Frequently asked questions about RTM

This is the legal right of leaseholders in a block of flats to acquire the management of their properties and either manage it themselves or appoint a professional management company of their own choosing. This provision is made available under The Commonhold and Leasehold Reform Act 2002.

It is intended to put power and control back in the hands of leaseholders, thereby driving up the standards of leasehold management and providing leaseholders with the statutory power to resist exploitation by unscrupulous landlords and managers.

The RTMF offers a comprehensive no-cost service preparing all the statutory notices and handling all legal procedures on leaseholder’s behalf. Leaseholder participation is minimal and the changeover usually seamless. Unlike most solicitors or company agents the RTMF provides ongoing support throughout and makes no additional charge for the statutory application to the LVT if the Claim Notice is challenged by the landlord.

The RTMF receives no commission from managing agents. Our advice is independent and unbiased. Leaseholders frequently select a management company that the RTMF has not previously experienced, in which case we can assist with tested and proven evaluation procedures and impartial guidance. Occasionally we may advise against an agreement with a company that appears financially unsound or has questionable references.

RTM is only exercisable through an RTM company set up according to statutory regulations. The first step is the incorporation of your own Right to Manage Company with 50% or more leaseholders as founding members and at least one leaseholder as a director. You will be asked to state whether you intend to undertake self-management or appoint a managing agent. Once the RTM company is established, the RTMF will set up all the legal procedures and serve the required legal notices including a notice on your landlord/freeholder advising that leaseholders will be exercising their statutory right to manage. So long as the statutory conditions are met the landlord has no legal grounds to object and the right to manage is determined a month later (The Determination Date). Your RTM company will take over the management 3 months later (The Acquisition Date).

The RTM company is only required to have one director but in larger blocks will typically have 3-5 directors. There is no requirement for directors to be leaseholders. Leaseholders could appoint a solicitor or an accountant to serve as a director on their behalf. In this event it is usually recommended that a majority of directors are leaseholders and preferably resident leaseholders so as to avoid disproportionate influence from persons not experiencing day to day living at the property. The landlord has no legal right to be a director but would be entitled to be represented on the board in the event it was requested.

Legally, you do not need a majority to proceed. As long as at least half the leaseholders in your block of flats are in support the Right to Manage process can proceed. However, to continue with only 50% support could be divisive and in practice when the benefits of right to manage are explained to all leaseholders most will support the idea.

All directors have a responsibility to serve the best interests of members of the RTM Company and insofar as the main object of the RTM company is the management of the property; directors´ responsibilities extend to all leaseholders of the estate. (They cannot treat non-members as second-class residents just because they choose not to be RTM members.) RTM Companies that appoint a managing agent do not retain responsibility for the day to day management of the estate as it is delegated to the appointed management company. If the management company meets all its obligations the RTM directors should have very little work themselves. However the RTM company and its directors do remain legally liable and it is important for the board of directors to insure themselves against claims of negligence or incompetence. This typically costs about £200-£300 per year for all directors. The directors are also liable to keep a register of members, make annual returns and prepare annual accounts although this work is typically delegated to a professional service provider at a minimal annual cost of a few hundred pounds. The role of director may sound daunting but with the responsibilities properly delegated it is easily manageable and there are many RTM directors who enjoy this privilege of service without previous experience and perform the task with exemplary efficiency. If the RTM Company intends to self-manage the responsibilities are more extensive and advice should be sought so that the directors are aware of their statutory duties in this regard.

Each participating leaseholder will be required to pay the fees and expenses of acquiring the right to manage. These generally vary from around £50 to £350 per flat depending on the number of flats in the block.

RTM legislation does not require a ballot. Support is usually determined by a show of hands at a meeting of leaseholders called for this purpose. If support is marginal or there is an indication some residents are being intimidated a ballot may be utilised but it is not possible to make it a secret ballot because it is a statutory requirement to disclose to the landlord the names of those leaseholders supporting RTM.

In most cases the employment of your caretaker will be governed by the Transfer of Undertakings and Employment Regulations (TUPE) and he or she will automatically transfer across to the RTM company or the new managing agent you appoint. Most caretakers enjoy a good working relationship with residents and will be happy to stay in post under new management. All contracts will parties other than those individuals in permanent employment will cease on the Acquisition Date and would need to be renegotiated.

All reputable managing agents should undertake to operate to a code of practice. The Association of Residential Managing Agents (ARMA) adopts the code of practice of the Royal Institution of Chartered Surveyors (RICS). In addition, our standard management agreement (if adopted) includes the obligation not to take undisclosed commissions on any of the services provided, guaranteeing that leaseholders get the best value for money.

Nothing can be 100% certain. If there has been a history of neglect by the previous management it may take time to turn things around. However the new manager will know that if they do not meet your expectations, you can replace them. This will be a powerful incentive for them to improve standards, control costs and keep all the promises they make to you.

The landlord may seek to charge its costs incurred in the transfer process, for example accounts and audit costs. By law, any costs must be reasonable and in the event of a dispute, can be decided by the LVT. These expenses will be minimal (typically between £250 and £1,500 depending on the size of the block) and will usually become payable after Acquisition Date.

Yes, most probably. Many leaseholders are facing excessively high charges for items such as insurance, security and maintenance contracts purchased at uncompetitive prices. By self-managing or appointing a managing agent on your specific terms you can require that the agent spends your money to benefit leaseholders not the landlord. This may result in thousands of pounds in overall savings or alternatively, if leaseholders prefer, it may result in an improvement in services at no extra cost. At the end of the day, you the leaseholders decide.

The ownership of your freehold will not change. Your freeholder will retain all the obligations and responsibilities previously held under the lease apart from the management responsibilities, which will pass to your selected management company. If provided in the lease your freeholder will continue to collect the ground rent. The freeholder also has the right to become a member of the RTM company as it retains an interest in the property. The freeholder´s vote is usually limited to a single share. Otherwise, the freeholder will have no involvement in the day to day running of the property.

Whether or not the freeholder can collect rent for the use of the caretaker´s flat will depend on the wording of your lease. If the lease clearly and unambiguously states that a rent is payable then you are probably required to do so, although the rent must be reasonable. If a rent is not clearly specified in your lease in terms an ordinary person would understand, then the rent can probably be successfully challenged. In our experience many leaseholders are paying rents they are not legally required to pay. Some landlords are charging excessive rents and the courts are already beginning to rule against such unreasonable charges.

All leaseholders´ funds which are held on trust by your existing manager or freeholder must be handed over to the new manager on the Acquisition Date. In practice the outgoing manager may withhold a small percentage of funds until the current year´s accounts are audited up to the Acquisition Date. Otherwise all funds in reserve fund accounts, sinking funds and future maintenance funds must be transferred to trust accounts in leaseholders´ names and operated by the new manager. Your new manager will organise the transfer of your service charge payments and advise you of any changes to your standing orders or direct debts.

Managing a property is not a task to be undertaken lightly. There is considerable legislation governing the administration of service charges and insurance and in addition the management will be responsible for routine risk assessments for the health and safety of residents. Organisations such as LEASE and ARMA provide information to assist leaseholders. The FPRA accepts membership from RTM Companies and can provide information and ongoing support. The RTMF is introducing a support package to assist RTM companies self-manage.

Managing a block and running a company are important responsibilities which should not be undertaken lightly. It is for this reason that it is generally recommended to appoint a professional managing agent. Right to Manage requires careful thought and planning but the RTMF scheme simplifies the process and looks after all the procedures and executive functions on leaseholders´ behalf, working alongside your nominated directors. With the administrative side handled by the RTMF and the cost controlled and minimised, leaseholders will usually find that the benefits of Right to Manage clearly outweigh any potential risks. If you are considering RTM the best advice is to consult with other estates that have already exercised RTM.

Yes, thousands of leaseholders in blocks of flats have already acquired RTM. They now enjoy better services and considerable savings in service charges, either through self-management or through the employment of professional management of their own choosing.