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Right to Manage Company Formation

Do you want to form your own Right to Manage Company? Right to Manage is only exercisable through a Right to Manage Company set up in accordance with the statutory regulations. A Right to Manage Company (RTM) 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 Company. Their limit of individual liability is £1. The landlord also has the right to become a member of the Right to Manage Company. 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 Companies only require a single Director. Larger blocks will usually have a board of three or more. However, it is a matter for each company 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 Company.
 
The freeholder has no legal right to be a Director but does have the right to a single membership of the Right to Manage Company.
 
We have already outlined in our Right to manage article what you need to do to be able to proceed. As long as at least half of the leaseholders in the block are in support of the right to manage then the process can go ahead. It is always best to involve as many people as you can in a Right to Manage Company to protect against criticism at a later date.
 

Starting the Legal Process

 
There are normally founding members of a Right to Manage Company with at least one leaseholder as a Director. Once the 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 forms with the Right to Manage company 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 Right to Manage Company which is quite a simple thing to do.
  • Right to Manage Company 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 Company 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 company 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 Right to Manage company acquires the right to manage (acquisition date). The landlord/manager then hands over management to the Right to Manage Company 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.

For competitive commercial insurance call us now

01273 827090


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