Can residents taking over management company?


Residents have the Right to Manage their own development which is enshrined in Law by what is called a Right to Manage Process and legally form an 'RTM company. There are a few initial steps to start this process the main one being having a majority (over 50%) vote to change. Normally residents would then appoint a specialist RTM solicitor to act for them and serve the relevant papers and notices to the Freeholder. This normally takes about 4 months on average from start to finish.

There are two ways for leaseholders to take over their management company – only if the residents also own their flat. That is the Right to Manage and the Court Appointed Manager -In essence it doesn’t matter whether or not the leaseholder actually occupies in the flat – it is the ownership of the flat that gives them the right to take over the management of their block.

So in reality, residents can’t necessarily take over management of their block – but leaseholders (owners) can.
By leaseholders this means someone who owns a “long leasehold” flat ie with a lease that was originally granted for at least 21 years.

Here at Ringley, we have a dedicated five strong leasehold team who focus on work related to leasehold property : leasehold extensions, right to manage, and freehold enfranchisement. 

Is Right to Manage RTM the same as a Residents Management Company?

No, they are very different. In essence RTM's have the right to change agents as do RMC's but RMC's have far more control (see below). 

Two ways to take overcontrol of your block :

1. The usual way of gaining management rights is through (and by law) Exercising your Right to Manage (often referred to as RTM).

2. The alternative – an application to the First Tier Property Tribunal (or FTT), for the Appointment of a Manager although the application is to the FTT, this route of taking over management of your block is more commonly known as an application for a Court Appointed Property Manager.

The two routes are very different. 

It is important to note the Court Appointed Manager route. Even if you don't wish to seek to pursue it, others in your block mayhave a different sentiment. The resdients need to be aware that even an RTM Company can be replaced by a manager appointed by the FTT – and there is no minimum participation required for Appointment of a Manager.

And an application for Appointment of a Manager application can be made by only a single leaseholder

Can residents take over management of their block? Flat owners’ rights

The Commonhold and Leasehold Reform Act 2002 (“the Act”) provides leaseholders with the right to manage their estate. Provided you meet the qualification criteria, you may exercise the right by adhering with the provisions and deadlines set out in the Act, and without the need to prove that your freeholder/manager is in default.

As this is a “no fault” claim, freeholder and existing block managers will sometimes take purely technical points in an effort to prolong or otherwise defeat your claim, clearly when they wish to keep the management for any reason. It is for this reason it is so imperative to instruct a specialist RTM solicitor who is knows  Act in detail and whom can prepare the relevant notices for you to ensure the provisions are complied with and to mitigate the risk of such problems.

Why would you exercise your Right to Manage?

The Right to Manage gives qualifying leaseholders (owners) the right to take over the management of their block through via a LimitedCompany which they have incorporated for the purpose (“the RTM Company”).

The primary reason why leaseholders would decide to take over management of their block themselves is normally because the current block management is either too expensive or simply doesn’t get the work done satisfactorily. Ineffective maintenance or high service charges affect the value of your apartment, but also can make it really difficlut to sell on.

The RTM Company will be consist of the active and participating leaseholders whom will take over the management functions set out in the leases (except the right to forfeit those said leases).

There are limitations to what can be achieved under the Act - Be aware when you acquire the Right to Manage you are not actually buying the freehold title and you cannot therefore make any changes to the lease itself. You are then limited to managing the block with the provisions contained in the original leases.

Does the Block Qualify for a RTM Company?

To qualify the building or estate :

·         Has to be self-contained building or part of a building

·         Have two or more flats held by qualifying leaseholders

·         The number of flats in total held by qualifying leaseholders cannot be not less than two thirds of the total number of flats in the building

What actually is a self-contained building?

To qualify as a self-contained building, your block must be structurally detached so the question of whether or not a building is structurally detached or not the subject of many Court hearings - thers is plenty of case law exists on the topic to guide your advisor.

Premises which are exempt : 

·         Blocks with substantial non-residential parts

·         Blocks with resident Freeholders

·         An immediate Freeholder who is a local housing authority

·         Where there is already an RTM Company

Your solicitor or surveyor should be able to give you more information about your particular building to help you to establish whether your building qualifies. They may need to inspect the premises in order to form an opinion on this point which is crucial to your claim.

Setting Up Your Management Company


A new RTM company to manage your block will need to be formed at Companies House – do this early because there may only be one RTM Company in existence for a particular building so if someone else has formed a company before you your claim may not succeed.

Your block management Company must be “a company limited by guarantee” – a certain type of company without shareholders or share capital, and based around the fact that it’s members act as guarantors of the company’s liabilities.  This new management company must then have as its aim the acquisition of and exercise of the right to manage the block.

There must be a prescribed form of Memorandum and Articles of Association. Also the company name needs to include the ending “RTM Company Ltd”

The participating leaseholders (owners) will all be members of the RTM Company and any leaseholder that doesn’t participate in the art application, will not.

 

The Process of Your Right to Manage

Ringley Law will manage the process for you and ensure all procedurea and any timelines are adhered to.

1.    An initial enquiry into the facts – ie does the block even qualify and who are the qualifying leaseholders ?

2.    Establish that there is sufficient take up in each relevant building

3.    Purchase and professionally set up the RTM Company at Companies House

4.    Serve a Notice of Invitation to Participate to qualifying leaseholders in each block informing them of your intentions and to ask them to join in ( that is unless they are already members of the RTM Company).

5.    Enter into a Participation Agreement or have each leaseholder sign a Letter of Intent.

The Participation Agreement is avery important document especially with larger blocks as it is a binding document that commits all those who signit  to remain involved in the whole RTM process. It is deigned to ensure leaseholders stay committed through what can often be a frustrating and lengthy process.

6.    Select your prospective replacement managing agents. - this is Ringley's main business.

7.    Select a preferred Acquisition Date (i.e. the date when you would like to take over the right to manage). 

8.    Collect as much information as possible about the current management agent regime. 

9.    Serve your claim notice upon the freeholder and any third party management companies.

10.  Diarise key milestone dates to ascertain any objections to the claim

11. Consider whether ther is a need to claim a right of access during that period

Who can be a director of a newly formed RTM company?

It is legally possible for the RTM to just have one single director but it’s more common and effective for there to be between three and five directors depending on the size of the block.

What then happens when I sell my flat after the RTM process ?

If you are a shareholder in the RTM company normally your shareis transferred to the purchaser of your flat. It is very important for RTM company to represent the interests of those owning the flats in the block.

The future Management of your block after RTM 

On the Acquisition Date of your RTM Company all existing management contracts end automatically unless otherwise agreed by the RTM Company in advance.

Therefore do have a prospective and vetted managing agent ready BEFORE the Acquisition Date.

The RTM Company will now have the authority to take decisions about the management  and future of the block and to instruct a good managing agent of their choice. 

Block management is of course Ringley's core business so with Ringley Law acting to set up your RTM we are well positioned to help you. Please fill out the form in this page and we will contact you within two hours.

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