What is right to manage and how does it work?

Niki Adkins, Partner in Frettens' Leasehold Property Team, explains what the right to manage' is, how it works, and how leaseholders can set up a RTM company.

What is the right to manage?

The right to manage allows leaseholders to take control of the management of their block under the Commonhold and Leasehold Reform Act 2002.

The Act gives leaseholders the ability to force the transfer of the management functions to a Right to Manage (RTM) company set up by them.

How to set up a RTM company

How do I get the right to manage?

Qualifying tenants can acquire the right to manage under the Commonhold and Leasehold Reform Act 2002. Whilst the freeholder’s consent is not required, it is necessary to serve a formal claim notice on your freeholder. After a set period of time the management will transfer to the Right to Manage company.

How do I qualify for right to manage?

Under the Commonhold and Leasehold Reform Act 2002 there is set criteria that must be fulfilled in relation to the tenants and the premises in order to qualify for right to manage:

• The premises must be a self-contained building or part of a building.
• Two or more of the flats are held by qualifying tenants.
• The total number of flats held by those tenants is not less than two-thirds of the total number of flats.
• The participating tenants must be those of flats comprising of not less than 50% of the total number of flats at the date the Claim Notice is served.
• A tenant can participate regardless of the number of flats they own in the building.
• Not more than 25% of the building can be non-residential/commercial.

Does a leaseholder have to prove that a property has been badly managed to attain the right to manage?

It is not necessary to prove the freeholder’s mismanagement and the right to manage is available automatically so long as the tenants and the premises qualify under the Commonhold and Leasehold Reform Act 2002.

What is a right to manage company responsible for?

What rights do the RTM company have?

The Right to Manage company’s rights will largely be guided by the management structure set out by the covenants contained in the existing leases. This means that the company will provide the services and collect service charges as is stipulated in the existing leases.

Do I need a solicitor to set up RTM?

Whilst it is not necessary to have a solicitor set up the Right to Manage company, there are a number of formalities and requirements provided by the legislation that must be followed correctly in order to avoid your freeholder rejecting your claim.

We would usually advise that participants enter into Participation Agreements to set out the rights and obligations of all the parties and ensure all participants provide the correct funds. The Participation Agreement is legally binding and will help to protect all of the participants.

A specialist solicitor will be well placed to prepare and distribute the Participation Agreements together with all the other necessary documentation.

What procedures need to be followed when creating a RTM company?

All qualifying tenants at a block are entitled to become members of the Right to Manage Company. Accordingly, it is necessary to invite all of them to participate using the prescribed form.

Once the Right to Manage Company is set up and all the qualifying tenants have been invited to join a formal Claim Notice must be served on your freeholder. Once a set period of time has passed the management will transfer to the Right to Manage Company.

How much does the RTM process cost?

The members of the Right to Manage Company will be responsible for the Right to Manage Company’s legal fees and expenses. In addition, they will also be responsible for the freeholder’s reasonable legal fees and expenses.

Right to manage solicitors - how we can help

Our bright team of specialists is experienced in dealing with the Right to Manage process from start to finish.

We offer a free initial chat for all new clients, so whether you are considering your options regarding RTM, or are looking for some more technical advice, please don't hesitate to call us on 01202 499 255 or contact us here..