Just as every block and estate is different, there are many different property management arrangements. Here are four of the most common block and estate management arrangements:
For simplicity’s sake, the term ‘leaseholder’ in this blog refers to a long leaseholder who was granted an original lease of over 20 years.
Leaseholders are not necessarily residents of the building; it could be the case that they let out their individual property to a tenant – who is not considered leaseholders, but occupants.
Example 1: Two Party Lease 
The most common and seamless arrangement is the simplest one; Freeholder and Leaseholder, this is referred to as a ‘Two Party Lease’.
In such a Two-Party Lease, the Freeholder is responsible for the building itself, the grounds i.e. area surrounding the building, and charging the service charge and ground rent (if applicable) to the leaseholders.
The leaseholder(s) are responsible for their own individual property (or ‘unit’) within the freeholder’s building or land, usually a single apartment or house. The two main responsibilities of a leaseholder are:
- Paying any due ground rent or service charges.
- Maintaining their own ‘unit’ in the property.
While this system of management is known as a two-party lease, it could be the case that the freeholder employs a managing agent to deal with the day-to-day management of the building, as well as the charging and chasing of any due payments from leaseholders.
Example 2: Tripartite Lease
Similarly to two-party leases, tripartite leases work by the function of freeholder and leaseholder, with an added third party for the facility of management, typically, this third party is a Residents’ Management Company (‘RMC’), or a managing agent.
Tripartite leases are often formed when the leaseholders choose to have a direct say in the management of the property, and so choose to entrust the property management in the form of an RMC.
When used correctly, with willing and responsible directors of the RMC, this type of arrangement works well for both the leaseholder(s) and the freeholder, as the leaseholders have more of a say on how the service charge is spent.
As alluded to, the RMC may choose to instruct a managing agent to take responsibility for the day-to-day management, administrative tasks, and legal obligations.
Example 3: Right to Manage (RTM) Company
The Right to Manage is a process whereby the responsibility of block management is relinquished of the freeholder, and entrusted to a Right to Manage company, which is directed by the leaseholders of the property.
The Right to Manage is enshrined in the Leasehold and Commonhold Reform Act 2002, and was introduced in order to empower leaseholders with the ability to challenge poor management practices.
When the Right to Manage is exercised after a majority and concurrent vote, qualifying long leaseholders are offered the decision to join the RTM company as a director, which entitles them to have a direct say in the management of the property.
It is worth noting that a Right to Manage company can choose to appoint management responsibilities to a managing agent, in the same way that an RMC would.
Example 4 – Right to Enfranchise (RTE)
The Right to Enfranchise was introduced in the Leasehold Reform, Housing and Urban Development Act 1993 and refers to when the freehold is taken over, by the leaseholders in an act of ‘Collective Enfranchisement.
Leaseholders have the ability to use the Right to Enfranchise in order to force the sale of the freehold to them before any other parties. The freehold interest is typically held by a Residents’ Management Company.
Once successful, the RMC functions as the freeholder, being able to grant themselves longer leases, establishing greater control, ownership, and autonomy, as well as having full say in its management.
Upon establishing control, the RMC can also choose to entrust the management of the property to a managing agent if it so chooses.
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