Rights to Manage (RTM) is a legal right that enables leaseholders of a building to take control of the management of their building without the consent of the landlord. This right was introduced in the Commonhold and Leasehold Reform Act of 2002, which aimed to give leaseholders more control over their building and the management of their homes.
The process of obtaining RTM is straightforward, and the leaseholders only need to meet certain eligibility criteria to exercise their right.
Eligibility for Rights to Manage
To be eligible for RTM, the leaseholders must meet certain criteria. These can get complex and we will cover them in future blog posts, but in simple terms:
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- The building must be a self-contained building or part of a building
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- The building must contain at least two flats that are held by qualifying tenants
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- Not more than 25% of the floor space of the building is used for non-residential purposes
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- None of the flats can be owned by a local housing authority
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- At least 50% must agree to the action, or both in the case of 2 flat buildings
The RTM process
Qualifying tenants must form a limited by guarantee company (not shares!) to take on the management of the building.
In most cases, the company must serve a notice on the landlord and any existing management company detailed in the lease informing them of the leaseholders’ intention to take control of the building.
The landlord has until the end of the given notice to make a challenge, but if no challenge is made, the leaseholders can proceed with taking control of the building. Challenges are limited in scope and allow the leaseholders to take the application to tribunal within two months.
Once an RTM has been agreed, the company formed by the leaseholders becomes responsible for the management of the building, including the maintenance, repair and insurance of the building.
The benefits of Rights to Manage (RTM)
Increased control: With an RTM, leaseholders have more control over the management of their building, which can sometimes result in a better living environment.
Lower costs: As the management of the building is taken over by the leaseholders, the costs associated with any existing management companycan be reduced, resulting in lower service charges for the leaseholders.
Improved communication: RTMs encourage better communication between the leaseholders and the landlord, as the leaseholders can negotiate directly with the landlord on matters relating to the management of the building.
Increased transparency: RTMs promote transparency in the management of the building, as the leaseholders have access to the financial and other records relating to the management of the building.
Note: it is possible for an RTM to fire an existing third party management company and self manage instead. However, it is also perfectly possible for the RTM to instead decide on another third party management company to take care of the property. An RTM does not necessarily mean leaseholders have to do all the management, it can just mean the leaseholders get to choose for themselves the management company they wish to represent them.
The drawbacks of Rights to Manage (RTM)
Complexity: The process of obtaining an RTM can be complex and time-consuming, requiring the involvement of solicitors and other professionals.
Cost: There is a cost associated with obtaining an RTM, as the leaseholders may need to pay for solicitors, surveyors and other professionals.
Responsibility: Once an RTM is obtained, the leaseholders become responsible for the management of the building, which can be a daunting task for some.
Conclusion
An RTM provides leaseholders with an opportunity to take control of the management of their building, which can result in a better living environment, lower costs and improved communication with the landlord. However, the process of obtaining an RTM can be complex and costly, and the leaseholders must be prepared to take on the responsibility of managing the building once RTM is obtained.
It is important for leaseholders to carefully consider their options and weigh the benefits and drawbacks of running an RTM before deciding to pursue it. They may want to consult with solicitors and other professionals to determine if RTM is the right option for their building.
Seek advice, speak to others in shared buildings, and decide together by communicating with your neighbours before proceeding. If you do proceed, know that Freeholder.app will make management a whole lot easier.