Solicitors specialising in Right to Manage Company Formation
We have a dedicated team of expert lawyers specialising in leasehold property. Our team assist leasehold flat owners in matters such as obtaining the Right to Manage (or RTM), lease extensions and collective freehold purchase (also known as lease enfranchisement), along with the Appointment of Managers by Tribunal. The team are always happy to discuss any issue you may have and would be pleased to hear from you.
And as you can see from the length of this web page, taking over the right to manage your block of flats can be quite complex.
Got a question about the Right To Manage your block? Or simply want to discuss your options? Call our specialist team on FREEPHONE 0800 1404544 for FREE initial phone advice – no strings attached.
Flat owners’ rights – what are they?
The Commonhold and Leasehold Reform Act 2002 (“The Act”) gives you as the owners of leasehold flats the right to manage your own block. Provided you meet the qualification criteria, you can exercise this right by complying with the provisions and deadlines set out in the Act- without the need to prove that your freeholder/manager is at fault.
RTM Solicitors – your application and the importance of instructing genuine specialists
Freeholders and managers often prove keen to hang on to controlling the management of the block for one reason or another. Since this is a “no fault” claim, they will often try to do so by arguing purely legal or technical points in an effort to delay or otherwise stop the claim succeeding. That’s why it’s really important to instruct a specialist solicitor with plenty of experience of RTM claims, who can prepare the relevant notices on your behalf to make sure that your application complies with law and procedure, and to limit the risk of any objection succeeding.
Unfortunately, not many solicitors deal with the right to manage on a regular basis. And because, as you can see from this web page, it can be quite a complex area of law, that can be a real problem. Rest assured our team have the specialist experience you need. We deal with around 500 lease extension, freehold purchase and RTM applications every year, and have assisted around 10,000 people extend their lease, buy their freehold or exercise their right to manage.
We are also members of ALEP, the only organisation for solicitors and surveyors specialising in this area.
Why Acquire The Right To Manage Your Block?
The Right to Manage gives you as qualifying leaseholders the right to take over the management of your block through a Company which you have set up for the purpose (“the Right to Manage Company”). The RTM Company will be made up of the participating leaseholders and it will take over the management functions set out in the leases (except the right to forfeit those leases).
However there are limitations to what can be achieved under the Act. When you exercise your Right to Manage you are not buying or being given the freehold title – so, for example, you cannot make any changes to to any lease yourselves. You are therefore limited to managing the block in line with the terms of your lease.
Which Is Best For Us – Buying The Freehold Or Exercising Our Right To Manage?
Click here to find out more about Leasehold Enfranchisement vs Right to Manage
Does Our Block of Flats Qualify for RTM?
To qualify your building must;
· Be a self-contained building or part of a building, with or without “appurtenant property” ( i.e. any right or restriction which goes with that property)
· Contain two or more flats held by qualifying tenants
· The total number of flats held by qualifying tenants must be not less than two thirds of the total number of flats in the building
To be a self-contained building it must be structurally detached (there can be some attachment but it must not be structural). The question of whether or not a building is structurally detached or not has been the subject of many Hearings. It is a surprisingly complex issue and and and there is plenty of case law on the topic.
Meanwhile, a self-contained part of a building is one which is attached to another building but which is vertically divisible so that it could be developed independently of the rest of the building without significant interruption to the services of the rest of the building.
The important point to note here is that since a fairly recently decided case (Triplerose Ltd v Ninety Broomfield Road RTM Co Ltd) it is clear that the Right to Manage can only be acquired over a single set of premises (i.e. one block and its appurtenant property). This means in one development made up of a number of buildings, there may be as many RTM Companies.
However, in practice if several RTM Companies exist on one estate and they wish to coordinate their efforts, they could choose to instruct the same managing agent who could ensure a holistic approach is taken to block management.
What Type of Building Does Not Qualify for RTM?
These are often referred to as “Exempt Premises”. They include the following types of buildings;
· those with substantial non-residential parts
· those with resident landlords
· those with an immediate landlord who is a local housing authority
· those where there is already an RTM Company, and
· those where the right to manage has been acquired (but ceased within the past four years)
Your solicitor should be able to give you more information about your particular building to help you to establish whether your building qualifies. This is another reason why you need a specialist solicitor. They may need to inspect the premises in order to form an opinion on this point, which is crucial to your claim.
Who Are The Qualifying Tenants? Do You Have Sufficient Participation?
A Qualifying Tenant is;
· A leaseholder with a lease of over 21 years
· Where a head lease exists or multiple long leases over the same flat, the qualifying tenant is the one who is at the bottom of that chain
Exempt Tenancies;
· Business tenancies (if in business use at the relevant time)
· Unlawful subtenancies (unless the breach has been waived)
· Tenancies which aren’t assignable or capable of being sub-let as a whole
Your solicitor will be able to advise you as to who the Qualifying Tenants are in your particular block.
To proceed with a claim not less than 50% of the Qualifying Tenants of the property in question must participate (so 50% or more per building).
There is no period of ownership requirement and there is no limit on the number of flats any one Qualifying Tenant may own and still qualify.
What Appurtenant Property Should Be Claimed?
The following rights should be claimed where they belong to the relevant premises;
· Garages
· Outhouses
· Gardens
· Yards
· Other appurtenances
An experienced solicitor should be able to advise you as to what appurtenant property should be claimed – again they may require a physical inspection of the property to form an opinion on this point.
Your RTM Company
A company should be set up to manage your block. It’s definitely a good idea for this to be done at an early stage. One of the reasons for that is because there can only be one RTM Company in existence for any block, and if another company is set up before you get round to it, your claim may not proceed.
In short, your RTM Company must be a company limited by guarantee (i.e. without shareholders). It must have as its object the acquisition of and exercise of the right to manage the property.
There is a prescribed form of Memorandum and Articles of Association (two legal documents that form part of the company formation).
If you are one of the participating leaseholders, you will become a member of that RTM Company.
It may surprise you to hear, but it’s important to note, that once you have exercised your right to manage, your freeholder can also become a member of that Company.
However, third parties to leases who do not own any leasehold or freehold title in the property may NOT be members of the RTM Company (such a management companies).
RTM solicitors and the right to manage process
One of our specialist solicitors will manage the process for you and ensure the procedure and any timelines are followed. However in brief, the process involves;
1. Initial investigation – does the building qualify and who are the qualifying tenants?
2. Establish that you have sufficient interest in each relevant building
3. Set up the RTM Company
4. Serve Notice of Invitation to Participate on EVERY qualifying tenant in each relevant building to let them know your intentions and to invite them to join in (this is mandatory) unless they are already members of the RTM Company
5. Enter into a Participation Agreement or have each participant sign a Letter of Intent
Click to read more about Participation Agreements
6. Select your managing agent, at least in principle
7. Consider your preferred Acquisition Date, taking into account any management issues, contracts, service charge issues, insurance renewal date, financial year end
8. Obtain as much information as possible about the current management, there are notices in a prescribed form which are available for this purpose
9. Consider appurtenant property over which the right to manage is going to be claimed
10. Prepare and serve your claim notice upon the landlord/s and any third party management company/s, copies kept for file
11. Diarise key dates and wait to see whether any objection is raised to claim
12. Consider whether you need to claim a right of access during that period
13. Then;
a. If the claim is admitted by your freeholder, then on the Acquisition Date (set out in your notice of claim) the management obligations will pass to your RTM Company.
b. Alternatively if your freeholder disputes the claim, then you will have to make an application to the First Tier Property Tribunal for a decision on whether you are able to exercise your right to take over management of your block
What happens if our freeholder challenges are claim to exercise our right to manage?
In fact, in the event of a dispute either party may apply to the First Tier Property Tribunal for a decision. Fortunately there are a relatively small number of disputed RTM claims – largely because the right to manage is a legal right for qualifying leaseholders, and are only a small number of reasons to justify an objection.
Click here to find out more about the First Tier Property Tribunal works.
Future Management of your block?
Crucially, on the Acquisition Date all management contracts determine – unless otherwise agreed by the RTM Company.
As a result, a good deal of thought needs to go into the management of the block BEFORE the Acquisition Date.
It is a good idea to instruct a managing agent who can deal with the day to day running of the block. The RTM Company will of course have the power to make decisions about management and to instruct a managing agent of their choosing, but an agent will have the expertise and the time to give to the work to ensure it is well managed. You will want to consider your choice of agent at an early stage. The process may be quick once the notices have been served and you will need to have a manager in place on the Acquisition Date in readiness.
Court Appointment of a Manager
Exercising the Right To Manage does not stop the qualifying tenants in a block from applying to have a manager appointed by a Tribunal.
It is important to be aware of this route. Even if you do not wish to seek to pursue it, others in your block may feel differently. Even an RTM Company can be replaced by a manager appointed by the Tribunal and there is no minimum participation required for Appointment of a Manager.
There are advantages to Appointment of a Manager.
- In particular if the leases are defective in the way in which they recover service charges then it may be better to seek the Appointment of a Manager instead of the Right to Manage (although an RTM Company can apply to the appropriate Tribunal to vary leases which are defective under the Landlord and Tenant Act 1987).
- Another advantage is that where there are several blocks on an estate, the Right To Manage only allows one claim per block, which could result in several RTM Companies being involved in the management of one estate. Whereas a Tribunal are able to appoint one manager to cover a whole estate if they feel it is appropriate.
However, Appointment of a Manager is a fault based claim and you must prove your claim. For example, you might be able to show that your freeholder is not maintaining your property to an acceptable level. As a result, the costs may be higher in respect of your legal work – and the outcome, as with any Tribunal or Court claim, is not guaranteed.
Click here to read more about the Court Appointed Property Manager
Thinking of Exercising Your RTM?
If you and your fellow flat owners would like to investigate the possible acquiring the Right To Manage at your building further, the RTM solicitors in our Leasehold Property Team would be more than happy to assist with any queries you may have.
There may, however, be sufficient interest within your building to investigate the possibility of purchasing the freehold, known as ‘Collective Enfranchisement’ or you may have a claim for Appointment of a Manager by Tribunal.
You also have rights available to you as an individual flat owner to purchase a leasehold extension from your freeholder.
FAQs
What are RTM rights?
Right to Manage refers to leaseholders taking over the management of their flats from the freeholder. If you are eligible, you can form a management company with the other flat owners and deal with issues, including putting buildings insurance in place, arranging for maintenance to be carried out and collecting service charges.
What is the Right to Manage law?
The law relating to Right to Manage is set out in the Commonhold and Leasehold Reform Act 2002. If you meet the following criteria, you and your fellow leaseholders can apply to the freeholder to take over the flat management:
• Two-thirds of the flats in the block must have leases originally granted for 21 years or more, known as ‘long leases’
• At least half of the flat owners with long leases must join in with the application or, if there are only two flats, both of the flat owners will need to participate
• The property must be at least 75% residential
If the block has four flats or less and the freeholder lives in one of them, he can generally stop the leaseholders from taking over the management.
How long does it take to get right to manage?
If you instruct expert solicitors to deal with the right to manage, it can often be completed within 6-8 months. There are several stages to go through, including:
• Obtaining the agreement of enough leaseholders to join in the process
• Serving a notice inviting participation on all long leaseholders who are eligible to join in but who have not yet agreed to participate
• Setting up a management company to take over the management role
• Serving a right to information notice on the freeholder asking for the documentation you need for the Right to Manage process
• Setting up bank accounts to pay service charges and sinking fund contributions into
• Serving a notice of claim of the right to manage on the freeholder
The freeholder has one month in which to serve a counter notice, should they choose to.The notice of claim must include a completion date and this must be at least three months from the date of any counter notice. This means that completion will be at least four months away from the time the notice of claim is served.
What is a notice of claim for Right to Manage?
The notice of claim is the document that tells the freeholder that the leaseholders wish to take over the Right to Manage. It must include certain information, including full details of the management company and confirmation of the actions that the company will be responsible for.
It is essential that you correctly draft the notice or the freeholder may be able to avoid handing over the Right to Manage.
The freeholder’s counternotice can consent to the claim or, in some limited circumstances, object. Objection is possible if:
• The building does not qualify
• The leaseholders are not eligible
• A management company is set up, but it does not comply with the rules
