Right To Manage (RTM).
Right to Manage gives leaseholders the ability to manage their own block and no longer pay a service charge to their landlord – which can often include expensive administration fees – and arrange their own insurance and maintenance contracts.
What is Right to Manage?
Do you live in a leasehold property like a flat or apartment building? Are you fed up with less-than-satisfactory service from your landlord or managing agent and wish you could sort things out yourself and employ contractors you see fit?
Right to Manage gives leaseholders the ability to manage their own block and no longer pay a service charge to their landlord – which can often include expensive administration fees – and arrange their own insurance and maintenance contracts.
Do I have the right to take over the management of my building?
Qualifying tenants of leasehold flats and apartments have the right to collectively take over the management of their building via what’s called a ‘Right to Manage Company’. This company will be owned by the tenants and can take on the management responsibilities, such as insurance and repairs. Some matters will remain the responsibility of the freeholder, and ground rent will still be payable.
There are some specific criteria for being able to exercise a Right to Manage a leasehold property, including:
The building must be at least partly self-contained
Commercial leaseholders must not comprise more than 50% of the building
Commercial leaseholders must not occupy more than 25% of floor space in the building
The RTM management company must comprise at least 50% of the residential leaseholders
Leaseholders must have occupied their flats for at least 21 years to be qualifying tenants for RTM – and at least two qualifying tenants (QTs) must participate, with at least two-thirds of flats let to QTs (ie two-thirds of flats must have leases longer than 21 years)
RTM cannot take place if the landlord is a resident.
Is it the same as Collective Enfranchisement?
Collective enfranchisement is a right created under The Leasehold Reform Housing and Urban Development Act 1993. It gives leaseholders the right to act together to buy the freehold of the building. A limited company will usually be formed, and the participating leaseholders will become shareholders of the freehold company.
The criteria for collective enfranchisement is similar to that of a RTM Company. The legal process can be lengthy, but it will result in the freehold company taking full ownership of the building, common areas and grounds. As with a RTM Company, the freehold company will take over all management responsibilities for the building. However, unlike an RTM Company, the freehold company will have a right to grant lease extensions and ground rent will no longer be collected.
What are the criteria to form a Right to Manage company?
You need to meet certain criteria to form the RTM company, with at least half of the leaseholders taking part in the action. The freeholder does not need to consent to the formation of the RTM Company and at the end of the process, they must hand over control of all management matters.
Once the legal process is complete, the leaseholders can manage the building directly or, more commonly, can appoint a managing agent to do this on their behalf.
I feel like I’m paying too much for my service charge. What are my options?
Owners of leasehold properties usually need to pay a service charge. This is collected by either the freeholder or the management company and will be used to pay for services such as maintenance and repair of the common areas, buildings insurance, and redecoration.
The service charge should be reasonable and should reflect the needs of the building and the freeholder or management company should not make a profit from the fees collected.
If you feel that your service charge is excessive, you can write to the freeholder or management company and express your concerns. However, if this is unsuccessful, there are some legal options available to you.
If you would like to discuss any of the above options, please contact Holden Smith Law by completing the form here, emailing us at info@holdensmith.co.uk or calling your nearest Holden Smith office (see below).