Keeping and properly exercising the right to manage can be surprisingly complex. Here are some of the more common questions that are right to manage solicitors are asked on a regular basis.
Q: What exactly does a right to manage company have to do?
A: Any right to manage company (or RTM Company) has to carry out the following duties and obligations.
- The RTM company has to adhere to the government’s Code of Management Practice, just as any other landlord has to.
- The RTM company also has to take over any landlord obligations which are stated in the tenants’ leases, such as carrying out repairs to a reasonable standard in a stated time period.
- The company also has to tell the freeholder when any tenant breaches their lease.
Just as with any other sort of company, the directors of a right to manage company will have the same responsibilities as other directors. It is also their obligation to maintain the landlord’s covenants.
- The RTM company has to be registered with Companies House. The company also has to submit a yearly return and keep detailed accounts.
- The RTM company will need to have Articles of Association drawn up. This is something a solicitor can help with.
- The RTM company will have to appoint a Board of Directors, which is usually made up of qualifying tenants. The Directors will look after the day to day running of the company. When you are going through the right to manage process it is particularly important to make sure you have tenants who are happy to take on this level or work and responsibility.
- The RTM company has to stay solvent. This could mean members or directors having to make up a shortfall if a tenant doesn’t pay their monthly fees. RTM companies also have to have a clear idea on how to raise funds to make sure that there is enough money in the kitty to pay for maintenance of the block.
The company has to hold regular board meetings.
The most important job of any right to manage company is the day to day running of the building. This could include organising insurance, repairs and maintenance. If there is any development planned this has to be voted on by all of the company members, which might include the landlord.
Q: How much will getting right to manage cost me?
A: There are several costs which may be associated with getting the right to manage a block of flats. These can include:
- Registration fees for Companies House
- Surveyor fees
- Your solicitor’s legal fees
- Your landlord’s solicitor’s legal fees
- Landlord’s legal fees for dealing with the initial notice
- Fees for the managing agent (where applicable)
- Accountant fees
- First-Tier Property Tribunal [previously known as the Leasehold Valuation Tribunal or LVT] fees, if applicable
The exact amount of these fees will vary depending on the size of the building, the response of the landlord and how many tenants are involved in the right to manage.
Remember that as the overall cost is divided by the number of tenants involved, more tenants means less cost per person.
Q: How long does the right to manage process take?
A: Unfortunately, there are no hard and fast answers to this one. If everything runs smoothly, then it could take as little as four months for you to gain the right to manage after the company is created.
When the RTM company is established, you must then allow 14 days to tell the tenants who have chosen not to be involved about the creation of the company and give them a chance to get involved too. After this has been done, you can serve notice on your landlord. The landlord has to be given 28 days to respond to the notice, and issue a counter-notice if they want to. The law says that after this 28 day period has finished, you must wait a further 3 months to take over the right to manage.
Delays can happen when you are trying to get your fellow tenants together to create the company, when asking a solicitor to inspect the business and issue you with their report. If the landlord issues a counter-notice and you have to apply to the Residential Property Tribunal (also known as the Leasehold Valuation Tribunal or LVT) this will also hold matters up.
Q: Do I really need a solicitor to help me with right to manage?
A: Depending on your individual situation, the right to manage application might be complicated. Solicitors who have experience in right to manage will have a good level of knowledge about the law and will help make sure that you not only qualify for right to manage, but that you carry out the process properly. You might think you have a good level of understanding about the process, but it’s a solicitor’s job as a legal professional to keep up to date with changes in legislation. If the law has changed recently, then the solicitor will be completely up to speed with the changes.
Specialist legal advice will also be needed when you are setting up your RTM company. You will also have to have legal documents drafted.
When your landlord receives the notice that tells him you wish to exercise right to manage, he will more than likely call a solicitor straight away. It therefore levels the playing field if you are represented by a solicitor too when making the application. If your landlord wants to negotiate, then the solicitor will be best placed to come to an agreement which is favourable to you.
Q: How do we choose the right managing agent?
A: Getting the right to manage means you get the choice over whether to manage the block yourself or ask a professional property managing agent to do the job for you.
Spend some time looking for the right managing agent as this choice can affect the value of the properties in the building. Here are some things to think about when trying to select a managing agent:
- What is their level of expertise and how does the managing agent structure their team?
- Do they communicate by letter or online or by some other method?
- Do they have a robust reporting and accounting system in place, and can they show you how they will spend your money?
- Do they carry out check for problems regularly or carry out a programme of regular inspections?
- Is the agent a member of any professional organisation? ARMA (Association of Residential Managing Agents) is a body whose members have to prove their competence. It is also the only trade organisation in England and Wales to be solely concerned with leasehold apartment blocks.
- How will you contact the agent in case of out of hours emergencies?
- Will they give you a dedicated account manager?
- Can they offer you a service which is appropriate to the needs of the building, you and the rest of the tenants?
- Do you think you could form a good working relationship with the agent as this is a critical factor in effective building management?
- Make sure you are getting the best value for money in terms of utility providers and contractors for the block.
- Ask potential agents about the types of blocks they currently manage to ensure they are a good fit for your building
- Give all of your requirements to any potential agent so they can give you any information you need and manage your expectations.
- Ensure that the agent has time to manage your building and isn’t overloaded with other work
- Speak to other clients who are currently using the agent and establish whether they are happy – word of mouth recommendation is often the best way of establishing a company’s reputation.
Termination of the right to manage – the grounds
If a RTM has already been carried out but at a later date the management of the building is not up to scratch, the RTM can be terminated by an application for the appointment of a manager. This is a joint decision with the landlord, and the landlord must agree to take the management responsibilities back. A few of the instances in which a RTM company stops having the rights to manage the building include:
• An order is made under Part 2 of the Landlord and Tenant Act (1987) which takes the RTM away from the right to manage company, or when a management company appointed to replace the original RTM company begins to operate
• When the RTM company starts the process of buying the freehold to the building
• The RTM company goes into receivership, is wound up by the directors, is struck off or becomes insolvent. In these cases the RTM ceases and responsibility for management reverts to the freeholder
• All of the leaseholders agree that they no longer wish to exercise their rights to manage
Termination of the right to manage – the application
An application to cease the right to manage must cover all of a building, or at least part of it with two flats or more. Any one tenant or a group can make the application. An application under Part 2 of the 1987 Act can only been made if it can be shown that the RTM company has:
• Demanded or is likely to demand service charges which are unreasonable
• Breached some of their obligations under the terms of their lease
• Not complied with some of the codes of management practice
Who then takes over the right to manage?
If the First-tier Tribunal – Property Chamber [previously known as the Leasehold Valuation Tribunal or LVT) has sufficient proof that removing the right to manage is appropriate, they might make an order to remove the RTM company’s management responsibilities and place them with a manager designated by the LVT. This could be one of the other tenants or another named responsible person. This person can then get a management company to carry out the tasks, but the responsibility remains with the person named by the LVT.
Restrictions on future RTM applications
In cases where a RTM is terminated, the tenants are not allowed to make a subsequent right to manage for four years, unless the LVT agrees. This is a complicated and specialised area of property law, so if you are looking for legal advice on right to manage issues, make sure you are dealing with the experts.
Looking for Specialist Right to Manage Solicitors? Contact Us Today
Wherever you live, our solicitors can help. For a FREE initial telephone consultation on the Right To Manage Leasehold Property from an expert solicitor,
- Call us today on FREEPHONE 0800 1404544 for FREE initial advice or
- Complete the contact form below
Comments or questions are welcome.