Can the freeholder end our Right to Manage, and what could make it end by accident?
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Not by serving a notice. Once the company has the right to manage, the Act lets it end by agreement with every landlord, or automatically in a short list of situations. The one directors can cause themselves is the company being struck off the register for not filing. Before the right is acquired, the freeholder can challenge the claim with a counter-notice, and the tribunal then decides.
Before you have the right: the counter-notice
The claim notice must be given to the landlord, to anyone else who is party to the lease other than as landlord or tenant, and to any manager appointed by the tribunal (section 79(6)). It sets a date, at least a month later, by which they can respond with a counter-notice (section 80(6)).
A counter-notice either admits that the company was entitled to acquire the right on the day of the claim, or says it was not, naming the provision of the Act it relies on (section 84(2)). If a counter-notice says the company was not entitled, the company does not acquire the right unless the tribunal finally decides it was, or the people who gave the counter-notice agree in writing that it was (section 84(5)).
What the freeholder has to do, and what the company has to do
- The freeholder has to say, in the counter-notice, which provision of the Act means the company wasn’t entitled.
- The next move is the company’s. It may apply to the tribunal for a determination that it was entitled, and it has two months from the counter-notice to do so (section 84(3) and (4)).
- If the company doesn’t apply within that time, or applies and then withdraws, the claim notice is deemed to be withdrawn (section 87(1)). Missing the two months loses the claim.
- If the tribunal finally decides the company was not entitled, the claim notice ceases to have effect (section 84(6)).
Because the application is the company’s to make, in practice it is for the company to satisfy the tribunal that it met the conditions on the day it gave the notice. The points that decide it are the ones in the Act: the building has to qualify, everyone who had to be invited to take part has to have been given an invitation at least 14 days before the claim (section 79(2)), the company must be a proper RTM company, and its members on that day must include qualifying tenants of at least half the flats (section 79(4) and (5)). That last one is why the register of members matters.
After you have the right: what ends it
Section 105, headed “Cessation of management”, lists when the right stops being exercisable by the company:
- By agreement between the company and each person who is landlord under a lease of the whole or any part of the building (section 105(2)). A freeholder can’t do this alone, and neither can the company.
- If a winding-up order is made or a resolution for voluntary winding-up is passed, the company enters administration, a receiver or manager is appointed, a voluntary arrangement is approved, or the company’s name is struck off the register under section 1000, 1001 or 1003 of the Companies Act 2006 (section 105(3)).
- If a manager appointed by the tribunal under Part 2 of the Landlord and Tenant Act 1987 begins to act, or an order under that Part that the right is to cease takes effect (section 105(4)). A tenant of a flat applies for a manager, on grounds such as a breach of management obligations, unreasonable service charges, or other circumstances that make it just and convenient (sections 21 and 24 of that Act).
- If the company stops being an RTM company (section 105(5)). It must be a private company limited by guarantee whose articles state that its object, or one of them, is acquiring and exercising the right to manage the building (section 73), and it stops being one if the freehold is transferred to it.
Nothing in that list lets a freeholder end the right just by serving a notice. The routes that involve a freeholder are agreement, or a challenge before the right is acquired. The rest depend on what happens to the company, or on a leaseholder applying to the tribunal for a manager.
The one directors can cause: being struck off
The registrar may start steps to strike a company off if there is reasonable cause to believe it isn’t carrying on business or in operation (section 1000). GOV.UK says the registrar may form that view if the company hasn’t sent annual documents it should have, such as its confirmation statement or accounts, or if the company has no directors. The registrar writes to ask whether the company is still operating, then publishes a notice in the Gazette, and strikes the company off not less than two months after that notice if there is no reason to do otherwise. When the striking-off is notified in the Gazette, the company is dissolved.
For an RTM company, being struck off is listed in section 105(3), so the right to manage ceases. GOV.UK also says that from dissolution the company’s assets pass to the Crown and its bank account is frozen. The directors’ liability continues as if the company hadn’t been dissolved (section 1000(7)). Getting a company back on the register takes an application, and in some cases a court order. Section 105 doesn’t say the right returns if the company is restored, so don’t plan on it.
How to avoid giving anyone the opening
- File the accounts and the confirmation statement on time, every year, even when nothing has changed.
- Always have directors in office. A company with no directors is one of the signs the registrar looks for.
- Answer any letter from Companies House straight away. The notice period is short.
- Keep the register of members up to date, so you can show who your members were.
- Don’t change the articles in a way that removes the RTM object, and don’t put the company into liquidation.
- Run the building so there is nothing to complain about to a tribunal: consult on major works, keep proper accounts and keep the safety checks up to date. A leaseholder who wants a manager appointed needs grounds, and good records are the best answer to them.
This is general information, not legal advice. If a freeholder or leaseholder serves a counter-notice or a notice about appointing a manager, take advice quickly. The deadlines are short.
How Tiny Freeholder helps
Tiny Freeholder reminds you before the accounts and confirmation statement are due, using the dates held by Companies House, and prepares the company’s accounts from your records. It keeps the register of members, dated and printable, and runs Section 20 consultation and the fire safety checks with a record of each step. Those are the things that keep a company on the register and leave a tribunal nothing to find. It does not give advice on a counter-notice or a manager application.
Sources
- Commonhold and Leasehold Reform Act 2002, sections 79 to 81 (claim notice)
- Commonhold and Leasehold Reform Act 2002, section 84 (counter-notices)
- Commonhold and Leasehold Reform Act 2002, section 87 (deemed withdrawal)
- Commonhold and Leasehold Reform Act 2002, section 105 (cessation of management)
- Commonhold and Leasehold Reform Act 2002, section 73 (RTM companies)
- Landlord and Tenant Act 1987, sections 21 and 24 (appointment of a manager)
- Companies Act 2006, section 1000 (striking off a company not carrying on business)
- GOV.UK: Striking off or dissolving a limited company