services - Right To Manage (RTM)
RTM was introduced through the Commonhold and Leasehold Reform Act 2002 and provides a right for leaseholders to force the transfer of the landlord’s management functions to a special company set up by them – the Right To Manage company (‘RTM Co’).
The Right To Manage is available to leaseholders of flats, not of houses. The right is exercised by the service of a formal notice on the landlord. After a set period of time, the management transfers to the right to manage company (‘RTM Co’) which has been set up by the leaseholders. Once the right to manage has been acquired, the landlord is also entitled to membership of the company.
What is Right To Manage (RTM)?
It makes sense for the leaseholders to take general control of the upkeep of their most valuable asset, their home, especially if it is felt that the landlord, and its appointed managing agent, are not offering the best value or service from the service charge monies collected.
In acquiring the power to make approvals and to enforce the covenants of the leases, the leaseholders become wholly responsible for all decision-making in terms of budgets and reserve funds, standards of management and provision of services, repairs and major works, and with the overall function of the building.
Taking greater control of the management results in a more appropriate choice of contractors and service that deliver better value and therefore can lead to reduction in service charge budget spend.
Why consider RTM?
The timescales are largely determined by the 2002 legislation, as it sets out clear timebound gateways for moving through the process. Typically though the process to acquisition will take 4-5 months but this can be extended if there are any disputes or if there is a delay in transferring existing funds.
How long will the process take to acquire the RTM?
Due Diligence and set up the RTM company (2 weeks)
PAD will ensure the application is valid and will highlight any perceived risks.
It is the ‘RTM Co’ that actually acquires the RTM on your behalf (not PAD). Some leaseholders will need to be Directors.
Serve notice on the landlord and ask other leaseholders if they want to join the ‘RTM Co’
Invite non-participating flat owners to join. Issue claim notice to landlord, advising of the intention of the leaseholders to acquire RTM.
If needed - deal with disputes in the counter-claim
Address any counter claim notice by the landlord (typically, these are rarely upheld). Go to tribunal for judgement if needed.
Complete acquisition (at least 4 months from the date of first notice)
landlord transfers money and cancels existing contracts
Our RTM package costs just £30 per unit (£350 minimum charge) but we will also beat any like for like quote.
The fee is payable to us at the start of the process. The only other potential further charge from
PAD will be to cover any Tribunal for a judgement – this is very rare.
What does RTM cost?
The ‘RTM Co’ must reimburse the landlord for any costs incurred in the process. This may generally be taken to mean the landlord’s legal expenses in dealing with the notice, any accountancy or audit costs arising from provision of accounts or transfer of monies and the costs of his solicitor or managing agent in the hand-over of management records and functions. This typically ranges from £25-£75 per flat, but can be either side of this range.
On average, leaseholders typically pay less than £80 each to get RTM and in the norm is able to recoup this saving and more in the first year.
All leaseholders who participated in the RTM will be members of the ‘RTM Co’, those who didn’t participate can become members at any point. On the acquisition date the ‘RTM Co’ takes over the management functions of the block.
‘Management functions’ are defined in the legislation as ‘functions with respect to services, repairs, maintenance, improvements, insurance and management’ – that is, the delivery of all the duties reserved to the landlord under the lease. Typically these will include:
repairs, redecorations and maintenance of the structure of the building and the common parts, including cyclical or seasonal maintenance and the maintenance of plant and facilities, lifts, central heating boilers etc;
improvements to the building (where this is included in the lease);
provision of services – the lighting of the common parts, heating, cleaning, grounds maintenance, caretaking and porterage, warden services in the retirement sector etc;
arranging the insurance for the building;
levying and collection of service charges, accounting and the provision of statutory and other information;
compliance with all statutory requirements relating to the management and fabric of the building;
the day-to-day management of the building.
The right to receive the ground rents does not pass to the ’RTM Co’ but remains with the landlord.
How will it be different after the RTM process is complete?
The Directors will make decisions on behalf of all the leaseholders. Typically, the first decision is whether the leaseholders want to manage the block themselves or engage a managing agent.
As a managing agent, PAD can deliver a flexible service that’s right for you, taking on as much or as little as you’d like to, so please don’t hesitate to get in touch so we can discuss how our service can help complement the management of your block.
Whether using PAD as your managing agent or not, the leaseholders will control how the block is managed and what works are undertaken, hence ensuring leaseholders start to see the savings in annual service charges and improvements in the way the block is managed.