In this video, Wills and Tax Specialist Lee Young looks at the different types of LPAs, whether you need one and what to include.
Right to Manage and Enfranchisement are two commonly used tools by leaseholders to gain more control over their building. Niki Adkins, Leasehold Partner at Frettens, discusses both RTM and enfranchisement; comparing the two and weighing up their pros and cons.
What is RTM?
The Right to Manage allows leaseholders to take control of the management of their block under the Commonhold and Leasehold Reform Act 2002.
Niki has previously written about the Right to Manage, giving a more in-depth look into what it is and how it works. You can read the article here.
What is enfranchisement?
Enfranchisement allows leaseholders to purchase the freehold of their building under the Leasehold Reform Housing & Urban Development Act 1993.
Lease enfranchisement or Right to manage – Which is best?
The key difference between right to manage and enfranchisement is that under right to manage the leaseholders would have control of the management of their building without having to purchase the freehold.
Benefits of RTM over enfranchisement
As mentioned, if leaseholders only wish to take control of the management of their building, then acquiring the right to manage would be sufficient and means that the leaseholders do not have to pay a premium for the freehold. As a result, the right to manage procedure is often a more affordable option.
Benefits of Enfranchisement over RTM
Purchasing the freehold would give the leaseholders the ability to manage the block with the addition of some extra benefits.
As shareholders in the freehold company, the leaseholders would be able to grant lease extensions and vary the lease so the ground rent payable is reduced to a peppercorn (nothing at all).
It is important to note that if the existing leases at the building state that the management of the building is allocated to a certain company, then purchasing the freehold will not automatically give the leaseholders the right to manage the building.
A separate right to manage claim would be necessary to allow the leaseholders to manage the building.
Right to Manage or Enfranchisement: A Comparison
Right to Manage | |
Pros | Cons |
Gain control of management of the building | This is the only thing you gain with an RTM process |
Cheaper as no premium payable only legal fees |
|
Enfranchisement | |
Pros | Cons |
Gain control of management of the building | Unless the lease grants management to a third party – RTM claim would be needed after purchase |
Can grant lease extensions | More expensive due to premium |
Can reduce the ground rent to a peppercorn |
|
RTM and Enfranchisement cost comparison
The right to manage process is often the more affordable option as you will only be responsible for legal fees. With enfranchisement, it is likely that there would be a premium payable for the freehold.
In addition to the premium, leaseholders would be responsible for legal and valuation fees.
RTM and Enfranchisement Solicitors - how we can help
Our enthusiastic team of specialists are experienced in dealing with both the right to manage and enfranchisement procedures from start to finish.
We offer a free initial chat for all new clients, so whether you are considering your options regarding RTM and enfranchisement, or are looking for some more technical advice, please don't hesitate to call us on 01202 499 255 or contact us here..
