Dalston Square Right to Manage

We as a group of leaseholders believe that we should obtain the right to manage (“RTM”) over Dalston Square because:

•     An RTM will enable the leaseholders to remove First Port, and to have in its place an honest, efficient and competent managing agent.
• An RTM means that the managing agent of Dalston Square will be appointed by and will be accountable to the Leaseholders, who live in and/or have substantial investment Dalston Square.  At the moment,  Barratts, who are the developers of Dalston Square, have the right to appoint and instruct our current managing agent, First Port.

As leaseholders, we pay “service charges” that go towards insuring, maintaining and repairing the buildings and the common parts in Dalston Square.  Over the last decade, the Service Charges have increased very substantially from year to year, while the services have deteriorated.

The reason for this is simple: Barratts has the right to appoint and instruct the managing agent, but they have do not have to pay for the cost of doing this.  The managing agent appointed by Barratts, First Port, is not accountable to the Leaseholders, even though all the costs that First Port incurred from managing the development is payable by the Leaseholders through Service Charges.  The Leaseholders have no say on how the service charges collected by First Port should be spent, and no say in how First Port should provide its services better and more efficiently.  There is also a lack of transparency and limited information about how First Port conduct its businesses and how service charges are incurred.  First Port have very little incentive to keep the service charges low, and it is mired with layers of bureaucracy and inefficiencies, whether deliberate or otherwise.  If the leaseholders think that the Service Charges are unfair or unreasonable, the only way to challenge this is to go to the First-Tier (property) Tribunal, which is a protracted and time-consuming process, and there is a risk that the Leaseholders will have to pay for First Port’s legal costs, and the leaseholders cannot get back their legal costs, even if they are successful.

There are many, many examples of how this misalignment of incentives lead to egregious over charging of service charges in [Dalston Square]* and [also in other developments managed by First Port].*link to a separate site about First Port.

We as a group of leaseholders believe that we as leaseholders can and should do something about this situation!  Currently, there is legislation that enable leaseholders to take more control of their development by setting up an “RTM Company”.  This RTM Company would have the right to manage, appoint and instruct their own managing agent to manage Dalston Square for the benefit of leaseholders.

Benefits of the Right to Manage

Our aim is to set up an RTM company and appoint a new managing agent to manage Dalston Square.  Our objectives are to provide a managing agent who would:

           1) Lower Service Charges;

           2) Better manage Dalston Square;

           3) provide better information and be transparent over service charges incurred; and

           4) be more responsive to the questions raised and the views of leaseholders.

Will a reduction in Service Charges mean a reduction in in services?

No.  Our expectation is that the current services will stay the same or will be improved.  We believe that there is a lot of opportunities to save on service charges without reducing the level of services we are currently receiving from First Port.  [For example, [insert concierge costs].  If the RTM company employ employees directly (with the managing agent responsible for the supervision and training), then there would be a 20% savings on VAT.  Currently, the service charges include two lots of VAT, one charged by [] and another charged by []. 

First Port

Dalston Square has been managed by FirstPort since the completion of the development in 2010 (under a previous name Peverel).  To describe our experience with FirstPort, we quote the following:

• “their service charges have risen very significantly with little or no explanation and that FirstPort has repeatedly failed to respond adequately to requests for summaries and evidence.  There have been particular concerns raised about the charges your company is levying for insurance and the lack of transparency around the role [FirstPort] internal insurance brokerage, Knight Square, plays;
• The standards of service they receive from FirstPort have consistently been poor and does not justify the aggressive increases in service charges.  We have heard repeated stories of repairs not being adequately carried out, monitoring of repair quality and/or FirstPort being slow to act when repairs are required;
• Communications have been poor and there is a little consultation before major works (Section 20) are carried out and with residents’ wishes are often ignored;
• Instances of major works being carried out that in the opinion of leaseholders require a Section 20 where no notice has been served by Firstport;
• FirstPort has often been unresponsive to resident’s concerns and complaints and escalation to the head office has proven ineffective.”

This is taken from a letter to Martin King, First Port’s Managing Director, written by a number of members of Parliament who have received complaints about First Port from their constituents.

[Link to the letter or insert a photo of the letter here.]

We can only say that their experience with First Port perfectly describe our experience with First Port as leaseholders of Dalston Square.

Section 3 

How does the Right to Manage Work?

RTM is a right for leaseholders of a building containing flats to take over the management of the building from the freeholder, via an RTM company.  This right is set out in Chapter 15 of the Commonhold and Leasehold Reform Act 2002. 

In order for leaseholders to exercise the right to RTM, they need to follow very prescribed steps set out in the legislation.  The steps prescribe how many RTM will be needed (only buildings that are “structurally detached” can be subject to RTM, and all buildings that are not structurally detached need to apply for RTM together under one RTM company).  The name of the RTM company needs to clearly describe the properties they manage.  The RTM company needs to be a company limited by guarantee and the articles (ie the rules of the RTM company) are prescribed by legislation.  For more detailed information about the RTM legislation, please see [Link to https://www.leaseholdknowledge.com/] for more detailed information on the Right to Manage.

We set out the RTM structure and the RTM process for Dalston Square below.

RTM structure

This is the structure of the RTM:

[Insert diagram of RTM structure, LL will provide.]

RTM Process

1.  Planning stage.  We are reviewing the published accounts of Dalston Square and the budgets for 2024 to 2025 and the information we have been provided by First Port.  We are speaking to experienced, reputable management companies to get quotes from them.  Typically, management companies will agree to assist us with the RTM process in return for our commitment to use them for the first year after the successful RTM.  However, we as leaseholders would need to pay for disbursements or out of pocket costs incurred by the RTM process, these are anticipated to be the cost of a surveyor, the costs of setting up new companies, the costs of land registry searches, the costs of posting invitations to become a member to leaseholders and Barratt’s legal costs (which need to be reasonable).

1. Set up RTM Companies.  The RTM Company is a company limited by guarantee, and the RTM legislation specifies the articles of association the RTM Company needs to have, and the RTM Company’s name needs to clearly describe the buildings that they will be managing.  There will be at least one director, initially, it will be one of us leaseholders who have been involved in setting up the RTM process.

As described in the structure above, there will be three RTM companies as follows:

• Collins Tower, Gaumont Tower, Dunbar Tower, Raddon Tower and Labyrinth Tower RTM Company (“Phase 1 RTM Company”)

• Ocean House, Dekker House, Burke House and Thomas Tower RTM Company (“Phase 2 RTM Company”)

• Sledge Tower, Abraham House, Marley House, Joplin House, Ruffin House and Wonder House RTM Company (“Phase 3 RTM Company”)

1. Invite leaseholders to become members of the RTM Companies.  All “qualifying leaseholders” who are leaseholders in the buildings described by one of the three RTM companies will be invited to become a member of the RTM Company.

Once 50% plus 1 qualifying leaseholders have agreed to become a member of the RTM Company, then that RTM company will be able to exercise the right to RTM by serving notices in steps 4 and 5 below.

1. Invite non-participating leaseholders to become members of the RTM Companies.  A notice inviting participation to be served on all qualifying leaseholders who are not members who have not agreed to become members. 

1. Serve a notice of claim to the Freeholder.   Within 2 weeks of the notices inviting non-participating leaseholders in step 4 above, the RTM Company needs to serve a notice in the prescribed form to the Freeholder.

1. Response from the Freeholder.   The Freeholder can challenge the RTM by counter-notice within one month.

If there is an objection, then the RTM Company can either revise the notice of claim to take into account the objection from the Freeholder (in that case they need to go back to steps 4 and 5 again), or the RTM Company can take the case to the First-tier Tribunal (Property Chamber) who will rule whether they have the right to manage.

If there is an no objection, then the RTM Company will acquire the right to manage within four months of the date of notice of claim (“the acquisition date”).

1. Transition Period.  During the period between the notice of claim and the acquisition date, Barratts, need to notify existing contractors and inform existing contractors of the takeover by the RTM company.

After the RTM

The RTM Company is able to appoint and instruct its own managing agents to manage Dalston Square after the acquisition.

The RTM Company will take over all management functions of the lease, but it needs to keep the freeholders informed on such matters as consents, eg to alterations.  It will have powers to enforce obligations under the lease but not forfeiture powers.

Leaseholders who acquire their flats in Dalston Square after the acquisition of the RTM will be entitled to become a member of the RTM Company.  The freeholder is also entitled to become a member of the RTM Company.

The RTM Company will be a company limited by guarantees.  The directors of the RTM Company need to comply with the Articles of Association and Companies law.  A majority of the members of the RTM may appoint and remove the directors in accordance with the Articles of Association of the Company. 

Who are “we”?

We are a group of leaseholders in Dalston Square.  We have been quite frustrated by the level of service charges and the lack of information from First Port over many years, and we have decided to work together to do something about this.  We are all volunteers, and we do not receive any payment for our time.

Pre-registration

If you are interested in an RTM, and you would like to become a member of the RTM company, please write to us at [email].  Please provide your name, Apartment Number and Building.  We will then send you a form to complete.

Cost of the RTM

As mentioned, we are currently speaking with a number of managing agents.  They have experience in helping developments through the RTM process, and all managing agents we have spoken to so far have agreed to assist us with the RTM process provided that we commit to appointing them as managing agents for the next year.  

[However, we have disbursement costs that would be payable by the leaseholders.  We believe that all leaseholders will benefit from the substantial decrease in service charge following the RTM.  We are looking for a fair way of funding these costs.]

How much will I save?

[I will build a database with each flat, the current service charge allocation (I think I have this/can work this out), and how much the current service charges are given the budget we have.  I will then add a column with the amount other management companies will quote for the same service.  Then another column with the amount saved for the first year.  This is a lot of work but I think it’s the most compelling case for many people for the RTM.] 

Further questions

If you have further questions relating to the RTM, please email us at [].  If we have a lot of the same questions, we would post it as a “FAQ” section on this website.

Next steps:

Once we set up an RTM Company, we will be inviting all the leaseholders to become a member of the RTM Company.  There will be three RTM Companies, and you will need to choose the RTM Company that describes the building that you are the leaseholder of.

Only the person who is the registered leaseholder under the Land Registry can apply to be a member of the RTM Company.

If there is more than one registered leaseholder under the Land Registry, please use one entry for all the registered leaseholders.

If you are a shared ownership leaseholder, you are invited to become a member of RTM Company in the same way as other qualified leaseholders.

If you are a council tenant, unfortunately you are not eligible to become a member of the RTM Company under the current legislation.  However if you would like to become involved in the management of the services, please contact us at :[]

Q.  The right to manage has the option to either appoint a managing agent or for the board of directors to run the management of the block/estate themselves? Which option will be chosen?

1. The management of the block is too complex for it to be run by the RTM Company itself and a managing agent will always be required. RTM will offer the accountability of the managing agent to the leaseholders ( via the RTM board of directors). Currently there is no accountability from Firstport to the leaseholders. Requests for information are either being ignored or inadequate information provided.

Q. Will the directors of the RTM companies be paid any salaries?

A. No - They are restricted by the Companies Articles and Association of being paid salaries.

Q. How will the RTM Company be accountable to leaseholders?

A. We can talk about a general annual meeting

Q. Does the RTM Company have to continue existing contracts created by the landlord/managing agent?

1. Typically, when an RTM company acquires the management responsibilities of a block of flats, this will end any existing contracts arranged by the landlord. It is the decision of the right to manage company if they want to continue the prior contracts.

Q. Can any leaseholder be a director of an RTM Company?

A. Yes - Any leaseholder can be a director of an RTM company ( subject to the Companies house rules about Directors qualification). We would ask that those who wish to become Directors have experience in the Financial, general business, legal or property domain experience.

Q. What happens if as leaseholders we are not happy with the way the RTM Company is run?

A. The RTM company is made up of members who are the leaseholders. A general meeting can be called with 10% of members serving a General meeting requisition notice with resolutions. The resolutions can propose legal binding actions on Directors ( such as refraining from or directing them to perform certain activities relating to the properties) or to remove or add directors.

KD Addition Q and A…

Q. I am a shared ownership leaseholder. Can I participate in the Right to Manage?

1. Previously shared ownership leaseholders could not participate but due to court of Appeal ruling. The Court of Appeal has decided in Avon v Canary Gateway (Block A) RTM [2023] EWCA Civ 616 that leaseholders with shared ownership leases are entitled to participate in the right to manage their buildings, even if they own less that 100% of their property. Unfortunately shared ownership leaseholders cannot join the Residents Association as no court case has been brought to test this opinion.

Q. What historic rights of information pertaining to service charges will the RTM Company?

1. The RTM Company would have the right to request historic records going back 6 years. Recent requests (section 22) for information of the  2023 accounts by individual leaseholders have been refused by Firstport on the grounds that these requests are out of time. Once historic information has been received by the RTM Company this can be shared with leaseholders. If there is a basis for a legal claim then it is our understanding that this claim must be initiated by a leaseholder or a group of leaseholders. 

Q.  Would it not be better to request to BDW Trading ( Freeholder) to change the managing agent?

1. 1) Mention still no accountability

2) The only mechanism to save on VAT (that is passed on currently by Firstport or another managing agent) would be to employ staff directly through the RTM Company. As per 2024 accounts this would save approx 91,000 pounds for Concierge and 26,000 for Communal Cleaning. This equates to 5.15% of the entire budget for Dalston Square