At the beginning of this year, the Law Commission announced a consultation exercise amidst concerns that legislation relating to leaseholders’ Right to Manage is not operating as smoothly as intended.
What is the Right to Manage?
The Association of Residential Managing Agents (ARMA) explains that the Right to Manage is enshrined in the Commonhold and Leasehold Reform Act of 2002.
It gives leaseholders of property the right to take over the management functions of the freeholding landlord – whether or not the latter concurs with that decision or not.
By transferring the functions to a Right to Manage company, leaseholders gain the advantage of direct responsibility for managing and maintaining common areas, ensuring the provision of services and, crucially, arranging the building insurance of their choice. On the strength of that independence, leaseholders – through their Right to Manage company – may be able to negotiate more favourable terms than those they are currently paying in the form of management charges to the landlord.
Some of the biggest savings might be made by the Right to Manage company arranging its own specialist Right to Manage insurance – in place of any building insurance previously arranged without any consultation by the landlord.
Our product page explains how Right to Manage insurance works and the benefits you may achieve by arranging it with us here at UKinsuranceNET.
The Law Commission’s current concerns about the Right to Manage
The government is concerned that although there are an estimated 4 million leasehold properties in the UK, so far only around 6,000 Right to Manage companies have been set up. It instructed the Law Commission to find out why that might be.
The consultation exercise being conducted by the Law Commission intends to run until the 30th of April 2019 and addresses concerns that the current legislation is:
- unnecessarily complicated – with procedural details that delay transfer to a Right to Manage company or prevent it happening altogether;
- too slow – with the insurance history that is essential to arrange alternative Right to Manage insurance not forthcoming;
- lacking in the information needed by leaseholders in determining the future role and responsibilities of a Right to Manage company; and
- too expensive, because leaseholders also have to bear the landlord’s costs when switching to their own Right to Manage company.
The Law Commission’s objective, therefore, is to make the Right to Manage legislation simply, easier to apply and more readily understandable to leaseholders who may be interested in exercising their right to manage the property which they own.
Why you need specialist Right to Manage insurance
It is important that any Right to Manage company with which you may be involved arranges specialist Right to Manage insurance – standard forms of property insurance are unlikely to suffice.
That is because a building occupied by more than one household – in a block of leaseholder flats, for instance – is vulnerable to particular risks unlikely to be encountered by a standard residential home or let property:
- more people live in the building, so, statistically speaking there is greater risk of a claim being made;
- depending on the nature of the damage to the exterior of the building or its common areas, the costs of repair are likely to be more extensive than those for a conventional residence;
- communal areas – such as lobbies, hallways and staircases – pose special risks of damage.
For all of these reasons, specialist Right to Manage insurance is the order of the day.