We are seeing an increasing number of new instructions for RTM claims against RSLs.
A collective enfranchisement claim is one to compulsorily acquire at a price the freehold to a building and an RTM claim is one to allow the leaseholders within the building to take over the management functions from the landlord (or its managing agents), without having to pay for it (except costs).
The leaseholders’ rights arise under statute. With a collective enfranchisement claim, this arises under the Leasehold Reform, Housing and Urban Development Act 1993. An RTM claim arises under the Commonhold and Leasehold Reform Act 2002. In broad terms, both Acts contain identical qualifying criteria.
The building must consist of at a least two flats with each lease being granted for a term of more than 21 years. In a building which consists of just two flats, then both leaseholders must participate but, otherwise, a building must have at least two thirds of the total number of flats within the building with qualifying leases. Of this number, at least half of the leaseholders must participate to bring a claim.
For the purposes of either Act, it makes no difference if the lease is a shared ownership lease which has not been fully stair-cased or if the leaseholder has only just acquired their lease. Neither a minimum period of ownership is required nor is there any need for the leaseholder to actually reside in the flat.
Upon bringing a successful collective enfranchisement claim, the leaseholders will be entitled to acquire the freehold and any intermediate leasehold interest with the freeholder/landlord receiving compensation to be calculated in accordance with the 1993 Act.
In relation to a RTM claim, every management function will be transferred to the RTM Company, which is a specially created company limited by guarantee, if this is successful. The leaseholders do not have to prove that there has been poor management of the building or pay any form of compensation to the landlord.
The leaseholders will be obliged to reimburse the freeholder/landlord for their reasonable costs for both claims. For collective 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 and completion. But for RTM claims, the leaseholders will be obliged to reimburse the landlord for its reasonable costs incurred in dealing with the investigation of the claim and the preparation of any counter-notice.