The right to manage (RTM)

These rights are set out in Chapter 1, Part 2, Commonhold and Leasehold Reform Act 2002.

The right to manage is a way for leaseholders of a building to take over managing that building. You do not need permission or an order from a court or tribunal to set up a right-to-manage company (RTM company). It is a right that you (and the other leaseholders) can exercise simply by serving a claim notice on your landlord (and any management company that is also named on the lease). However, there are some situations where the RTM company can refer disputes, costs or other issues to the tribunal for a decision.

Your landlord can apply to the tribunal to challenge your notice to set up an RTM company for the following reasons.

• The building is not eligible for the right to manage, for example, because more than 50% is non-residential or less than two-thirds of the flats are owned by qualifying leaseholders.
• The RTM company is not eligible, for example, because less than half of the qualifying leaseholders are members of the RTM company or because the RTM company has not been set up in line with the regulations.
• The RTM company has not followed all the necessary procedures and requirements of the application process.

Your landlord cannot apply to the tribunal to challenge your right to set up an RTM company just because they object to losing the management of the building, or because they have doubts about the management experience or competence of the RTM company.

If your landlord gives the RTM company a counter-notice challenging the company’s right to manage the building, the RTM company can apply to the First-tier Tribunal within 2 months of the date of the landlord’s counter-notice for a decision that it was, on the relevant date, entitled to take over managing the building. The tribunal’s decision will be based only on whether the RTM company had the right to take over managing the building on the date the leaseholders served the claim notice to set up the RTM.

If the tribunal decides that the RTM company did not have the right to manage the building, the claim notice will no longer have any effect, and the tribunal can order the RTM company to pay the landlord’s reasonable costs arising from the notice and the tribunal hearing. A decision becomes final at the end of the period allowed for appeal (if there is no appeal), or at the time when any appeal is finally decided.

Application Form – Application Relating to (No Fault) Right to Manage

If the RTM company cannot serve the claim notice on the landlord or any other relevant people or companies involved (known as parties to the lease) because they cannot be traced, the RTM company can apply to the tribunal for an order that it is entitled to take over managing the building.

The tribunal will expect the RTM company to have made all reasonable enquiries into the identity or whereabouts of the landlord, for example, by writing to their last known address or writing to the solicitor who drew up the original lease. If the RTM company still does not manage to trace the landlord and needs to apply to the tribunal for an order, it must first serve a notice on all the qualifying leaseholders of the building telling them it intends to apply to the tribunal for an order. (There is no prescribed form for this notice.)

The tribunal will consider the steps the RTM company has taken and may ask it to take further action. If the landlord (or a landlord of any part of the building) is traced because of this, the tribunal will take no further action on the application and the RTM company will be able to go ahead with serving the claim notice.

If the landlord is still not traced, the tribunal may make an order which will transfer the right to manage to the RTM company. The tribunal can also tell the RTM company what it needs to do to put this right in place.

If the RTM company finds the landlord after applying to the tribunal, but before the tribunal makes the order, the tribunal will take no further action in connection with issuing the order. Instead, the matter will be treated as though you had made the claim notice on the date of application, and all the rights and obligations of the RTM company will be decided as though you had served a claim notice. However, if the tribunal has already made the order before the landlord has been found, the application for an order cannot be withdrawn without the landlord’s or tribunal’s permission.

On the day the RTM company takes over managing the building, or as soon as possible afterwards, the landlord, any manager appointed under section 24 of the Landlord and Tenant Act 1987, and any management company that is also named on the lease must give the RTM company all ‘accrued uncommitted service charges’. These are the total of:

• all the service charges collected from the leaseholders; plus
• any service charges held in any investments, together with any interest that has built up on these; less
• any amount needed for any spending that should be covered by the service charge and which took place before the RTM company took over

The RTM company, the landlord, a manager appointed under section 24 of the Landlord and Tenant Act 1987 and any management company that is also named on the lease can apply to the tribunal for a decision on how much this payment should be.

If your landlord arranges an external assessment of this amount, they can charge the RTM company the reasonable fee for this as part of the costs. The RTM company can then challenge the assessment by applying to the tribunal if it believes the assessment is not accurate. However, the assessment does not have to be carried out by law, and the tribunal can decide the amount your landlord must pay to the RTM company, based on the information they have available. Clearly, both the RTM company and your landlord will need to provide evidence of:

• the service charges leaseholders have been asked to pay during the charging period
• the amount the leaseholders have actually paid
• any service charges that have not yet been paid
• any money your landlord has paid for work and services
• any service charges that are held in any investment account, and the interest on these amounts

One of the RTM company’s duties is granting approval under the terms of the lease. You will often need to ask your landlord for approval under your lease, for example, to transfer the lease or to sublet the flat or make alterations to it. If there is an RTM company, you will need to ask it, not your landlord, for any approval that is needed under your lease.

The RTM company must give your landlord (or landlords) 30 days’ notice before granting approval relating to transferring the lease, subletting the property, creating a legal charge over the property or parting with possession of it, making structural alterations or improvements, or altering the use of the property. In any other case, the RTM company must give your landlord 14 days’ notice before granting approval. If your landlord objects to the approval or wants to set conditions, they must tell the RTM company and you about this. The matter can then be referred to the tribunal. You, the RTM company or your landlord can make the application to the tribunal. (Or, if the approval relates to someone you want to sublet the property to, that person can apply to the tribunal for a decision.)

If there used to be an RTM company for your building, but it no longer manages the building, you cannot set up a new RTM company for four years from the time when the previous right to manage ended. (This does not apply if the right to manage ended due to the freehold of the building transferring to the RTM company.) However, you (and the other leaseholders) can apply to the tribunal to allow you to serve a claim notice to set up a new RTM company before the end of the four-year period. The tribunal will only allow this if they are satisfied that it is reasonable to do so.