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The Right to Manage Process

Residential Block Management

If you are looking to take more control over how your block is run and managed – maybe you are not happy with the current managing agent or high service charges or just you want to take more of a hands on approach to running the block in which you have an interest in; under the Right to Manage process, leaseholders can take control over the management of their block

The law in the UK allows leaseholders of residential apartments within a block to acquire the landlord’s management functions by transfer to a company set up by them – the Right To Manage (RTM) company. It was introduced as a means of taking control from bad landlords, or managing agents; and also to empower leaseholders, who generally hold the majority of value in the property, to take responsibility for the management of their block.

The great thing is, the RTM process is very simple and the landlord’s consent is not required, nor is any order of a court required. There is no need for the leaseholders to prove mismanagement by the landlord. The right is available, whether the landlord’s management has been good, bad or indifferent. However, the RTM process must be done properly and following the correct procedure. Enviro Estates can assist with this process and ensure it is done accurately.

If you’ve made the decision to take control of the way that your block is being run, you must follow the correct process to do a Right to Manage

Summary of the process for a Right to Manage

Qualifying for RTM

There are certain requirements in order to qualify for a Right to Manage. These are:

  • 2/3 of flats within the block must have a lease which was originally granted for an original term of more than 21 years
  • At least 50% of leaseholders must support the decision to do a RTM
  • Not more than 25% of the floor area is used for commercial purposes
  • The landlord is not a local housing authority
  • Any non purpose-built blocks (e.g conversion from house to apartments), there must be more than four flats and the landlord or an adult member of their family has not occupied one of the flats as their only or principal home for the previous twelve months

The right relates to a building, so, in an estate of separate blocks, each block would need to qualify separately and an individual RTM notice served.

Set up the RTM

The right to manage is exercised by the RTM company, not by the individual leaseholders, so you must form a RTM limited company before you can take control. This company is formed at Companies House usually as a “Private company limited by guarantee without share capital”; and each leaseholder will have a right to be an equal “member” of this company. The company must appoint a Director(s) and it can appoint a Secretary. Enviro Estates can help form this RTM company and provide secretail services.

Once the RTM company has been registered, with its original members, it must then formally invite the rest of the qualifying leaseholders to join.

It is the company which obtains the right to manage and which then takes responsibility for the management; the individual leaseholders may change over time, but the company remains in place.

Once the RTM company has been set up, notice must be served on all leaseholders giving them the opportunity to participate in the RTM process and also to inform them of what is happening. This form is called a “Notice Inviting Participation” and it must be in writing and in the prescribed form, and must be served on all qualifying leaseholders who are not, at the time of service, members of the RTM company or who have not already agreed to be members.

All of those qualifying leaseholders who respond to the notice and who ask for membership must be enrolled as members of the RTM company and the membership noted in the company records. Enviro Estates can help ensure this notice is served correctly.

Serve Notice

Firstly it is recommended that information is obtained about the currect status of the management of the block, but this is not essential.

It is also advised that a plan and budget is prepared – basically a business plan on how the RTM company intends to run the building. In The Notice Inviting Participation to all leaseholders, the notice requires a statement of whether the company proposes to self-manage or to appoint professional management company, but there is no requirement for employment of a manager, or for any prior management experience by the company. Enviro Estates is very experienced in drafting proposals for the budgeting of service charges for a block. This step is not a requirement and nor is it law that this budget/proposal be provided to the landlord when serviing notice.

At least 14 days after The Notice Inviting Participation has been served, a “Notice of Claim” is served on the landlord by the RTM company stating its intentions to take control over the management of the block.

A copy of the Notice of Claim must also be sent to each qualifying tenant in the building. It must also be sent out in the correct format and often this is where the RTM process can fail. If it is served correctly and all the requirements have been met for the RTM, the landlord can not reject this Notice of Claim.Enviro Estates can help ensure this notice is served correctly.

Taking Control

The RTM company must reimburse the landlord for any costs he has incurred in the process.

A date will be set for the transfer of management to the RTM

Immediately upon the RTM company taking over on the acquisition date, the landlord becomes entitled to membership of the company, with full voting rights as a company member (if he wishes to take it up). The landlord’s votes are, in the first instance, determined according to the units he holds in the building, flats or non-residential parts. In cases where he holds no units, and therefore would have no votes, he is allocated one vote as the landlord.

When the transfer process is complete, the RTM company can appoint a new managing agent to run the block. The residents will now have more control over how their block is run and generally a meeting is held every year to discuss the management and progress of the block.

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