Removing another restriction on Right To Manage
In England there is a no-fault collective right for the owners of flats in a block to have the management of the block transferred to a company they control, called a Right To Manage company or RTMco. It is one of the more effective remedies to the problems of long leases on flats.
To claim the right, an RTMco must comprise at least half of the qualifying flat owners. They must be the company's members. Company membership is defined by the Companies Act, and requires two things:
- consent to become a member of the company
- the recording of the member's name in the company's statutory membership register
These are both provisions of section 112 of the Companies Act 2006. But in practice, it has to be this way: the whole system would be impractical and unjust without consent, as it relies on having the member's address and potentially imposing burdens on those company members, particularly to pay up their shares. It would also likely contravene the ECHR Article 11 guarantee of freedom of association.
But flat owners' membership of Residents Management Companies is generally compulsory. The consent is obtained as a condition for owning the flat. Similarly, commonhold associations are companies with a requirement that flat owners join, but in this case, the requirement is statutory.
So why not make a statutory rule that qualifying leaseholders of flats have consented to join the block's RTM company, if any? This does not stop them resigning, nor does it dispense with the requirement that the RTM company's directors obtain the flat owners' service addresses. But the address registered at the Land Registry could be deemed always to be a valid service address. This would reduce the cost of signing up the requisite majority of RTM company members to the price of looking them up on the Land Registry, an absolute game changer.
This could be achieved by adding a section to Part 2 of the Commonhold and Leasehold Reform Act 2022:
"It is an implied term of any lease by virtue of which a tenant is a qualifying tenant for the purposes of section 75 of this Act, that the tenant under that lease consents to join any Right To Manage company established or to be established in respect of the premises and agrees to provide the directors of that company such details as must be registered in the company's register of member."
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