As a frequent advisor to News On The Block, Yashmin Mistry is often presented with questions from their readers. One such question on the subject of enforcement rights for RMC’s is detailed below, together with Yashmin’s answer.
Historically, an RMC is a private company limited by shares, and its main objective is to manage and maintain the common parts (entrances, lifts, carparks, gardens as well as the main structure of the block itself) for the general benefit of the lessees. Running an RMC generally can be a minefield. Andrew Morgan and Yashmin Mistry share some thoughts on how to avoid the legal headaches of running an RMC: https://www.jpclaw.co.uk/latest/how-to-avoid-the-legal-headaches-of-running-a-rmc
“We as an RMC have a freeholder who shows no interest in this 27 apartment block except to collect ground rent and lease extension fees. Our individual leases refer to ‘regulations’ set by the RMC. What status have these regulations if disregarded by leaseholders? It seems the only formal link between the RMC and individual leaseholders is by way of a separately signed Deed of Covenant as a schedule of the lease. Finally, have we any liability when informally aware of breaches of the lease between freeholder and individual leaseholder?”
“Many thanks for your email.
Prior to the mid-1980s it was standard practice for there to be only two parties to the lease: the leaseholder and the landlord. And the relationship tended to be skewed in favour of the landlord, giving them carte blanche to deal with property as they wished. Common complaints from leaseholders prior to the mid-1980s concerned the mismanagement of buildings by landlords and the imposition of unreasonably high service charges.
Developers could see that the balance of power was beginning to shift. Now that leaseholders were gaining more rights in terms of consultation requirements, management audits and flat management generally, being a freeholder was no longer such an attractive prospect. In response, developers started to change the way in which their leases were drafted. The concept of the tripartite lease was born.
What is a ‘tripartite lease’?
A tripartite or tri-party lease is, quite simply, a lease made between three parties: (i) the landlord (ii) the management company and (iii) the leaseholder. Management companies are companies limited by shares (or by guarantee) with its main objective being to manage and maintain the common parts (entrances, lifts, car parks, gardens as well as the main structure of the building itself) for the general benefit of the leaseholders. The full responsibilities of any management company will be set out in its Memorandum and Articles of Association, as well as being contained within the tripartite leases themselves. The advantage from the developers’ perspective is that they are no longer responsible for maintaining the property. They still get the premium and the ground rent, but now it is up to the management company to look after the building and its leaseholders.
Under a tripartite lease situation, the right to forfeit the lease in the event of breach by a leaseholder remain with the landlord party; management company are not entitled to forfeit leases. That is not too say however, the management company cannot be asked to take enforcement action based on the management company’s request / evidence that is presented to it in respect of any alleged breach. A landlord in that situation is likely to be co-operative on the basis that their costs are covered.
Aside from that, other actions for non-payment of service charges etc can be enforced by the management company as a usual money claim.
A lot therefore depends on what the nature of the complaint actually is and from there, what options are available to the management company to take action – either, on its own back, or alternatively, with the assistance and co-operation of the landlord
Hope that helps.”