What is the Right to Manage (RTM)?

The Right to Manage is the right for the leaseholders of a building containing flats to take over the management of the building from the freeholder via a Right to Manage company. This can take place even without the agreement of the landlord.

If you are the landlord, the leaseholders of the building will send you notice of their intention to take over the management of the building. If successful, the landlord will still own the building, but the leaseholders will manage it.

This is when the responsibilities of managing the building, and the magnitude of the task, become very real.

This means the new building managers will be responsible for:

• collecting and managing the service charge from residents.
• upkeep of the communal areas, such as communal hallways, lifts and stairs, atriums, and gardens.
• upkeep of the structure of the building, including the roof.
• dealing with complaints about the building and its upkeep from other leaseholders.

How has the Right to Manage come about?

RTM was introduced to give those with the largest stake in a building the ability to control the way the building is managed. Perceptions that leaseholders often want to address include: :

• Poor management by freeholders or by appointed managing agents.
• High service charges with little transparency about what the money is used for and little evidence of it being used to maintain the relevant development.
• Limited input allowed to the residents in decision-making processes for building maintenance and the overall property management.

By granting residents the right to manage their own buildings, RTM offers a route to potentially improved building management, financial transparency, and greater resident input and control without requiring the purchase of the freehold.

RTM tends to be the first choice of action when leaseholders complain about rising service charges and how the development is maintained. However, RTM is not for the half-hearted and there have been multiple stories of RTM companies not being able to cope with the responsibilities that come with property management.

It is important to remember that the right to manage does not change the legal requirement for money to be spent maintaining various aspects of a development; only who has the responsibility for spending it.

What are the qualifying criteria for Right to Manage?

There are a number of strict qualifying criteria for Right to Manage.

• For a building to qualify for Right to Manage the property must be made up of flats. Houses do not qualify.
• At least two-thirds of the flats must be leasehold and have leases that were for more than 21 years when the leases were granted.
• A minimum of 75% of the building must be residential. It is common for commercial units, such as shops or offices to occupy ground floor space in a block of flats. If this is the case, the commercial unit must not assume more than 25% of the total floor area.
• If there are less than four flats in the block, you must live somewhere else. Unless the block was purpose-built as flats, not converted from another type of building.
• Any number of owners can set up a Right to Manage (RTM) company, but at least half of the flats in building must be members of the RTM before it can take over the management of the building.

RTM companies

To exercise the Right to Manage a property, leaseholders must set up an RTM company and follow specific procedures. The RTM company can opt to manage the property itself or appoint and pay a managing agent to manage it.

The landlord will have the right to be a member of the RTM company and vote on decisions. They get at least one vote. How many votes the landlord has depends on the number of flats they own in the building.

Example – There are 20 flats in the block. 16 are owned by leaseholders. Four are owned by the landlord and rented out on assured shorthold tenancies. Therefore, the landlord gets four votes, one vote for each flat they own and rent out (1).

The RTM company must pay for any costs the landlord incurs during the management transfer process away from the landlord, even if the RTM company does not end up managing the building.

Right to Manage ‘notice of claim’

If a landlord receives a ‘notice of claim,’ it means the RTM company intends to take over management of the building. The ‘notice of claim’ stipulates:

• The date the landlord must respond by.
• The date the RTM company intends to take over management of the building.

The landlord can either accept the claim or dispute the claim. The notice will inform the landlord of the deadline to submit a dispute, which cannot be less than one month from the date of the notice.

Premier Estates provide award-winning property management services across the UK. If you would like to speak to one of our team about managing your property portfolio, please call 0345 491 8899.

Sources:

• 1 – https://www.theukrules.co.uk/rules/housing/landlords/right-to-manage/
• https://www.gov.uk/right-to-manage-a-guide-for-landlords
• https://www.lease-advice.org/fact-sheet/right-to-manage/
• https://en.wikipedia.org/wiki/Right_to_manage
• https://www.legislation.gov.uk/ukpga/2002/15/contents
• https://www.tpi.org.uk/search?q=right+to+manage
• https://residentsfirst.co.uk/updates/blog/understanding-right-to-manage-rtm/