Right to Manage Guidance

How Right to Manage Works

In order to be eligible for the Right to Manage (RTM) both the premises / block and the applicant leaseholders must meet a statutory criteria. RTM only applies to leaseholder owners of flats and not to leasehold houses or bungalows.

The premises / block will qualify if they consist of a structurally detached building or part of a building that can be served independently, they contain two or more flats held by qualifying tenants, and at least two-thirds of the flats are leased to qualifying tenants.

The premises / block will not qualify if more than 25% of the floor area is non-residential, if there are self-contained parts owned by different landlords, if it is a property owned by the local authority, or it is a building of four or less flats with one flat being occupied by the landlord as his principle home.

A qualifying tenant is a leaseholder whose lease was originally granted for a period exceeding 21 years. Where a flat is being let under two or more long leases, a tenant that holds the superior lease is not the qualifying tenant.

RTM Company Formation

Right to Manage is only exercisable through an RTM company set up according to statutory regulations. An RTM company must be a private company limited by guarantee and its articles of association states that its object, or one of its objects, is the acquisition and exercise of the rtm the premises.

All qualifying tenants are entitled to become members of the RTM company, with individual liability limited to £1. The landlord also has the right to become a member of the RTM company after the Acquisition Date as he retains an interest in the property and his membership is usually limited to a single vote.

Since November 2009 an RTM company only requires a single director, but larger blocks will typically be comprised of a board of three or more. There is no requirement for directors to be leaseholders, however 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 freeholder has no legal right to be a director but is entitled to a single membership of the RTM company.

Legally, you do not need a majority to proceed. As long as at least half the leaseholders in the block are in support, the Right to Manage process can proceed. However, it is generally advisable to aim for at least two-thirds to become members of the RTM company. This also avoids any criticism that the procedure is undemocratic.

The exercising of Right to Manage is started by the formation of the RTM company with leaseholders as founding members and at least one leaseholder as a director. Once the RTM company is established it must 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 Right to Manage is determined a month later with the RTM company taking over the management a further three months later.

Note: The RTMF does not manage properties or recommend specific management companies. We have no agreements with management companies and we do not receive commission from management companies. However we will provide impartial guidance and on occasions we may advise against management companies that are financially unsound or have a poor track record and previously proved unsatisfactory

Do You Qualify for Right to Manage

In order to qualify for Right to Manage Legislation the following must apply:-

  • The premises / block must be a structurally detached building or self-contained part of a building.
  • The premises / block must have at least two flats.
  • At least two-thirds of the flats must be owned by “qualifying tenants”.
  • If part commercial the non-residential part must not exceed 25% of the total floor area.
  • At least 50% of the leaseholders in the premises / block must be in agreement to proceed.
  • If your building is a converted property of four or fewer flats, the premises will not qualify if either the landlord or an adult member of the landlord´s family occupies one of the flats as their principal residence.
  • The local authority is not the landlord of any qualifying tenant.

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The Right to Manage Process
(See the section below for the RTM process for Retirement Blocks.)

  • Founding members instruct RTMF and pays the Right to Manage costs.
  • RTMF forms an RTM Company according to statutory memorandum and articles. Liability limited to £1 per member.
  • RTMF make Land Registry searches.
  • RTM Company serves s.78 Notices Inviting Participation of non-members.
  • When 50% or more membership is achieved, after 14 days RTM Company serves s.79 Notice of Claim on Landlord.
  • Landlord may serve s.84 Counter Notice within 1 month. Legal grounds should be limited to the procedure not being followed, the qualification of the building or company members.
  • If no Counter Notice Right to Manage is determined after 1 month. (Determination Date).
  • If a counter notice is served denying Right to Manage the RTM company can make an application to the FTT for determination within two months of the date of the counter notice. The determination date is either the date the landlord withdraws the counter notice or the date of the FTT decision (Allowing 28 days for appeal).
  • Following the Determination Date, the Landlord must serve s.92 Contractor and Contract Notices to advise about the pending RTM.
  • Leaseholders organise themselves for management, either by selecting or appointing a new managing agent or by forming their own management structure.
  • 3 months after the Determination Date the RTM Company acquires Right to Manage (Acquisition Date). Landlord/Manager hands over management/funds etc to new RTM Company or to leaseholders appointed Managing Agent.

The Right to Manage Process for Retirement Estates

  • RTMF give presentation to Leaseholders.
  • All Leaseholders invited to become members. 50% required to proceed. Liability limited to £1 per member. Members give good-faith refundable deposit towards the Right to Manage costs.
  • RTMF forms the RTM Company according to statutory memorandum and articles.
  • RTM Company serves s.78 Notices Inviting Participation of non-members.
  • With 50% membership, after 14 days the Right to Manage Company serves s.79 Notice of Claim on Landlord.
  • Landlord may serve s.84 Counter Notice within 1 month. Only legal ground is if procedure has not been followed. Minor inaccuracies are discounted.
  • If no Counter Notice Right to Manage is determined after 1 month. (Determination Date).
  • If Counter Notice is served the RTM Company can take matter to LVT (within 2 months). Determination date is either date the Landlord withdraws Counter Notice or date the Counter Notice is decided by the LVT (allowing 21 days for appeal).
  • Following Determination Date, Landlord must serve s.92 Contractor and Contract Notices to advise of RTM.
  • Following Determination Date RTMF invites members to join a Manager Selection Committee.
  • Manager Selection Committee selects a short list of 3 potential Managing Agents.
  • RTMF prepares tender documentation and invites tenders from three nominated agents.
  • Two Managing Agents invited to give presentations to all leaseholders.
  • Manager Selection Committee makes final recommendation of Managing Agent.
  • Arranges generel meeting of members of the RTM Company (GM) to vote on Selection Committee recommendation.
  • If appointment approved at GM, RTM Company completes agreement with nominated agent. New Managing Agent pays the Right to Manage costs and RTMF refunds leaseholders deposits.
  • Three months after the Determination Date the RTM Company acquires Right to Manage (Acquisition Date). Landlord/Manager hands over management/funds to new Managing Agent.

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Management Selection Process
(Retirement Blocks Only)

The appointment of the new management company is democratically determined by a Members’ Selection Committee. The invitation to join this committee is open to all members of the RTM company although we only advise participation by those capable of reviewing detailed information and willing to attend all meetings. There is no limit on committee size although it will typically comprise your founding directors and an equal number of members.

Selection Committee

The first meeting of the Selection Committee takes place shortly after Determination Date. The principal objective of this meeting is to determine a checklist of priorities and arrive at a shortlist of three potential management companies that will be invited to tender for the management contract. Very often leaseholders have recommendations from other estates that are well-managed or they may have made contact with local property management companies or found potential candidates on the internet. If requested the RTMF can supply lists of management companies with Right to Manage experience. The selection committee will also be asked to review a draft schedule of services and a management questionnaire, which will form the basis of the tender documentation.

RTMF Guidance

The RTMF does not recommend specific management companies. We have no pre-existing agreements with management companies and we do not receive commission from management companies. We do provide impartial guidance and on occasions we may advise against management companies that are financially unsound or have a poor track record and previously proved unsatisfactory.

Management Company Qualification

We would usually advise against the appointment of a management company that is neither a member of the ARHM (The Association of Retirement Housing Managers) nor ARMA (The Association of Residential Managing Agents). ARHM members are bound by a code of practice approved by the Secretary of State for the management of retirement housing and ARMA members operate to a similar residential management code produced by the Royal Institute of Chartered Surveyors (RICS).

Invitations to tender

Following the first selection committee meeting the RTMF collates all the appropriate information into one package, which is then sent to each of the shortlisted management companies in the form of an invitation to tender for the management contract. This information will typically include a questionaire, a copy of your property lease, a copy of your current service charge budget and a draft contract for approval. Each company will be asked to submit their own draft budget using the same format for easy comparison.

Second Meeting of Selection Committee

The second meeting of the selection committee takes place following the receipt of information and tenders from each of the shortlisted companies. The purpose of this meeting is to eliminate one of the companies. The remaining two companies are then invited to give presentations to all resident leaseholders. Elimination is determined by a show of hands and simple majority of the committee.

Management Company Presentations

The management company presentations and the final selection usually take place within the same week. Typically the two chosen management companies will give presentations at convenient times between Monday and Wednesday. Although the presentations are technically being arranged by the RTM Company for its members it is usual practice to invite all residents in the hope that those that are not already members may be encouraged to join and take a full part in subsequent meetings. The management company presentations are usually followed by a question and answer session so that everyone has the opportunity to participate..

Final meeting of Selection Committee

The final meeting of the selection committee usually takes place on a Friday morning following the management company presentations earlier in the same week. The purpose of the meeting is for the committee to arrive at its recommendation for the management appointment. To assist in the decision process the RTMF uses a simple scoring system based on the priority checklist agreed by the committee at its first meeting. This is only used as a guide and is always followed by further debate before voting takes place. The final committee recommendation is determined by a show of hands and simple majority. It should be noted that this is only a recommendation and still requires ratification by members in general meeting, usually on the Friday afternoon.

Members General Meeting

The primary business of the general Meeting is for members to vote whether or not they accept the management recommendation of the Selection Committee. Voting is preceded by debate and members have full opportunity to question the Selection Committee about its findings. The recommendation is then put to members in the form of a motion and voting is by simple majority. If the motion is approved the directors are empowered to enter into a formal management agreement with the proposed company.

Note: In the unlikely event that members vote against the recommendation the chair will usually ask the meeting to vote on the appointment of the second management company. In the very unlikely event this is unsuccessful the general Meeting would be adjourned and the Selection Committee would have to reconvene to reconsider its recommendations.

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Right to Manage Costs
See the section below for Retirement Blocks

Our standard fee for RTM is a base charge of £500, plus £75 multiplied by the number of flats in the applicant block plus VAT.

If there are multiple blocks applying it is now a legal requirement to form one RTM Company for each block even if it is intended that a single management company will manage the blocks. The overall fee for each block in a multi-block estate is a base fee of £500 per block plus £75 multiplied by the total number of flats in the block.

If the Claim is disputed and it is necessary to make applications to the First-tier Tribunal or the Court, the cost of professional representation is subject to an additional charge, usually about £1,500. This may increase by agreement in complex cases.

EXAMPLES

For a block of 3 flats the all inclusive fee will be:-
£725 plus VAT = £870

For an estate comprising 1 block totalling 10 flats, the fee will be:-
£500 plus 10 x £75 (£750) plus VAT = £1,500.

For an estate comprising1 block totalling 40 flats, the fee will be:-
£500 plus 40 x £75 (£3,000) plus VAT = £4,200

For an estate comprising 3 blocks totalling 45 flats, the fee will be:-
3 x £500 (£1,500) plus 45 x £75 (£3,375) plus VAT = £5,850

RTM Costs for Retirement Blocks

Under our subsidised scheme the RTM process is potentially free to all leaseholders. The democratically selected managing agent agrees to pay the RTM cost and the fee paid by each participating leaseholder is fully refunded on completion of the process.