If you already are a director of a Rights to Manage company or you are about to buy a leasehold property covered by an RTM, it’s important to understand the responsibilities and duties that come with the role. In this blog post, we’ll provide a basic overview of the role of an RTM director, including any legal obligations and best practices.
What is an RTM Director?
A RTM (Rights to Manage) director is a member of the board of directors for the company that has been established to manage the common parts of a building or estate. The role of an RTM director is to ensure that the company is run effectively and in accordance with its legal obligations and, most importantly, the terms of the lease.
Owning a leasehold property managed by an RTM does not automatically make you a director of that RTM. Many shared apartment blocks have only a couple of directors, or a committee. However, if you own a share of the freehold, some of the following responsibilities may also apply to you.
Legal obligations of a Director
RTM companies are limited companies and therefore directors have the same fiduciary duty as any other business would. These include:
1. Duty of Care and Skill
2. Statutory Duties – RTM directors must be aware of the Companies Act 2006, the Environmental Protection Act 1990, and the Health and Safety at Work Act 1974.
3. Duty to Exercise Power for Proper Purpose
4. Duty to Exercise Independent Judgment
5. Duty to Exercise Reasonable Care, Skill, and Diligence
6. Duty to Avoid Conflicts of Interest
7. Duty Not to Accept a Benefit from a Third Party
8. Duty to Declare an Interest in a proposed transaction or arrangement with the company
These duties may seem daunting and it is a role that should be taken with due consideration. However, if you have been involved in the running of another business before, the above may seem a little easier to handle.
The bottomline is: care about your role, make the playing field fair, and above all, keep your environment safe.
Specific RTM Duties
In addition to the above, an RTM director takes responsibility for:
Recovering Service Charges – RTM directors are responsible for managing the finances of the company, including collecting service charges from leaseholders.
Dealing with enquiries and complaints – RTM directors are responsible for dealing with any enquiries or complaints from leaseholders about the management of the building.
Reviewing and entering into service agreements – RTM directors are responsible for reviewing and entering into service agreements with contractors, suppliers, and other service providers.
Paying contractors and other services/suppliers – RTM directors are responsible for paying contractors, site staff, and other services and suppliers in a timely manner.
Placing comprehensive building insurance – RTM directors are responsible for ensuring that the building or estate is adequately insured. This includes placing comprehensive building insurance.
Health and safety assessments (especially Fire Safety) – RTM directors are responsible for ensuring that the building or estate is safe and in compliance with health and safety regulations. This involves carrying out regular inspections and assessments to identify any potential hazards. It is common for RTM directors to hire external fire safety organisations to do the correct assessments.
To ensure that you are fulfilling your duties as an RTM director, it’s important to follow best practices. These include:
Read and understand the lease – RTM directors should read and understand the terms of the lease to ensure that they are fulfilling their obligations.
Communicate effectively with leaseholders – RTM directors should communicate effectively with leaseholders to ensure that they are aware of developments within the company.
Maintain accurate records – RTM directors should maintain accurate records of all transactions and decisions made by the company.
Seek professional advice when necessary – RTM directors should seek professional advice when necessary to ensure that they are fulfilling their legal obligations and best practices.
How Freeholder app helps
Freeholder app provides a safe space for all the documents related to managing your RTM and allows them to be shared with all leaseholders. This not only improves transparency, but also reduces the amount of work a director has dealing with leaseholder requests. Freeholder also provides a shared calendar to distribute duties among directors and leaseholders, ensuring that all bases are covered.
Check out freeholder app today for free.
The role of an RTM director is an important one, and it comes with significant responsibilities and legal obligations. It can be daunting, but self managing your property can be a lot cheaper and a lot more reactive that hiring a property management company to do it for you. It is not best practice to tackle these responsibilities alone and other leaseholders should be brought into the fold, as directors, if help is needed.
If you want to find out more, here are some useful links: