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Right to Manage insurance

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In an article posted at the beginning of the year, we forecast soaring property management costs as a third of firms in the business confirmed that they had already increased their fees. The escalation in prices appears to have continued unabated. 

The management of leasehold properties

Property management companies are typically responsible for looking after the communal management of an individual leasehold property or a group of properties, such as a block of flats.

The costs of the services provided by the management company are generally passed on by the landlord or freeholder in the form of a management charge to individual leaseholders and, as the Royal Institute of Chartered Surveyors (RICS) explains, these usually cover such services as:

  •  the general management of the property; 
  • the collection of ground rent and services charges from leaseholders; 
  • general maintenance of the building and compliance with health and safety requirements; and
  • arranging insurance of the building. 

Although these are all essential services, enjoyed by all the leaseholders, the latter have little or no say in the amount paid by the landlord or freeholder to the property management company or, through it, the premiums charged by the insurer for building insurance.

Right to Manage

The Commonhold and Leasehold Reform Act of 2002, therefore, granted an important Right to Manage (RTM) in an important move that grants certain leaseholders the right to assume responsibility for the management of the block of flats or apartments themselves – thus dispensing with the services of any property management company appointed by the landlord or freeholder.

As the Association of Residential Managing Agents (ARMA) points out, this is an important right and one that may be exercised without the landlord’s permission, without having to prove any mismanagement on the part of the landlord and without the need to secure any court order in order to do so.

The organisation Lease spells out the conditions which must be met for a group of leaseholders to claim and exercise their right to manage:

  • the building or block must form a self-contained unit and must include at least two separate dwelling units or flats;
  • at least two-thirds of the individual dwellings need to be let to tenants who qualify by virtue of their original leases having a term of at least 21 years to run); and
  • although the block may also be for commercial use, this use must not account for more than 25% of the block’s total floor area.

Right to Manage insurance 

One of the principal reasons for many groups of leaseholders seeking the Right to Manage is to ensure that the building insurance for the block in which they live is not only appropriate to their needs, but also competitively priced.

For this, there is a specialised form of insurance called Right to Manage insurance – a product in which we have a recognised expertise here at UKinsuranceNET.

Your choice of specialist Right to Manage insurance when you take over self-management of the building in which you are leaseholders underlines the fact that exercising that right is a serious business, one not to be taken lightly, but one that carries important responsibilities and obligations that affect everyone living in your block – including making sure that the appropriate form of Right to Manage insurance is in place at all times.

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