Isle of Man Leasehold Reform Consultation

An Overview

Earlier this year, I was granted permission by the House of Keys to introduce a Private Members’ Bill with two distinct aims:

1. First, to reform the law around how long leaseholders of flats are able to acquire a ‘Management Order’ which would allow them to collectively take over management of their block of flats; and,
2. Second, to reform the law around how long leaseholders of flats are able to cooperatively acquire freehold ownership of a block of flats.

In the UK, these rights are known as ‘Right To Manage (RTM)’ and ‘Right To Enfranchisement (RTE)’, they are set out in Part 2 of the Commonhold and Leasehold Reform Act 2002 and Chapter 1 of the Leasehold Reform, Housing and Urban Development Act 1993.

Unfortunately, largely due to the COVID-19 pandemic, the time available to work on this Bill has been significantly impacted, which has resulted in focussing the draft Bill on the first of these two important reforms.

The second element is included in the consultation, and should the feedback warrant it, could either be included in the Bill before it is presented to the House of Keys, or be presented via a separate Private Members’ Bill. 

Where did this all start?

Most modern developments consisting of flats are set up in such a way that the leaseholders of those flats already each have a share in the management company, and are able to have a role in managing their block of flats. Unfortunately, this is not always the case, and there are a number of places in the Island where leaseholders don’t have any formal say in how their block of flats is managed & instead the management is undertaken by or on behalf of the freeholder of the development.

Often, this doesn’t cause problems: people can be generally content with arrangements, but sometimes issues may arise, and the current law doesn’t make it easy for leaseholders to assume management rights over a building their leasehold property forms a part of.

I was approached by a number of people from various parts of the Island who owned and lived in leasehold flats and were having difficulties with their management companies and who had no recourse available to them – or where they had tried to resolve issues using the existing processes hadn’t had any success.

This made it clear to me that this wasn’t just an isolated incident and there were gaps in our law when compared to the UK

I am of the belief that where an MHK can act to try and resolve a problem with the law then it’s our job to do that – at the end of the day, our primary role is as legislators and no one else has this opportunity!

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So what’s the plan?

The consultation sets out the proposals in detail but in short Isle of Man law already has a process for leaseholders to acquire the right to manage the block of flats their property forms a part of – by way of an application to the Rent & Rates Appeal Commissioners

Unlike the UK however the Isle of Man process requires that the leaseholders prove a “breach” of a responsibility – the bill essentially aims to remove this requirement where certain qualifying criteria are met. The proposed criteria are the same as those in the UK & the Bill also contains some protections for the freeholder to ensure that to whoever manages the property has to do it properly.

It sounds like a simple change, and it is – unfortunately because the way the law works it’s proved tricky to get this set out in the right way!

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Weren’t you also looking at reforming the Right to Collective Enfranchisement?

Yes! This is still on the cards – unfortunately the impact of Covid-19 on government and parliamentary resources has been significant and so some things have had to give – in my case it was this proposed part of the Bill

That doesn’t mean it isn’t going to happen!

The consultation includes a section on this and the principle is exactly the same – we already have a process on Island that can be used, all that needs to be done is to set up a mirror procedure in exactly the same way as the Bill does for the RTM provisions

If the consultation comes back and there is support for this proposal I will try and fit it into this Bill – if not, then I will look to bring a separate Bill to do this but it might only come after the general election in September 2021.

So get your response in!