What is the Right to Manage?

The Commonhold and Leasehold Reform Act 2002 introduced a right enabling leaseholders to take over the management of their building by setting up an RTM company. Leaseholders do not have to prove that the current landlord or property manager is at fault. The RTM company assumes full management responsibility for the building and is free to appoint any property manager of its own choosing. Right to Manage was first exercised by leaseholders in retirement estates in 2006.

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 less scrupulous managers and freeholders.

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 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.

The first step is usually a no-obligation RTM presentation to leaseholders in your estate lounge or at a nearby location. If RTM has support , the next step is the incorporation of your RTM company with 50% or more leaseholders as founding members and at least one leaseholder as a director. 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 grounds to object and the legal 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 final step is for you to appoint a managing agent of your choice and on your terms to provide the ongoing management service to your estate. In the 3 month interval between the Determination Date and the Acquisition Date the RTMF sets up a Selection Committee comprising the nominated directors and volunteer leaseholders and arranges for short-listed management companies to make presentations at your estate. The RTMF does not recommend specific management companies but does assist you in identifying the key information required to help you vet those selected. The RTMF offers a template Management Agreement which can be modified to suit your specific needs and we help in negotiating your final agreement to ensure you will get the services you require.

The RTM company is only required to have one director but will typically have 3-5 directors. There is no requirement for directors to be residents and often relatives of residents will volunteer to join the board. In this event it is usually recommended that the majority of directors are resident 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 in the unlikely 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 in their eighties who enjoy this privilege of service and perform the task with exemplary efficiency.

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.

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). The Association of Retirement Housing Managers (ARHM) has its own government approved code. For retirement estates we generally advise against any managing agent that is unwilling to commit to the ARHM Code of Practice. In addition, our standard management agreement 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 your 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 FTT. These expenses will be minimal (typically between £500 and £2,000 depending on the size of the block) and will usually be borne by the RTM Company after Acquisition Date.

Yes, most probably. Many leaseholders are facing excessively high charges for items such as insurance, alarm monitoring and maintenance contracts purchased at uncompetitive prices. By appointing your own 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 Competition & Markets Authority Residential Property Management Services (RPMS) market study published in December 2014 advises that “where residents have an RTM company their degree of satisfaction over RPMS is higher”.

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 after the Acquisition Date 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 house managers flat (called warden´s flat or caretaker´s flat in earlier leases) 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.

FAQs for retirement blocks

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 seamless. Unlike solicitors or company agents the RTMF provides ongoing support throughout, attending meetings with residents, liaising with prospective management agents and generally guiding leaseholders through the entire RTM process until the chosen management company takes over.

All the fees and expenses of acquiring your Right to Manage will be paid by the RTMF. To cover initial expenses incurred in setting-up the RTM Company and as evidence of leaseholders’ good faith to proceed with RTM the RTMF will request a deposit of £60 from each participating leaseholder. These deposits will be fully refunded when the RTM process is completed and a new management company appointed.

Yes, thousands of leaseholders in blocks of retirement flats have already taken this step with RTMF assistance. They now employ professional management of their own choosing, providing better services and considerable savings in service charges.