Freehold purchase vs Right to Manage

If you are looking at this question it is likely that you are dissatisfied with the way in which your property is currently run and you are therefore looking for a solution. The first thing to say is that you do have options, and we hope that that gives you comfort. Before you read on, you may also be reassured to know that there is an affordable option available to you. 

In an ideal world most of us would want to own our home free from anyone else and in its entirety. However, with the best will in the world, a flat in a block with flats is always going to involve some form of relationship with others. The framework of that relationship, however, can be structured in different ways. 

The two main options available to a leaseholder who is trying to make a change are the purchase of the freehold, along with other leaseholders (this is known as collective enfranchisement) and the exercise of their Right to Manage.  The main legal distinction between the two is simple- when you buy the freehold you do just that, and your freeholder will drop out of the picture. With Right to Manage the freeholder remains as a party to your lease, but you and the leaseholders take over the control of the management of the building. The freeholder still has a role and a financial stake in the building, but it is diminished from a practical day-to-day perspective. Your lease term will continue to reduce. 

Right to Manage (RTM) is a legal right that allows flat leaseholders in England and Wales to take over the management of their building from the landlord. This means that they can choose who will manage the building, how it will be managed,and how service charges are spent. RTM gives leaseholders more control over their building and can help them to improve the quality of services provided, reduce costs, and ensure that their rights as leaseholders are respected. It also gives them a greater say in decisions about major works or changes to the building.

The differences and advantages of both routes are set out below. The first thing that is likely to strike you is that Right to Manage is by far the most affordable solution. Buying the freehold can cost thousands of pounds, and also tends to be a time-consuming process, involving price negotiations with the freeholder. By comparison, exercising the Right to Manage is a much more affordable option- as there is no premium payable to the freeholder, and as the process is non-adversarial, costs of the application are low. Please see our Fees & Charges section for more specific information. 

One thing that should not be overlooked is the personal emotional investment that leaseholders make in these decisions. A freehold purchase, whilst ultimately rewarding, can in some situations be emotionally draining and time-consuming. This is not necessarily the case, but should be borne in mind when deciding how to proceed. What your long-term priorities are will influence how much emotional energy, as well as money, you are prepared to invest. 

Whether you chose to buy your freehold or go down the RTM route is ultimately up to you and your fellow leaseholders. Whilst there are other factors that apply and everyone will have an individual preference, the relative cost of each process is likely to have a large bearing, particularly where you are trying to persuade your neighbours to part with their cash. Naturally, some people will be more bothered by the current management situation than others, and an expensive freehold purchase may not always be an easy sell, or indeed a possibility for many. 

Lastly, a quick comment on extending your lease, as this is something else that you are to likely come across in your research. For a premium, most leaseholders will have the right to extend the term of their lease, which can be important if the remaining term is under approximately 80 years. This will not, however, have any bearing on the management of the building and the freeholder will continue to manage it. Whilst it depends very much on the circumstances of each particular building, freehold purchase is these days often similar in cost to lease extension and the preferred route for many.