Residential flat schemes—developer disposes of the reversion and management responsibilities
Residential flat schemes—developer disposes of the reversion and management responsibilities

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Residential flat schemes—developer disposes of the reversion and management responsibilities
  • Transferring the reversion
  • Setting up the management company
  • Management company covenants
  • Other covenants
  • Developer’s release
  • Other considerations

Where a developer has reserved only a nominal ground rent under the flat leases and also has no wish to manage the development once all the flat leases have been granted, it can divest itself of future liability by:

  1. transferring the reversionary interest under the flat leases, together with the developer’s interest in the undemised common parts of the development, to a tenants’ management company of which all the flat tenants are members

  2. procuring that the management company takes on responsibility for repairing, insuring and managing the development

  3. securing a release from the landlord covenants under the flat leases

This arrangement is usually marketed as an opportunity for buyers to control their own destiny, so far as management of their block of flats is concerned, by becoming members of the management company. This can be an attractive selling point for buyers because it puts them in a position that is broadly equivalent to that of an owner-occupier.

Transferring the reversion

The transfer should not take place until after the last flat lease has been granted (so that the developer can control the marketing of the development, the conduct of the sales process and the destination of the proceeds of sale). The consideration for the transfer is usually nominal.

However, the contract which precedes that transfer s