Understanding Right to Manage (RTM)

By Nige on October 31, 2024 at 8:50 am
Type: Post Category: Leasehold
Tags: Right to Manage | RTM

The Right to Manage (RTM) is a legal right that allows leasehold property owners, often in apartment buildings or developments, to take control over the management of their building. This framework empowers residents by enabling them to form a management company and assume responsibility for services such as maintenance, repairs, and other building-related obligations.

Established under the Commonhold and Leasehold Reform Act 2002 in the UK, RTM gives leaseholders a direct voice in the management of their homes, fostering greater transparency, accountability, and cost-effectiveness.

Quick Links

• Why was RTM Introduced?
• Key Benefits of RTM
• How does the RTM Process Work?
• Challenges and Considerations
• Is RTM Right for You?
• Moving Forward with RTM
• Why is this Important to Clients of Residents First?

Why was RTM Introduced?

RTM was introduced to address common issues faced by leaseholders, such as:

• Poor management by freeholders or appointed managing agents
• High service charges with little transparency on where the money goes
• Limited input in decision-making processes for building maintenance and management

By granting residents the right to manage their own buildings, RTM offers a route to improved building management, financial transparency, and greater resident control without requiring the purchase of the freehold.

Key Benefits of RTM

1. Control Over Costs: RTM enables leaseholders to set their own service charges, often resulting in cost savings. Without the need to turn a profit, RTM companies can focus on actual maintenance needs, avoiding inflated or unnecessary costs.
2. Transparency: Residents gain direct access to financial information about the building, including budgets, expenditure, and contracts with service providers. This transparency is a significant benefit for those who previously had limited visibility into how funds were used.
3. Decision-Making Power: With RTM, residents have a say in important decisions such as choosing contractors, setting maintenance priorities, and managing communal spaces. This can enhance the quality of services and ensure that priorities align with the residents’ needs.
4. Improved Accountability: Since RTM companies are composed of residents themselves, there’s greater accountability in terms of how the building is managed. Leaseholders can more effectively oversee and address issues that may have been previously overlooked.

How Does the RTM Process Work?

The RTM process involves several steps:

1. Forming an RTM Company: Leaseholders must establish a Right to Manage company, which is a limited company specifically created to take over the management of the building.
2. Qualifying Criteria: At least 50% of the building’s leaseholders must be willing to participate. The building itself must qualify under RTM rules, which typically means it must be self-contained and primarily residential.
3. Serving Notice to the Freeholder: Once the RTM company is formed, it must serve a formal notice to the building’s freeholder, who then has the right to respond or challenge.
4. Transfer of Management: If the freeholder doesn’t contest, management transfers to the RTM company. At this point, residents can take control of contracts, service charges, and property maintenance decisions.

Challenges and Considerations

While RTM provides significant benefits, there are important considerations:

• Legal and Administrative Costs: Setting up an RTM company involves legal and administrative expenses. Leaseholders should consider these costs when deciding if RTM is right for their building.
• Collective Responsibility: Running an RTM company requires ongoing commitment from residents, as they’ll need to handle contractor relationships, budgeting, and administrative duties.
• Potential for Disputes: Occasionally, freeholders may challenge RTM claims, especially if they have financial interests in managing the property.

Is RTM Right for You?

RTM can be an effective solution for leaseholders looking to improve building management, control costs, and ensure that decisions reflect their interests. If you’re considering RTM, assess factors such as resident interest, the complexity of building maintenance, and the availability of committed residents willing to take on management responsibilities.

Moving Forward with RTM

For residents ready to pursue RTM, it’s wise to seek legal advice and consult with other leaseholders. In many cases, professional RTM advisors or property management companies can provide guidance on transitioning smoothly.

The Right to Manage is an invaluable tool for leaseholders who want greater control and transparency over their property. By uniting residents in the management of their building, RTM fosters a community-driven approach that puts decision-making back into the hands of those who call the building home.

Why is this Important to Clients of Residents First?

RTM tends to be the first suggested action when leaseholders complain about increasing service charges imposed by the managing agent appointed by their freeholder/landlord.

It’s a relatively easy first step in securing control of services and costs, and as long as the block qualifies for RTM, is a legal right available to leaseholders.