Right To Manage Company Formation Process2024-09-03T15:46:38+00:00

Right To Manage Company Formation Process

Right to Manage (RTM) is the right of leaseholders to form a company to take responsibility for the management of their block. It is important you understand the Right To Manage company formation process to determine whether you are eligible.

There are around 4.5 million leasehold properties in the UK, most of them owner-occupied or privately rented flats.

Available to leasehold property owners of flats, Right To Manage is a tenant management organisation which enables the people who live in the property to take control away from Landlords and managing agents.

If you are a leaseholder, you may be interested in forming a Right to Manage Company and taking over the landlord’s management functions. At Scanlans, we’re experts in helping people like you form Right to Manage companies. The process is relatively straightforward, and consists of the following steps.

What is Right to Manage?

By establishing a special corporation called as a Right to control (RTM) firm, leaseholders of apartments are legally permitted to control their development under the Commonhold and Leasehold Reform Act of 2002.

  • An RTM firm is accountable for the following management functions:
  • Manage costs and budgets and choosing how to allocate service charge monies
  • Achieving accuracy in the company’s financial records
  • Arranging for building and communal area maintenance
  • Coordinating maintenance and renovation
  • Making sure that the building and communal facilities adhere to the necessary laws and regulations

The Right to Manage can only be exercised by an RTM company, it cannot be exercised by the leaseholders themselves.

9 steps to forming a Right to Manage Company

A Right to Manage company can be challenging to set up.

A number of actions must be taken in order to incorporate an RTM business after you are certain that the development is eligible and that you are aware of the duties involved. These stages include:

Research Your Right To Manage Company

As mentioned, it is straightforward to set up a Right to Manage company. You do not need your Landlord’s permission, and you don’t even need a reason, although many choose to undertake this due to a poor or incompetent manager or landlord. However, it is important to first understand the responsibilities and liabilities of taking over the management of the building.

As managers of the building, you’ll be responsible for all decision-making relating to budgets, the agent tasked with the upkeep, repairs and overall management for services relating to the building. One of your duties as a Right To Manage company is to decide whether to perform the day-to-day management of the services relating to the building, or to instruct property management companies such as Scanlans Property Management to carry out the work and manage the building.

For most buildings, it’s best to get a professional managing agent involved, as they have the expertise and understanding of processes to be able to effectively manage the building.

Other responsibilities include the following:

– The Right To Manage company must appoint RTM officers, similar to company directors.

– Like any company, there needs to be AGM style meetings for all members to share their views on the management of the building.

– You will have to deal with issues relating to neighbours and fellow leaseholders, such as service charge demands and service charge expenditure.

– Directors within the Right To Manage company must be aware of the company, healthy and safety and housing laws.

Right To Manage Qualification

The next step of the process is to determine whether your building qualifies for Right To Manage. For a start, two-thirds of the flats at least must be let to tenants whose lease was originally given for more than 21 years. The building may have some commercial elements, but this must not exceed 25%.

Right to Manage relates to an individual building, so in the case of an estate, where there are multiple residential blocks, each would require its own RTM company should you choose to go down that route.

Right To Manage Company Formation

Once you’re satisfied that you are eligible, the next step is to form a Right To Manage company. The company itself is the entity that will obtain the Right To Manage and subsequently take responsibility for the management of the building.

As with any company, the Right To Manage company requires the following during its incorporation:

 – Memorandum of Association – This is a statement given and signed by those forming the Right To Manage company detailing their intention to set up the company.

 – Articles of Association – This sets out the purpose of the company.

You must register your company online with Companies House and become a private company limited. It costs £12 and there are built-in checks to help you avoid errors.

You can also register your company by post – but it’s taking much longer than usual to process postal applications.

If you’re ready to incorporate your Right To Manage Company, contact us today. We can form the company on your behalf.

Invitation To Qualifying Leaseholders

All qualifying leaseholders must be invited to become members of the Right To Manage company. The invitation must be served to all who qualify in writing. The letter must state the intentions of the Right To Manage Company, the current members, the company details and invite them to become a member.

The letter should also detail information explaining the possible financial liabilities for joining the Right To Manage company. It should also detail the intentions of the company relating to whether it plans to use a Managing Agent or not. Finally, the notice should also include the 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.

Exercise the Right To Manage

Once 14 days have elapsed following the notice of participation, the Right To Manage Company may now exercise the right to manage the building. This is done by serving the Landlord with a Notice of Claim. This should include the full names and addresses of all qualifying tenants, dates for a counter-notice to be received from the Landlord, details of the qualification for the Right To Manage company and the date for the Right To Manage company to acquire the right to manage the property.

Gain Access for Inspection

Once you have served the claim notice, you may now gain access to areas that are usually not accessible for leaseholders. This is so you’re able to determine the state of the areas you will now be responsible for.

Counter Notice

The Landlord has the right to then provide a counter-notice, which can either agree to the Right To Manage, or provide reasons why the Right To Manage is not entitled to proceed. If the Landlord provides reasons why the Right To Manage cannot proceed, the Right To Manage company must find a decision via a Tribunal.

Reimburse Landlord Costs

During the process, the Landlord may incur costs. These are to be refunded by the Right To Manage company.

Right To Manage Acquisition

This is the exciting acquisition date where the RTM company acquires control of the management of the company. At this stage, its important to ascertain as much information as possible from the Landlord. For example, the Landlord will have current contracts in place with third parties to help with the management of the building. The Right To Manage company will need to inform all third-parties informing them of the change in management. The Right To Manage company must also request any other information it requires from the Landlord, such as accounting information and maintenance schedules.

It is likely that the Landlord will also have service charges that haven’t yet been spent. This money should be recovered from the Landlord, and then spent in accordance with the agreed management of the building.

The Right To Manage Process can be very valuable to leaseholders looking to have more control over the way their building is managed. Whilst it does mean increased responsibility, employing a professional managing agent such as Scanlans Property Management can help produce the desired results.

If you’re interested, get in touch with our dedicated Right To Manage team, who will be able to guide you through the process, including the Right To Manage company formation.

Why was Right To Manage Put Into Legislation?

The Right to Manage (RTM) was introduced as part of the Commonhold and Leasehold Reform Act of 2002 to empower leaseholders by giving them greater control over the management of their properties. Before this legislation, leaseholders had limited recourse when faced with poor management by landlords or managing agents, often leading to disputes and dissatisfaction.

The RTM was put into legislation to address these issues by providing a more straightforward and accessible process for leaseholders to take over the management of their building. Unlike other methods, such as purchasing the freehold, the RTM does not require leaseholders to prove any fault or wrongdoing by the landlord. 

This made it a more viable option for many leaseholders who were frustrated with high service charges, poor maintenance, or a lack of transparency in management.

The introduction of RTM aimed to create a fairer balance of power between landlords and leaseholders, ensuring that those who live in and maintain the property have a say in how it is managed. It also fostered greater accountability and improved living conditions, as leaseholders now had the ability to make decisions that directly impacted their homes. 

By giving leaseholders the legal right to manage their building, the government sought to enhance the quality of property management across the UK, making it easier for residents to protect their investments and improve their living environments.

Looking for advice on the RTM process?

The Right To Manage Process can be very valuable to leaseholders looking to have more control over the way their building is managed. Whilst it does mean increased responsibility, employing a professional property management company such as Scanlans Property Management can help produce the desired results.

If you’re interested, get in touch with our dedicated Right To Manage team, who will be able to guide you through the process, including the Right To Manage company formation.

Get in touch today to find out more.

Right to Manage Process FAQs

What is the 2002 right to manage?

In order to allow leaseholders to take over the landlord’s management of their building without having to purchase the freehold, the right to manage (or “RTM”) was implemented in 2002. This involves the RTM company taking control by managing costs, organising maintenance etc.

What does a RTM company do?

A qualifying tenant (long leaseholders in apartment buildings) are permitted to take over building administration by RTM firms. A limited by guarantee business must be established by the leaseholders to handle management duties. The RTM company serves the other leaseholders in the building.

What is the notice period for the Right to Manage?

After acquiring the right to manage, an RTM Company is able to give its assent on matters where it is necessary, such as structural modifications. However, it is suggested that the RTM Company give the landlord at least 14 days’ notice of its intended decision.

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