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Right-to-Manage (RTM) – The Burning Questions

Right-to-Manage (RTM) – The Burning Questions

Below are some of the more immediate questions that one might ask when considering whether to collectively exercise the Right-to-Manage and take control of a block away from the landlord. This list is not exhaustive by any means and is intended as an initial point of reference only. Should you wish to discuss any of the points made here, please contact us, whether it’s in respect of the RTM process generally, or you wish to get help managing a current RTM Company.

Two faceless and sexless characters looking at a signpost with doom and gloom one side and right-to-manage on the otherWhat does RTM stand for?

RTM stands for Right-to-Manage.

What does it mean?

Management is generally seen as those duties bestowed upon the landlord under the lease that relate to the up-keep of the building and the legal governance of the property. In practice this means the collection of service charges to fund maintenance works and services while at all times being accountable to the leaseholders of the building.

Having the right to manage means that the leaseholders can force the landlord to give them the collective power to aCommonholdssume block management responsibilities through a limited company. This gives the owners of the flats much greater control over how their money is spent and what happens in the building.

How long has it been around?

Right to Manage was introduced as part of the Commonhold & Leasehold Reform Act 2002.

DA row of boxes being ticked representing the RTM qualification criteriao I qualify for RTM?

Not all service charge schemes will qualify for the Right to Manage. For practical reasons RTM is restricted to certain blocks of flats. To qualify the building must:

  • be at least partly self-contained
  • have at least two leasehold flats within the property
  • have no more than 25% floor area non-residential
  • have at least two thirds of the leaseholders with leases longer than 21 years

50% or more of the qualifying leaseholders must also be in favour of becoming a member of the RTM Company. (For detailed information on the qualifying criteria, see the link at the bottom of this post.)

How easy is it to do RTM?

In the grand scheme of things taking your building through the RTM process is fairly simple, but it is not advisable for laA photo of a building that has gone through RTM.y-people to attempt it without help. Two important notices must be served in accordance with the law to ensure the RTM Company is compliant. There are also considerations with the land registry that need to be addressed. For these reasons you should look to appoint a professional firm to help with the process.

How long does RTM take?

In most cases an RTM application will take about five to seven months from start to finish.

It may take longer if the landlord decides to contest your application. Being absolutely sure that your building meets the requirements in advance of starting the process reduces the likelihood of this happening.

If I have a Right-to-Manage Company will I still need a managing agent?

In most cases yes.

When the RTM process has finished, the Directors of the RTM Company (usually volunteer flat-owners) will suddenly have the burden of block management responsibilities for the entire building to deal with. Having a professional agency to assist with billing, legal issues and maintenance makes sense therefore. Having said that, it is recommended that the Directors maintain an overview of their managing agent and ensure that important matters such as setting the budget are agreed jointly.

4 Leaseholders that have exercised their right to manage putting up a victory flag on the roof of the buildingIf I exercise my Right-to-Manage will my service charges go down?

In many cases, yes. In some cases, no.

Some freeholders charge well above the market rate for certain services owing to their indifference to leaseholders. Exercising the RTM will give leaseholders the opportunity to re-tender certain services and in some cases achieve big savings.

Buildings Insurance is commonly an area where costs are likely to go down. Conversely, some freeholders may have been under-investing in the property meaning that resident directors may decide to increase their service charges to get the building back up to standard.

Either way, the value of control is the main benefit to the leaseholders.

How democratic is Right-to-Manage?A jumble of words representing Democracy - a feature of right-to-manage

Running a building through a Right to Manage Company is a much fairer and more democratic form of block management than the traditional freeholder-controlled model.

The RTM Company will be subject to a written constitution and must be transparent with its finances. In addition, all leaseholders have the right to be elected to the board of directors for the company. It is advisable for an AGM (Annual General Meeting) to take place each year to elect and re-elect the directors.

A faceless and sexless person stepping into over-sized shoesIs the RTM Company still bound by the lease?

Yes. Contrary to popular belief, an RTM company is still bound by the same rules and regulations that a landlord is obliged to follow. The RTM Company merely ‘steps into the shoes’ of the landlord for the purposes of property management. This means that RTM Companies should pay close attention to developments in the world of Landlord & Tenant law.

Should I change my managing agent once the RTM process is complete?

Not necessarily but in many cases, yes.

As a newly elected board of RTM Directors you need to ensure that your managing agent is fighting your corner. Your agent may be too closely related to the freeholder to do this successfully. Your best bet is to get an RMC (Resident Management Company) specialist to act as your agent.

Written by Joe Mallon MIRPM AssocRICS

Partner of JFM Block & Estate Management

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If you wish to obtain more information on taking over your block through the RTM process, or you have an RTM company which you’re looking for help with, please contact us for details.

Alternatively, below is arguably the most in-depth source for leaseholders to refer to, courtesy of The Leasehold Advisory Service.

http://www.lease-advice.org/publications/documents/document.asp?item=21

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JFM Block & Estate Management LLP is an appointed representative of Arthur J. Gallagher Insurance Brokers Limited which is authorised and regulated by the Financial Conduct Authority.
Registered Office: Spectrum Building 7th Floor, 55 Blysthwood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909.

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