Right to Manage: Are You Considering Taking Control?
When leaseholders contemplate exercising their Right to Manage (RTM), a multitude of factors and procedures come into play. This article outlines some crucial areas to consider as you navigate this process, referencing the Commonhold and Leasehold Reform Act and the Leasehold Reform Act 2002. Understanding the legal framework, particularly the Leasehold Reform Act 2002, is essential before proceeding.
For many leaseholders, alternatives such as Buying the freehold may also be considered alongside RTM, but this article focuses on the RTM route and how it can help you Save money while improving control over your building.
The Notice Inviting Participation from Leaseholders
Understanding the composition of your future RTM company is paramount. Typically, this structure is a Company limited by shares or, more commonly, a company Limited by guarantee, which is the preferred structure for RTM. A Company limited structure ensures legal clarity and accountability for all members.
Legislation dictates that all qualifying flat owners are entitled to become members; you cannot exclude anyone. Conversely, once the RTM is acquired, the landlord also holds the right to membership, particularly in a company Limited by guarantee arrangement.
A formal, written notice inviting participation, in a prescribed form (it’s crucial to consult your solicitor on this), must be served on all qualifying leaseholders who are not yet members or have not agreed to become members.
Do you want an instant quote on your insurance? Click here now.
This Notice must clearly state:
- a) The RTM company’s intention to acquire the Manage RTM.
b) The names of the current members of the RTM company.
c) An invitation for the recipient to become a member.
d) Other required information, including company details. Many RTM companies are structured as a Company limited and registered accordingly.
e) The notice must explicitly state that the RTM company will assume the landlord’s management functions as outlined in the lease. This is a key aspect of effective Property management.
f) It must also state that each member of the RTM company may be liable for the landlord’s reasonable costs. However, leaseholders often pursue RTM to Save money in the long term through better Property management decisions.
g) Whether the RTM company intends to appoint a managing agent or self-manage.
Summary
Crucially, the notice must be accompanied by a copy of the RTM Company’s Articles of Association. These are typically drafted for a company Limited by guarantee, which ensures each member’s liability is restricted.
The notice can be served by post or delivered directly. Accuracy is critical, as errors could lead to a landlord issuing a Counter notice to challenge the process.
Notice of Intention
The notice of intention and its correct service are critical. Under the Leasehold Reform Act 2002, all leaseholders must have the opportunity to participate. Any procedural errors could allow the landlord to serve a Counter notice, disputing the RTM claim.
Landlords/freeholders often scrutinize this stage closely. Failure to follow correct procedures may result in a formal Counter notice, delaying or preventing progress.
Leaseholders
Qualifying leaseholders who respond must be enrolled as members of the RTM Company. This is especially important in a company Limited by guarantee, where membership defines governance and voting rights.
Need professional indemnity insurance? Call us on 01273 827090 or click here.
Obtaining Information for the Right to Manage
Once legally equipped to proceed, the RTM Company should conduct thorough due diligence into current arrangements and overall Property management practices.
Key considerations include existing contracts and whether switching from the current setup will help Save money or improve service delivery. In some cases, leaseholders compare RTM with Buying the freehold to determine the best route forward.
Legislation grants the RTM Company rights to obtain information from the landlord. In particular, these rights are supported under the Leasehold Reform Act 2002, which provides a structured process for accessing relevant documents. As a result, RTM Companies are better equipped to make informed decisions.
More broadly, managing any building can be complex. For this reason, effective property management requires a strong understanding of contracts, compliance, and financial planning. In addition, careful coordination of these elements helps ensure long-term efficiency and stability.
Essential information to obtain includes:
- Leaseholder and landlord details
- Insurance arrangements
- Maintenance contracts
- Building condition reports
Some leaseholders may also explore Buying the freehold as a long-term alternative strategy alongside RTM.
Section 82 Notices under the 2002 Act
Under the Leasehold Reform Act 2002, the RTM Company can serve a notice requesting specific information from the landlord. This is a formal legal step and must be handled carefully.
Failure by the landlord to respond appropriately may strengthen the RTM Company’s position, especially if a Counter notice is later issued.
Plans and Budgets
A primary driver for leaseholders pursuing RTM is cost reduction. Many groups aim to Save money, particularly on insurance and service contracts, through improved Property management.
The RTM Company is not required to provide a business plan to the landlord. However, internal planning is essential, especially for a company Limited by guarantee, where members collectively oversee decisions.
Want to discuss your insurance and policy in more detail? Call us on 01273 827090 or click here.
Summary
Looking ahead to the practicalities of managing the building is crucial. Whether your goal is to Save money, improve standards, or gain control, RTM offers a structured route under the Leasehold Reform Act 2002.
Leaseholders should also weigh RTM against options like Buying the freehold, depending on long-term objectives.
Before proceeding, ensure compliance with all legal steps to avoid challenges such as a landlord issuing a Counter notice. With the right preparation, RTM can deliver significant financial and operational benefits.
