Is the Right to Manage overrated?

The Right to Manage (RTM) is a popular option for many leaseholders and can prove quite effective. However, there are considerable drawbacks which should also be taken into account as this article will explain.

Firstly, it is important to remember that RTM can be very limited. A right to manage company can only generate income through service charges which will then be protected for all leaseholders. Although, the management situation is taken care of, the role of the freeholder is not removed completely and their consent will still be needed for lease extensions and work done on the building. Furthermore, the burden of paying the landlord’s often considerable costs falls squarely with the RTM company (not all lessees).

These drawbacks are quite problematic and we therefore advise clients who are interested in RTM to consider buying the freehold instead as this affords them for greater freedom in the long term. However, whilst collective enfranchisement is usually desirable it can be very expensive and at least half of all leaseholders will need to get involved in the process. If this is too difficult, the RTM can be a decent alternative which enables leaseholders to make service charges much fairer.

Leaseholders should not view RTM as the answer to all of the problems relating to the poor management of their building .They are simply assuming responsibility for all management tasks and cannot fix past mistakes relating to payments for example. They therefore take on a lot of work and may have very limited funding available. Leaseholders should also consider the Court Appointed Manager option or Reasonableness of Service Charge action at the LVT if they cannot raise sufficient funds from service charges to manage the block.

The most important thing to remember is that RTM is not an easy option and should be carefully thought through. Talk to a specialist leasehold property solicitor to make sure that you do not bite off more than you can chew.

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