What is the Right to Manage (RTM)?
It is a right that empowers leaseholders to take over the management of their building. It is only applicable to leasehold flats. Leaseholders can exercise the Commonhold and Leasehold Reform Act 2002. Taking over management by setting up a special company – an RTM company. There doesn’t have to be a question of bad management by either the landlord or the property manager. The Company assumes full management responsibility for the building. Its members are free to appoint a property manager of their own. You can therefore get rid of any management companies who don’t wish to manage your property.
Why do it?
The main reason for it is to put the power and control back in the leaseholder’s hands. It enables qualifying leaseholders to set the standards of their block. To have control over their costs such as maintenance fees and service charges.
You can also ensure that your management companies that you have dealt with in the past that will no longer manage the property as you can deal with it. When you have an acquisition date then you will be able to ensure that you take this over. You may want to either even consider buying the freehold as well as taking control of the management. It totally depends on whether your landlord or managing agents are the people you are aiming at or the people that you want to get rid of and which if any you don’t wish to have. This would obviously depend if you were doing a RTM or buying the freehold. If your management company is something you wish to remove then this is the perfect time to do it. You could of course consider buying the freehold as an alternative.
Who qualifies to be part of the RTM?
We have another article that provides a more in-depth explanation here – on how to qualify. In short, a leaseholder that was originally granted a lease of more than 21 years is a qualifying tenant. There is no limit on the number of flats owned by one person.
The right relates to a detached building, so in the case of an estate where the blocks are structurally detached. Each block would need to qualify separately and an individual notice served.
Do iInsure365 pay commission to any managing agents?
iInsure365 does not pay any commission to managing agents for any part of our insurance. We do receive a commission in relation to the insurance we provide which we are happy to disclose. iInsure365 are a completely open and transparent business. We will work hard to ensure that your annual premiums remain competitive on a year to year basis. Without compromising on the standard of cover.
What is the least amount of Directors and do they have to be residents?
The company is only required to have at least one Director. But, normally there is between three and five depending on the size of the premises/block. There is no need for Directors to be residents. The majority of most Directors are normally residents. This is to avoid unwanted influence from people who do not have experience of living in the property. The landlord of the building has no legal right to be a Director.
Can the leaseholders exercise the RTM if the landlord lives in the building?
It cannot apply where the premises fall within the resident landlord exemption.
The criteria for this exemption are as follows: –
- a) The premises are not a block of flats
- b) There are less than four flats
- c) The landlord or an adult member of their family has occupied one of the flats as their only or principal home for the last 12 months.
Can we ask the landlord to provide the names of the other leaseholders to invite them to take part in the process?
It is only the RTM Company that can insist on the landlord providing the names of the leaseholders. In the first instance, it would be necessary to speak to the flat owners or check the Land Registry. To ensure accuracy it may be best to use a solicitor.
What sort of majority do we need to go ahead?
You must have at least a 50% majority to proceed. As long as at least half of the leaseholders in the block of flats are in support, the RTM can proceed.
What are the responsibilities of the company Directors?
All Directors have the responsibility to serve the best interests of the company. This goes as far as managing the property in the best interests of all leaseholders of the estate. RTM companies can appoint a managing agent to deal with the day to day management of the estate itself. But, we can provide you with Directors & Officers insurance to cover any liability.
Will we be able to choose our own managing agent once we have taken over the management?
Yes, RTM Companies can find and instruct their own managing agents. The Association of Residential Managing Agents (ARMA) adopted a code of practice with RICS. (Royal Institute of Chartered Surveyors. It is important that you take the time to choose your own managing agent.
Can we expect to save money?
Yes, you very likely will. Many leaseholders are facing excessive charges for compulsory items. Things like buildings insurance, alarm monitoring, and maintenance contracts. We would be more than happy to supply you with a like for like quote and believe it would be a lot less than what you are currently paying. We also ensure that our prices stay low at renewal to continue saving you money. Don’t hesitate to ask us for a like for like quote.
Who owns the freehold after the leaseholders take over the management?
The landlord/ freeholder would not change. The freeholder retains his obligations and responsibility held under the Lease. This is apart from the responsibilities of the building. These transfer to the RTM company. Along with the collection of ground rent.
Is the RTM Company bound to carry on with the existing contracts entered into by the landlord?
The takeover of the management process will bring an end to all the existing contracts. The members of the RTM can then choose whether to continue with the contracts or not. For instance such as cleaning and insurance.
The Right to manage is in force, but the landlord insists that they continue to insure the building, is this correct?
No. The company and its directors have taken over management from the landlord. This includes any associated company or contracts that may have been in place before. The management functions include the insurance of the building. We would be more than happy to give you a quote in this regard.
Therefore, it is often the case that lessees who go through this process go on and consider buying the freehold. They can then take control of the management and get rid of the management company that would often be an obstacle when it comes to the insurance. You may find the managing agents also get a commission.
What can leaseholders do if the landlord fails to provide any information requested?
The landlord may decline to give over the required information. Leaseholders are then entitled to serve a default notice which will give the landlord 13 days to comply. If he fails to do so they can then bring an application for compliance in the local County Court under Section 107. The court can then make a cost order against the freeholder as well as granting the order. It is advisable to use the services of a solicitor to do so.
There is a long process to go through in relation to Right to manage and we would always recommend you use a solicitor. Don’t hesitate to see our useful links in this regard.
There will be technical terms such as an acquisition date, claim notice, counter notice and various legal documentation that you would need to deal with. It is your right to exercise the right of Right to manage and take control of your management.
The pros and cons of right to manage.
The right to manage process can be complicated and it involves taking a lot of responsibility. Make sure this is the right decision before you begin.
The advantages.
No rip off service charges
You will control what you spend, you can get the best possible price and keep service charges to a minimum.
Save money
You should be able to save money as you can choose not to pay for a management company.
Fast repairs
You should be able to get maintenance and repairs completed more quickly as your right to manage company will be focused on the building. There wont be long delays dealing with the management company that is handling multiple properties.
Quality maintenance
You can control who you employ to work your building. If you are unhappy about the quality of work you can then switch contractors so it is in your control.
Cost effective
Right to manage gives you control of your building with out the costs involved in buying the freehold. With right to manage while you will have to cover legal fees and settlement costs it is not the price of buying the freehold.
The disadvantages.
Running a company
It would be your duty to make sure the right to manage company is run correctly. This means you need to register at company house, deal with filing accounts, annual reports, collecting service charges. We often find that people don’t understand when you are running a right to manage company the accounts don’t relate to the freehold they only relate to what money you collect.
You are responsible for the building
It will be down to you to ensure that you can maintain your building. You will need to ensure you have the right insurance in place and potentially gather money from leaseholders for a continuity fund to cover up keep and repair.
Handling disputes
Before you take responsibility of your building you will have to ensure that any service charge disputes are settled. This can be hard and a lengthy process depending on the situation. It can also cause many conflicts. You may also have to take enforcement action against your own neighbours if anyone falls behind on this payment and sometimes this can be awkward.
You will need to get on with your neighbours
If you are going to agree together to run the building you will need to be able to co-operate with other leaseholders. It is a good idea to meet with your neighbours beforehand to ensure you get on and have a shared view of how the building should be managed.
Obviously, it is totally a matter for you about how to proceed but you need to weigh up everything there is involved in property management.
Government changes.
The Government has planned reforms to abolish ground rent and make it easier and fairer to extend your lease or buy your freehold which not affect right to manage. The changes wont be in place for at least a few years so you may wish to apply for your right to manage now. You should always speak to an expert when dealing with this.
Do you need directors and offices insurance for your company? We do this insurance and can help you out in this regard. It is something we do on a regular basis.
Do you need other insurances? We can do most types of property insurance but even to professional indemnity, why not contact us on 01273 827090 or enquiries@iinsure365.co.uk
Key words:
Management companies
Acquisition date
Buying the freehold
Claim notice
Exercise the right to manage rtm
Control of the management
Floor area
Counter notice
Landlords and managing
