Do you own a leasehold property, have rights to manage the building, and are looking to appoint a director of your Right To Manage (RTM) company?

It’s important to understand who can be a director of a Right To Manage company, as well as their duties, responsibilities, and legal obligations. Knowing this information is essential for successfully appointing a director to the role.

This blog post aims to provide a detailed overview of what RTM company directors need to know so that they can be successfully appointed to the role.

From understanding the process for appointing a director, to exploring the benefits, advantages, and responsibilities associated with being a director of an RTM company, this article covers everything you need to know about becoming an RTM company director. We will also answer the all-important question: who can be a director of a Right To Manage company?

Short Summary

  • Right to Manage enables leaseholders to assume full responsibility for the management of their building.
  • Directors of an RTM company have a range of legal duties and responsibilities, and the role of a Company Secretary is to provide technical and specialist knowledge to the board of directors.
  • Becoming a director of an RTM company involves qualifying factors, understanding the duties and responsibilities associated, taking out Directors’ and Officers’ insurance, enlisting the services of a solicitor, and being aware of the technical terms involved.

Overview of Right to Manage

💡 More information on Right To Manage eligibility

Leaseholders may exercise their Right To Manage their building by forming an RTM company, as provided for by the Commonhold and Leasehold Reform Act 2002. Leasehold flats are the only ones applicable to this. This does not apply to any other type of property. The RTM company takes full management accountability for the building and its members have the option to appoint a property manager of their own.

This entails registering at Companies House, managing filing accounts, annual reports, and collecting service charges. Leaseholders have the ability to set the standards of their block, in addition to managing fees and service charges.

In order to set up an RTM company, a minimum of 50% of the qualifying leaseholders must qualify and provide consent to proceed. The RTM company must be registered with Companies House and the leaseholders must issue a formal notice to the landlord. Upon completion of these steps, the RTM company is authorised to assume the management of the building.

Who Qualifies? (Who Can Be a Director of an RTM Company?)

To qualify to become the director of a Right To Manage (RTM) company, an individual must be a leaseholder with an original lease of more than 21 years, with no limit on flats owned in order to qualify. Additionally, each block requires individual qualifications for RTM, and directors of RTM companies have personal liability for any action taken in their role as directors.

It is important to note that at least one director must be appointed, but potentially a number of directors can be appointed to a single RTM company. Often, RTM companies will have 3-5 directors.

Qualifying individuals must be aged 16 and over, and, as with any other company director, should not have been disqualified or convicted of a criminal offence in relation to the promotion, formation or management of a company.

5 Duties and Responsibilities of an RTM director

It is also important to understand the duties, roles and responsibilities of RTM directors.

The directors of the RTM company are responsible for the day-to-day management of the company, for ensuring that health and safety legislation is adhered to, and for the collection of service charges. They are also responsible for ensuring that board meetings are held as necessary and that the company complies with all relevant legislation.

Legal obligations

An RTM director has particular duties and responsibilities to both the company and the leaseholders in their capacity as a company director. Ensuring that the management company works lawfully and conforms with all applicable regulations and laws is the director’s key responsibility. They must also utilise their authority for the betterment of the RTM business in its whole and exercise reasonable care.

The RTM director has legal responsibilities and obligations that they must be aware of while interacting with the landlord or management firm. 

They have to make sure that the RTM firm is shielded from any legal action and that the leaseholders’ interests are taken into consideration. In order to make sure that all legal and filing obligations are fulfilled, the director must also collaborate closely with the company secretary.

Day-to-Day Management and Operational Responsibilities

Directors of RTM companies are responsible for a variety of daily operations and managerial tasks. These include overseeing the property, handling leases and service fees, communicating with managing agents or property managers, making sure the articles of association are followed, resolving particular issues pertaining to managing an apartment building, and giving priority to health and safety issues.

Directors need to be aware of their duties related to property management, including upkeep of communal areas, external building repairs, and insurance policy arrangements. 

RTM directors are responsible for managing lease agreements since they have assumed management of the property. They have to make sure that the structure and consistency of every leasing agreement is the same. The lease should specify how other fees and leasehold service costs are to be paid.

Meetings

It is imperative that directors continue to be actively involved in the day-to-day operations of RTM. Regular attendance at meetings, accurate minute taking, and updating members are all expected of them. 

This guarantees that all members have the chance to participate in decision-making processes and that the company’s affairs are transparent.

Health & Safety

Directors are also required to make sure that the RTM company’s health and safety policies are current and that sufficient safeguards are in place to avoid and control any potential risks. 

They have obligations related to health and safety, but they also have to follow fire safety rules and keep safe evacuation protocols in place in case of an emergency.

If the director is unsure of health and safety legislation, they should seek specialist advice from a professional management company.

Obligations of a director

Directors bear several legal obligations, burdens, and responsibilities because they oversee a company’s operations. Directors must, for instance, behave in good faith and in what they sincerely feel to be the company’s best interests.

The general responsibilities that all directors have under the Companies Act of 2006 are, in general, as follows:

  • To act within their powers;
  • To promote the success of the company;
  • To exercise independent judgement;
  • To exercise reasonable care, skill and diligence;
  • To avoid conflicts of interest;
  • Not to accept benefits from third parties;
  • To declare an interest in a proposed transaction or agreement.

Directors owe certain obligations to the company, and the company has the right to enforce them if they are broken. It is noteworthy that the company’s members have the authority to start this process if they believe the directors are failing to fulfil their responsibilities.

Company Secretary’s Role

A Company Secretary is an officer elected by the directors during the company formation process that is responsible for ensuring that directors are kept informed of the company’s daily operations. A professional managing agent can also often act as a Company Secretary service due to the technical and specialised nature of the role.

The role of a Company Secretary is critical in an RTM company as they are required to exercise independent judgement, manage the company’s service charges, and ensure that all directors comply with their legal responsibilities.

Having a Company Secretary in an RTM company offers a number of benefits, including providing technical and specialist knowledge to the board of directors. This can be crucial in helping to ensure that the company meets legal and regulatory requirements and avoids potential legal issues and disputes.

In addition, the Company Secretary is responsible for ensuring that the board of directors accept only benefits that are reasonable and takes reasonable care in all management responsibilities, such as setting up board meetings, monitoring conflicts of interest, and filing annual accounts with Companies House.

Benefits of Being an RTM Director

The advantages of being a director in an RTM company are numerous.

  1. As a director, you will have the opportunity to influence the development and operations of the building you live in and be involved in its day-to-day management.
  2. Additionally, you can also use your voice to provide feedback to other directors and the company secretary.
  3. Becoming a director also allows you to be a part of the land registry title, which is an important part of the management functions.

With these benefits, plus the wider benefits of the Right To Manage, it is clear to see why it is advantageous to become a director of an RTM company.

How Can I Become a Director of an RTM Company?

First things first, you’ll need to check you qualify based on the criteria for directors of RTM companies as outlined above.

Once you have established that you qualify, the next step is to go through the formal process of becoming an appointed director. You must be approved by a majority vote of all members of the RTM company and it’s important to note that you cannot be voted in without unanimous agreement from all members.

After being approved, you will need to complete the necessary paperwork and submit it to Companies House. You’ll also need to provide proof of identity and address and sign a Declaration of Compliance.

Once this process is complete, you will officially become a director of an RTM company.

Right to Manage – Make the First Step

Scanlans Property Management is one of the leading block management companies in the UK, supporting leaseholders and residents with their Right To Manage process for a number of years.

Right To Manage is a great way to have more control over your residential block, and having an experienced managing agent by your side ensures a smooth Right To Manage process.

We’re regulated by ARMA, so you can be confident the management of your block is in good hands. Our services are fully inclusive, meaning you can sit back and relax whilst we manage all aspects of the block.

If you’re interested in exercising your Right To manage, get in touch with Scanlans today to see how we can support you through the company formation process and ongoing management of your residential block.

Not sure what to do or if a development may apply? Contact our RTM and block management experts for an informal without obligation discussion.

Summary

Being a director of a Right to Manage company can be a beneficial opportunity for leaseholders of flats, as it provides the power to shape the future and management of one’s building.

Whilst there are certain qualifications needed to gain this role, such as having an original lease of more than 21 years, for most interested parties this opportunity can be a fruitful one.

However, before doing so, directors must weigh up all associated responsibilities and be aware of the potential risks involved with RTM.

From understanding and adhering to legal duty obligations to taking Directors’ and Officers’ insurance and enlisting the help of a solicitor, pursuing the position of a Right To Manage company director involves making sure you have knowledge of all aspects.

Additionally, the company secretary is also an important figure who can provide extensive support within the framework of the RTM company.

Taking all of these factors into consideration, those considering becoming a director of an RTM company should take time to seek advice or guidance from those with professional expertise.

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Frequently Asked Questions

Who can be a director of an RTM company?

Anyone can be a director of an RTM company, as long as they meet the criteria outlined in the Memorandum and Articles of Association. Directors must be at least 18 years old and property owners or leaseholders on the Land Registry Title.

How do you become a director of Right To Manage a company?

You will need to ensure that you meet the criteria outlined in the development Memorandum and Articles of Association for becoming a director. All directors must have the necessary skills and commitment to working collaboratively to manage the building.

What is an RTM director?

As an RTM director, one is responsible for leading the Right to Manage Company by ensuring that all leaseholders are properly invited to join, dealing with any associated service charges and enquiries, as well as resolving complaints in accordance with legislation and the terms of the lease.

This involves ensuring that all leaseholders are aware of their rights and obligations and that they are given the opportunity to exercise their Right To Manage. It also involves ensuring that all service charges are properly collected and that any disputes are resolved in a timely and efficient manner.