Right to Manage Company

What is the Right to Manage?

If you own a flat, the Commonhold and Leasehold Reform Act 2002 gives you the right to force your freeholder to hand over to you the right to manage your block of flats, subject to certain criteria being met. You do not have to prove that your freeholder manages your block badly or prove a breach of their obligations and do not have to pay your freeholder compensation. You do however have to set up a Right to Manage Company [also known as an RTM Company or Residents Management Company] to manage your flats.

Got a burning question about your Right To Manage? Call our experts on FREEPHONE 0800 1404544 for no strings attached FREE initial phone advice.

Why would I want the Right to Manage?

If you believe that either your freeholder or the management company is simply too expensive, that they are doing a poor job, and that you and the other tenants can manage the block cheaper, better, or both, then you might want to acquire the right to manage your own block and set up your own Right to Manage Company.

We have helped many tenants successfully exercise the right to manage their block of flats themselves.

Click here to read more about why you might want to exercise your right to manage

Who can apply for the Right to Manage?

You don’t have to prove that the managing agent or freeholder  is doing something wrong to make an application for Right to Manage.

However to qualify for UK RTM there are a few basic requirements:

  • You must own a long lease with an unexpired term of at least 21 years or your lease must be terminable on death or marriage
  • The landlord cannot be a charitable housing trust and the lease must not be a business lease
  • The building must contain at least two flats held by qualifying tenants and at least half of the tenants must want to take part in acquiring the right to manage
  • Two-thirds of the total number of flats in the building must be owned by qualifying tenants
  • Not more than one quarter of the floor space must be in non-residential use

In general terms. leaseholders who meet the criteria for freehold purchase are, in most circumstances, also liable for Right to Manage. it’s also worth noting that the owner of every flat in the block has to be formally offered the opportunity to get involved with the Right to Manage application process and become members of the RTM (Right to Manage) company.#

What is the cost of exercising our right?

Just your legal costs and the reasonable legal costs of the freeholder. With RTM there is no premium payable by the participants. Unlike a lease extension or collective enfranchisement application, you do not have to pay any costs incurred by the landlord in loss of interest, or cost of having a valuation done on the property.

Can the freeholder object to the RTM application?

Yes, but freeholders have very few legal grounds on which they can challenge a Right to Manage application.

What powers are not transferred by the right to manage?

Whilst the freeholder will still be responsible for flats and retains the right of forfeiture, it is the responsibility for maintenance and other services that is handed over to the new block management company.

The freeholders permission will also be required in order to assign a lease or sub-let a property. If this permission is denied it may require an application to the First Tier Property Tribunal.

How much does it cost to obtain the Right to Manage?

No premium is payable to take over the rights to manage your block. And unlike both lease extension and enfranchisement, you will not need to pay a specialist surveyor to provide any form of valuation.
However you will have to pay:

  • Your freeholder’s reasonable legal costs
  • Your solicitor’s costs including the cost of transferring ownership of the freehold
  • The cost of the Right to Manage Company Formation

The Right to Manage – the expense of changing your mind

If you are a leaseholder thinking about exercising your Right to Manage with fellow leaseholders, you must be sure that you are all committed to the process.

The starting position is that you will be responsible for the costs that the freeholder incurs during the RTM process.

And if problems emerge, that can become expensive. If the freeholder serves a Counter Notice objecting to the RTM taking place, expenses can rapidly mount up as the hearing draws near.

And if you decide to withdraw your application, then you will all be liable to your freeholder for their reasonable legal costs to the date of withdrawal. For example, the freeholder might have had to order an inspection of the property or instruct a barrister.

What happens when one of the residents sells up?

When any individual leaseholder sells their flat , their share in the Residents Management Company will normally be transferred from the vendors to the purchasers -making sure that only those owning a flat in the building have a say in its management.

We have Acquired The Right to Manage – What Happens Next?

Once the leaseholders of a block of flats has been granted the Right to Manage, what follows is a lot of hard work.

Firstly, it’s important not to forget that although all of the qualifying leaseholders are entitled to be members of your RTM company, not unusual for some leaseholders to be unwilling to get involved – and that regardless of their lack of involvement, you still have a duty to them and also to any leaseholders who didn’t qualify for membership.So it’s important to get the opinion of all leaseholders when the company is taking decisions that will affect the whole building.

Normally every leaseholder participating in the right to manage exercise will end up with one share in the Residents Management Company- with one share per flat owned.

Most Right to Manage applications made because there have been worries about the poor or overpriced management of the block. This can mean that the owners of the flats in the block can be unwelcoming or even hostile to new managing agents. The owners of the flats therefore need to think about whether to use a managing agent, or manage the block themselves.

With larger blocks, it is usually better to look for a professional and experienced managing agent.

  • Good management of your block – the need for information

It is also vital that that those running the new RTM company make sure they get hold of all relevant information about the management of the building. This includes the contracts and copies of any lease in existence before the right to manage was granted, financial records and accounts books.

All records and books will have to be inspected carefully – in particular the company which has recently been granted the right to manage may well be looking to renew some of the contracts or leases.

In particular the new directors must be aware of all the contracts the previous landlord and managing company have in place, which remain valid. If there are any relevant contractors you will need to warn them about the change of management.

  • Your new RTM company – the need for good communication with the leaseholders

Another important factor is a good level of contact between the leaseholders and the new managing agent. Flat owners should make their expectations clear from the outset in order to create a professional relationship which should keep everyone happy. Putting together a list of jobs which need to be done and prioritising this list should make it clear what needs to be done in the building.

A regular point of contact should be established through the holding of regular monthly meetings, at least for the first six months after the right to manage is granted. The directors of the Right to Manage company should also meet regularly with the owners of the flats to make sure that they are happy with the way things are going, and so that the directors can communicate better with the managing agent.

With larger blocks, it is often good practice for the directors of the new company to introduce themselves to the non-participating flat owners with a letter outlining the situation and detailing what plans they have for the building.

  • Your RTM company – prioritise the outstanding jobs

There are usually many repairs and other job which have to be addressed immediately after Right to Manage is obtained. It is really important that these issues are dealt with as soon as possible. Flat owners in the block will be pleased to see problems being dealt with too.

Even with medium-sized blocks, if there has been a lengthy period of poor management and maintenance, it might well be worth employing a Property Manager for the initial period so there is someone to supervise any repairs and maintenance jobs.

  • Getting the right block insurance

When looking for buildings insurance, working with the flat owners can be very cost effective. Any money which is saved from a cheaper insurance premium, can then be reinvested into improving the building, for example for window cleaning or other maintenance issues. Working closely with the owners of the flats should mean that the management of the building is more effective, and will improve relationships between the flat owners and the managing agent.

When it is done properly, getting the right to manage can be hugely effective. Finally, make sure to inform owners of the flats as early as possible about any proposed changes to the management of the building.

End of Right to Manage

There isn’t a time limit set on a right to manage company, but there are some situations in which a company ceases to have the right to run a building. These are:

• When the right to manage company and all of the leaseholders agree to give up the right to manage
• When the right to manage company is wound up or goes into receivership
• When the right to manage company stops acting in that capacity, for example if the company is used for collective enfranchisement to buy the freehold of the block instead.

Contact Our Right to Manage Company Solicitors

Wherever you live, our solicitors can help. For a FREE initial telephone consultation on the Right To Manage Leasehold Property from an expert solicitor,

  • contact us today on FREEPHONE 0800 1404544 for FREE initial advice or
  • Complete the contact form below