Leaseholders struggling with issues of poor servicechargesorted.co.uk/blogs/block-management-service-charges-how-it-affects-the-stakeholders'>block management can exercise the Right to Manage (RTM) and take over the charge of managing the building. The Commonhold and Leasehold Reform Act 2002 enables leaseholders to establish a Right to Manage company (RTM company) irrespective of the present quality of servicechargesorted.co.uk/blogs/block-management-service-charges-how-it-affects-the-stakeholders'>block management.

The right to manage the property comes with real responsibilities as the RTM Company must appoint directors and comply with the Articles of Association and Company Law. Forming a right-to-manage company requires detailed planning. Despite a straightforward process, there are several complex qualifying criteria and rules to follow.

Considering the option of RTM

Considering the option of RTM

A property management company handles the common services in a block of apartments or flats, keeping the building in a sound state of repair. Leaseholders can decide to take control of property management by coming together if the services are not satisfactory. A common motivator is often the landlord over charging for buildings insurance.

Right to Manage is also helpful if leaseholders have concerns about lack of covenant enforcement, anti-social behavior, or general overcharging by the property management company. The right to manage can be an effective tool to put management in the hands of leaseholders. This is because it allows them to take control of property management without having to get approval from the landlord.

There are other options to deal with the problem of poor property management, like the court-appointed manager process and buying the freehold. But the court-appointed manager route requires fault on behalf of the landlord to be proved and buying the freehold requires the majority of leaseholders to have funds to pay their share of the premium (or purchase price).

The essential qualifying criteria

The essential qualifying criteria

RTM is only available for buildings with flats or apartments. A leasehold house is not eligible to apply. Leaseholders can exercise the right to take over property management regardless of the quality of the landlord's management. Applying for the right to manage requires a minimum of fifty percent of long leaseholders to be part of the application.

A minimum of 75 percent of the area must be with the leaseholders or put another way not non-residential blocks, i.e., not commercial shops or offices. The Right to Manage is available for individual buildings satisfying all eligibility requirements, even if the property comprises several buildings. The landlord may become a member of the RTM company, though leaseholders need not seek their consent to form the RTM company.

The RTM Company

The RTM Company

Forming a Right to Manage Company is vital if leaseholders plan to exercise their right to manage. The Right to Manage Company ensures efficient property management, as the right to manage is not available to individual leaseholders.

The purpose, activities, and articles of association of the company should all be outlined in the Memorandum of Association in order for the RTM Company to be recognised. Preparing the list of leaseholders willing to form the RTM company and assigning directors and officers are essential elements of forming the company. The Company constitution is then set out in the Memorandum of Association.

The main benefits of the Right to Manage

The main benefits of the Right to Manage

Leaseholders need not prove the mismanagement of the present property manager while applying for the right to manage the property. It is a no-fault process. After establishing the right to manage, the following benefits are available.

Leaseholders have control over property management, including control over expenses. They may negotiate service contracts to minimize costs.

The RTM grants equal rights to all leaseholders in decision-making and voting.

Freedom to select or change contractors

RTM is more efficient if actively run by the new RTM Board which can set the standards and strategic direction for the block.

The takeaway

The takeaway

Exercising the right to manage can be a positive step toward improving property management and saving costs. Leaseholders can implement their ideas for effective property management. The right to manage is an easier option than purchasing the freehold, a costly and complex alternative. The RTM is another helpful solution for removing the existing building management system for leaseholders.