support. There are some restrictions, for example a previously disqualified Director or one who has been bankrupt may be prohibited from standing as a Director.

How can we change it?

As above, most members can volunteer to become Directors for an RMC or RTM, and this can potentially improve or shift the general approach to management. In the case of a freeholder or developer owned building, this can be more complicated - it might be worth negotiating with the freeholder to see if the residents can take over management. Alternatively setting up an RTM company can give residents the opportunity to take on management, and provide more control for their homes.

If there is an issue with the management, raising this at an AGM can often be the simplest way to rectify the problem. You can also learn more about the views of other owners, and potentially vote on a specific direction which may be different to that of the current managers. In the case of a freeholder managed building, it may be more challenging and you might have to seek legal advice on how to take action, or potentially apply to the court to appoint a manager or other recourse.

It is important to remember before moving to a property that shares land and property with other owners, that communal living is often about compromise. There is no one size fits all approach, and it will require a tailored approach to consider the views, concerns and needs of everyone involved - and this may mean you don't always get what you request. If you need any help or guidance with such issues, you can contact our team of property managers to advise on specific concerns you may have.