For leaseholders struggling with poor management or financial concerns, exercising the Right to Manage |(RTM) can be a great option. The process is relatively straightforward, but it is not without its challenges.
In this article, we will provide a step-by-step guide to help leaseholders navigate the process effectively, ensuring a smooth transition to RTM.
Step 1: Determine Eligibility
Before starting the RTM application, it is important to determine whether your building is eligible:
- Your block must consist of at least two flats.
- At least 50% of the building must be used for residential purposes.
- At least 50% of leaseholders must be willing to participate.
- At least two-thirds of the flats must be owned by leaseholders whose leases were originally granted for terms longer than 21 years.
It may be a good idea to consult a solicitor in these early stages. They can verify that your building meets the criteria, saving time and avoiding potential legal issues later in the process.
Step 2: Form an RTM Company
Once eligibility is confirmed, the next step is to set up an RTM company. The RTM company must be formally incorporated, as it will represent the leaseholders when serving the legal notices and managing the building in the future. It must be a private company, limited by guarantee and every participating leaseholder must be a member.
You can register the RTM company online, either yourselves or with the help of a solicitor. The company must have the appropriate Memorandum and Articles of Association, as required by law. Each participating leaseholder must become a member of the RTM company. This gives them voting rights and allows them to be involved in key decisions.
Tip: Setting up a steering group is beneficial. Responsibilities can be assigned, helping to distribute the workload and make for a smoother process.
Step 3: Gather Leaseholders’ Support
Once the RTM company is formed, the next step is to gather support from the other leaseholders in the building. At least 50% of leaseholders must be in favour of the RTM. This can be challenging as not all leaseholders will have the same enthusiasm for taking on management responsibilities.
Arranging meetings to explain the benefits of RTM such as improved quality of service and better control over costs can be helpful. You can also create leaflets or a simple information pack that explain what RTM means and what is involved in the process.
Be transparent about the responsibilities and any costs involved – open discussion can help alleviate fears and increase the likelihood of agreement.
Step 4: Serve Notice Inviting Participation
Once the RTM company has gathered enough support, a “Notice Inviting Participation” must be served to all qualifying leaseholders in the building. This notice invites leaseholders who have not yet joined the RTM company to participate.
The notice should include the name of the RTM company and explain the rights that leaseholders have to join. Recipients should be given at least 14 days to respond.
Tip: Keep clear records of which leaseholders have been served the notice and their responses. A well-documented process will help prove that everything has been done correctly if any disputes arise.
Step 5: Serve the Notice of Claim
The next step is to serve a “Notice of Claim” to the landlord. This is a formal notice, stating that the RTM company intends to take over the management responsibilities of the building.
The Notice of Claim must include:
- A clear description of the building, including addresses.
- The RTM company’s name and registered address.
- A proposed date for when the RTM company intends to take over management (this is usually at least three months after the notice is served).
Your freeholder then has 28 days to respond. They can either accept the notice or dispute it if they believe the RTM company does not meet the requirements.
Tip: A mistake in the Notice of Claim could lead to unnecessary delays or a legal dispute. It’s best to hire a solicitor to ensure that the notice is drafted and served correctly.
Step 6: Respond to Your Landlord’s Reply
If the landlord agrees to the Notice of Claim, the process can move forward smoothly. However, if the landlord disputes the claim, they must do so within 28 days, providing reasons for the objection. Common reasons for dispute include claims that the building or RTM company does not qualify.
If a dispute arises, you should apply to the First-tier tribunal (Property Chamber) and supply all your supporting evidence. They can then determine whether the RTM Company has the right to proceed. Professional legal support is advisable in this instance.
Step 7: Management Handover
Once the Notice of Claim is accepted or the tribunal grants the RTM company the right to proceed, preparations must be made for the management handover. The handover date is usually three months after the Notice of Claim has been accepted. During this time, the landlord is required to provide the RTM company with necessary information such as financial statements, maintenance contracts and health and safety records.
If you lack experience in managing a property, it is advisable to appoint a professional managing agent. This ensures that responsibilities like maintenance, insurance and service charges are handled correctly and efficiently.
Tip: A managing agent should be selected well in advance. Look for an agent who has experience with RTM properties and is a member of a professional body to ensure high standards.
Step 8: Running the RTM Company
Once handover is complete, the RTM company will be fully responsible for managing the building. This includes:
- Maintenance: Arranging repairs, scheduled maintenance and improvements.
- Service Charges: Collecting service charges from leaseholders and ensuring that funds are managed responsibly.
- Compliance: Ensuring that the building complies with all safety regulations, including fire safety.
Key Tips for Success:
- Regular Meetings: Hold regular meetings for the RTM members to make decisions collectively and ensure everyone is informed.
- Hire Professionals When Needed: Consider hiring an accountant to manage financial records or a managing agent to handle day-to-day operations.
- Transparency: Maintaining transparency with all leaseholders about costs and management decisions helps prevent conflict and ensures everyone remains satisfied with the RTM company’s actions.
