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Forming a Right to Manage Company

Do you want to form your own Right to Manage Company? Right to Manage is only exercisable through a Right to Manage Companies set up in accordance with the statutory regulations. A Right to Manage (RTM) company must be a Private Limited Company by guarantee. Also, its Articles of Association should state that its object, or one of its objects, is the acquisition and exercise of the Right to Manage premises.

Forming a Right to Manage Company

You are no doubt aware of the requirements of qualifying tenants. Qualifying tenants have the right to become members of the Right to Manage Companies. Their limit of individual liability is £1. The landlord also has the right to become a member of the RTM. This is only after the acquisition date as they keep an interest in the property and his membership is usually limited to a single vote.
 
Since November 2009 Right to Manage Company only require a single Director. Larger blocks will usually have a board of three or more. However, it is a matter for each RTM to decide. The Directors do not have to be leaseholders, however, most likely they will be or have an interest in the block. They are normally recommended by the majority of the leaseholders and it would be preferable if they were residents. The Directors would, therefore, be able to see what happens on a day to day basis to help with the Right to Manage Companies.
 
The freeholder has no legal right to be a Director but does have the right to a single membership of the Company.
 
We have already outlined in our Right to Manage Company article what you need to do to be able to proceed. As long as at least half of the qualifying leaseholders in the block are in support of the Company then the process can go ahead. It is always best to involve as many people as you can in a Right to Manage to protect against criticism at a later date.

Starting the Legal Process

There are normally founding members of a Right to Manage Companies with at least one leaseholder as a Director. Once the RTM Company is established it must serve certain required legal notices on the freeholder. The notice will state that the leaseholders will be exercising their statutory right to manage the property. So as long as they meet the statutory conditions the landlord has no legal grounds to object. A month later the Right to Manage Companies forms with the Right to Manage taking over the management a further three months thereafter.

What is the Right to Manage Process?

  • A land registry search is first entered into to establish who the freeholder is.
  • Companies House creates the Company which is quite a simple thing to do.
  • Right to Manage serves a Section 78 Notice inviting participants of non-members.
  • To achieve the minimum membership of at least 50% of the leaseholders must join. Then, after 14 days the Right to Manage  Serves a Section 79 Notice on the landlord.

The above notice starts the process of the Right to Manage.

The landlord may serve a Section 84 counter-notice within one month. The legal ground limits for them to do this are:

  • Not following the correct procedure.
  • The qualification of the building not being correct.
  • The company members are not leaseholders.
  • If there is no counter-notice, a Right to Manage is determined after one month, known as the determination date.
  • If the landlord serves a counter-notice denying the right to manage. The right to manage  can make an application to a Tribunal for the determination within two months of the date of the counter-notice. The determination date is either the date the landlord withdraws the counter-notice or the date of a decision by the Tribunal.
  • Following the determination date, the landlord must serve a Section 92. This is issued to any contractors and contract notices to advise about pending right to manage.
  • Leaseholders organize the block management. Either by selecting or appointing a new managing agent or by forming their own management service.

 

Three months after the determination date the company acquires the right to manage (acquisition date). The landlord/manager then hands over management to the Right to Manage or the leaseholders appoint their own managing agent.

Summary

Do you need freeholders insurance on a like for like basis? Do you want to purchase your freehold to try and reduce your costs through your insurance? Don’t hesitate to ask for a like for like quote. Your landlord could be charging a substantial amount more than the market rate so why not question what you’re paying for.

Definitions

RTM Company – this is an abbreviation for a Right To Manage Company.

Managed RTM – again this is an abbreviation for Managed Right To Manage Company.

Leasehold Reform Act 2002 – this is an Act introducing common holds. Which we will deal with under a separate article.

Common and leasehold reform – see the recent paper on this. Which we also contributed towards.

Management of the building – this relates to the management of any building. Which is why a right to manage company is put into place.

Service charge – This relates to the money that lessees pay towards the upkeep of the building. Which is held in trust.

Management functions –Meaning what the Management Company would do. By law under the Royal Institute of Chartered Surveyors.

Estate of Separate blocks – Meaning blocks of flats whilst on the same estate insure separately.

RTM Notice served – again this is a right to manage notice served on the property.

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