Right to Manage

Legislation: Commonhold & Leasehold Reform Act 2002

What is Right to Manage (RTM)?

The right for the leaseholders of a building containing flats to take over management of the building from the freeholder, via an RTM company.

Qualification:

• The right applies to leaseholders of a building or part of a building containing at least 2 flats.
• At least two-thirds of the flats in the building must be owned by long leaseholders (leases of more than 21 years when first granted)
• At least half of the flats in the building, held by long leaseholders, must take part.
• The building does not qualify for RTM if the non-residential areas, eg shops, make up more than 25% of the whole floor area of the building.
• The building may not qualify if there are four or fewer flats and there is a resident landlord.

Procedure:

• Participating leaseholders must set up an RTM company using prescribed Articles of Association.
• A notice inviting participation must be served on all leaseholders who are not members, or who have not agreed to become members.
• A Notice of claim for RTM must be the served on the freeholder not earlier than 2 weeks after the above notice. This is a technical notice and, ideally, should be drawn up by a professional.
• The freeholder can challenge RTM by counter-notice within one month.

  If he does, the RTM company can apply to the First-tier tribunal (Property Chamber), or Leasehold Valuation Tribunal where the building is in Wales, for a ruling as to whether they have the Right to Manage.

• If the freeholder does not challenge, the RTM company acquires Right to manage four months from the date of the notice of claim. (“the acquisition date”)
• The freeholder should notify the RTM company of existing contractors and also notify those contractors of the take over by the RTM company

Management:

• The RTM company does not have to keep on the freeholder`s existing contractors, eg managing agents. They can employ their own agents, or manage the building themselves.
• The RTM company takes on all management functions under the lease, although the freeholder has to be kept informed on such matters as consents eg to alterations or letting.
• The RTM company has the power to enforce obligations under the lease, but not to use the forfeiture procedure.
• The freeholder is entitled to apply to be a member of the RTM company after the acquisition date.
• The RTM company must abide by the Articles of Association and company law. Officers of the company will be needed eg Directors.