Right to Manage: The Outcome (Part 5)

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Early last year we started the Right to Manage process for a scheme where Young London manage all the privately  rented units, with the remainder occupied by the owners.

The freehold is owned by The Consensus Group (part of the Vincent Tchenguiz empire).

On completion in summer 2008, County Estates (one of the Peverel/Consensus Group companies) was appointed to be the managing agents. As we had a good relationship with the developer we tended to deal with

the developer for a year of so post completion rather than County Estates when there were any issues to deal with.

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Roger Southam: Right to Manage Process

Roger Southam

Roger Southam

Roger Southam
Chairman and Chief Executive at Chainbow

Right to Manage (RTM) effectively strips away all the powers of the freeholder, excluding ground rent collection. It means the leaseholders are able to appoint the manager they want and have control of the running and services.

Requirements include: there has to be more than two flats, less than 25% commercial space, more than 75% of the flats let on leases over 21 years and you have to have at least 50% of leaseholders being members of the RTM company.

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Right to Manage: Block Management (Part 4)

Right to manage – block management – Part 1 – click here

Right to manage – block management – Part 2 – click here

Right to manage – block management – Part 3 – click here

So, here’s the latest installment regarding the Right to Manage (RTM) we are leading. Below is an update we are sending today to the participants in the RTM – representing over 75% of the leaseholders.

No names yet, will divulge all soon.

“Dear XXXX,

I am writing to keep you updated on the progress of the Right to Manage (RTM) initiative at XXXX.

Below are the updates to the steps as set out in my email of 4 June:

STEP 1: To set up the legal RTM Company.

COMPLETED

XXXX RTM Company Limited (company registration number XXXX) was incorporated on 14th June 2010.

STEP 2: XXXX RTM Company Limited served Notice on non-participating Leaseholders.

COMPLETED

Notice was served on 15th June 2010.

STEP 3: 1 month Claim Notice to be served on the freeholder. COMPLETED

Notice was served on 01st July 2010 giving them 1 month to object on specific grounds only. 

STEP 4: Following the expiry of the 1 month Claim Notice, there is a 3 month waiting period

to enable a smooth transition between the property management companies.

IN PROGRESS

We are currently in the 1 month Notice period.

Should the freeholder raise any objections, these will be dealt with by Chainbow/Young Group.

XXXX RTM Company Limited intends to acquire the right to manage the premises on 2 November

2010, with the management being transferred to Chainbow on the same date.

Should you have any questions, feel free to contact me at the Young London office on +44 (0)20 7593 3300.”

To be continued . . . part 5 coming soon . . .

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Right to Manage: Block Management (Part 2)

Well, last week (12th May 2010) I wrote a blog saying we had instigated a right to manage (RTM) process – click here to see it.

I am pleased to say the response has been phenomenal.

I am always a little apprehensive when starting a process like this, even though you strongly believe it is the correct thing to do, you worry whether others will reply and commit money. It’s a bit like having a party then thinking nobody will turn up!

To recap, we (Young Group) wrote to all the leaseholders in a block asking them to support a RTM process. This was due to our belief that a new managing agent would run the development more efficiently with a lower service charge over time.

The Housing Association who own a block on the site have already given their support.

Well so far, with have had a positive reply from over 60% of the private leaseholders – considering there are over 100 apartments this is fantastic. So we are significantly over the threshold.

What has been pleasing is not only the number of leaseholders that have supported our action but the appreciation that we have taken the lead. Some have given reasons for their support – see below – others have said that they trust Young Group’s judgement that this action is required.

Below are some quotes from the comments leaseholders have given (without our asking for views):

“XXXX [current managing agent] have been utterly useless in just about every respect and I’d be very happy to see them go.”

“They are a disgrace [the current managing agent]. They never responded to emails or voicemails. I actually got in contact with the Ops Director directly to get a response.

They also told my mortgage provider that I hadn’t paid them monies which my mortgage company then paid but also took money from me for the same payment.

This is taking hours and hours of my time to resolve, made worse by the fact that XXXX are denying they ever contacted my mortgage provider (my mortgage provider has sent me all the details). The sooner they are rid of the better.”

“I will go with whatever you recommend.”

“You only have to google the name [of the current managing agent] to read half a dozen horror stories of excessive charges and tardy or otherwise inadequate responses to customers’ communications.”

“As I have never been impressed with XXXX [current managing agent] I am very willing to support you on the RTM.”

“They have been given a chance and resoundingly failed. Thank you Young Group for taking the baton and dealing with it – you have my full support as always!”

Some strong feelings out there.

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Right to Manage: Block Management

Last friday we sent out a letter regarding ‘right to manage’  to leaseholders of a block Young Group co-invested in with our clients a number of years ago. Below is the main part of the letter – I have blanked out certain names for confidentiality reasons:

“Dear X,

I am writing in reference to your investment in XXXX that we manage.  As you will know, at Young Group we take this role very seriously and are always looking at how to enhance your asset’s value, be that through your rental income or capital value.

An area that many people do not monitor is the way the fabric of the building is maintained; are the communal areas looked after, is security good and how responsive are the block managers?

NB, Young London manage everything in your apartment inside the front door, the block/managing agent look after the communal areas of

the scheme.

This letter concerns the performance of the block managing agent.

Through the work of our estate agency, Young London, Young Group has been acutely aware of inefficiencies and shortfalls in the block management at XXXX.  Aside from concerns regarding the day-to-day management of the block, of particular concern is the managing agent’s slow speed of response to issues. We have also been advised that there are costs within the service charge that are high, especially regarding the insurance of the block.

With these concerns in mind, Young Group is recommending that leaseholders at XXXX carry out a Right to Manage (RTM).  It enables the leaseholders (you and me) to appoint a new block managing agent of their choice, rather than the choice of the freeholder (who in this instance own the current managing agent).

Right To Manage (RTM)

All leaseholders are entitled to join the RTM company. We require over 50% of leaseholders to support this action to change the block managing agent.

The private Residents’ Association (RA) and the Housing Association (HA) in XXXX have both already lent their support to the Right

to Manage and to appointing a new managing agent for the development.

It now requires the support of our investor leaseholders.

Initiated by Young Group, both the RA and the HA have held various meetings and have selected Chainbow as their preferred managing agent.

Chainbow is an experienced property management company that has a robust track record – we have worked with them for a number of years and they are managing agents of other schemes that we are involved in.  Chainbow has long campaigned for leaseholders’ rights and raising standards of transparency in service charges in the residential property sector.  More information regarding Chainbow can be found at www.chainbow.com.

The Cost

A contribution of £25 plus VAT (£29.38) per leaseholder is required to join the RTM company.

 This float will be placed into the RTM company accounts to cover expenses involved during the process of setting up the RTM company and the legal process of appointing a new Managing Agent.  Any surplus at the end of the process will be returned.

The Next Steps

In order to change the Managing Agent over 50% of the leaseholders in

the block must join the RTM company.

To reiterate, in our opinion the benefits will be both financial (both through lower service charge in time and enhancing overall value of your investment) and better service.

If you are in agreement, there are 2 steps that need to be taken:

1. Payment is required For ease of administration, £25 plus VAT can be collected from your tenant’s next rental payment

2.  Written Agreement that you are happy for the legal process to get underway. To formalise your response to this email, please email the following wording to XXXX:

“I agree to participate in the formation of a right to manage company for the running of XXXX and to become a member thereof.”

 NAME:

APT NUMBER:

There is a set legal framework to follow and we will of course keep you updated with progress of the RTM formation and changeover of managing agent.  In the meantime, should you have any questions, feel free to contact our Property Manager, Christo Du Plessis at the Young London office on +44 (0) 20 7593 3300 or your P

ortfolio Manager.

I very much look forward to a successful and smooth transition process that will result in XXXX being managed in a more cost efficient manner and to a higher standard for the benefit of all of us who have invested in property at the development.

  I look forward to your support.

Kind regards,

Neil Young

CEO, Young Group”

I will write another blog shortly regarding the support we have had and the comments that have been written.

Young Group takes it role of managing our clients assets very seriously, this is another example of that.

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