In the UK, providing that buildings and leaseholders meet the criteria, Leaseholders have a legitimate right to form a Right to Manage (RTM) company to take over building management from the landlord or the existing property manager. Exercising the Right to Manage is a complex process and has long-term implications and Leaseholders must understand that the decision to set up an RTM company involves profound responsibilities. Besides, they should know the pros and cons of RTM before taking things forward.
Considering the Right to Manage option
Usually, the property management company of the Freeholder's choice looks after the management functions of the communal areas of the building. Common reasons for leaseholder disputes are excessive service charges, mismanagement, and lack of communication. Leaseholders can explore the option of the Right to Manage to resolve these issues as setting up an RTM company can enable cost savings by getting financial control over building management.
RTM helps leaseholders take timely decisions collectively to serve the interests of all members. If Leaseholders choose to manage their building themselves this ensures a dedicated service rather than a property management/property manager who likely has several buildings to look after. Leaseholders can appoint contractors of their choice as RTM empowers them with complete control over building management.
In order to ensure the smooth running of the RTM company there should be a mutual understanding between Leaseholders
Highlights of RTM
Subpar building management is a rampant problem across the UK, affecting most leaseholders. Right to Manage is the solution for leaseholders having issues with their property management company. The Commonhold and Leasehold Reform Act of 2002 introduced the Right to Manage legislation, allowing leaseholders to take over building management functions from the landlord or property management company by setting up a Right to Manage Company. The right to manage does not mandate the leaseholder to prove mismanagement to take over block management control from the existing company or landlord. Leaseholders need no permission from the landlord to exercise their right to manage.
Setting up an RTM company entitles leaseholders to the right to levy and collect management service charges. As well as maintaining their communal areas i.e. gardens, cleaning, electricity, etc. they will also be responsible for organizing their health & safety compliance i.e. fire risk assessments. An RTM helps save costs as leaseholders need not pay for the services of a property management company however Leaseholders have the authority to appoint a property manager or managing agent of their choice.
Potential issues with the right to manage
The right to manage the building comes with a myriad of responsibilities. Leaseholders have to fulfill all tasks of a typical property management company. It can be stressful for leaseholders for several reasons:
1. Most activities require close coordination and are excessively demanding and time-consuming.
2. Organize or appoint contractors – ensuring that they are appropriately qualified, insured, and provided the best value
3. Ensuring repairs are completed promptly
4. Arrange building insurance
5. Ensure compliance in line with continually changing legislation
Running an RTM company involves significant stress, whether the leaseholders decide to manage the functions of the building themselves or appoint a managing agent. The type and nature of leaseholders managing the RTM company play a crucial role in the overall management of the venture. Changes in leaseholders can hamper the functioning of the RTM company. Expert advice is necessary to operate RTM. Besides, the leaseholders must understand their responsibilities for the smooth functioning of the building management without a professional property management company.
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