The Right to Manage: A Comprehensive Guide for Landlords & Leasehold Tenants
The Right to Manage – opportunity to control how your property is managed
Commonhold and Leasehold Act 2002 gave the tenants of development the right to take over the management of their development from their landlord, by using a company specially set up for this purpose called a Right to Manage Company (RTM). If you are a landlord or residents within a development looking for more information on Right to Manage, this comprehensive guide will prove useful as a starting point.
- The Right to Manage (RTM)
When it comes to managing the property, the Right to Manage allows a number of leasehold property owners to take full control and management of the buildings in question without necessarily taking into consideration the landlord’s agreement. As a landlord, you should know that the leaseholders who want to take charge of the management of your building need to send you a notice stating their intention of planning to do this. In case they become successful with their intended plan, you will still have full ownership of your property while they are managing it on your behalf. In other words, the leaseholders managing your building will have the following responsibilities:
- To collect and manage all the service charges, outsourcing to a competent Service Charge Accountant or a Service Charge Accounting firm can make the process easier.
- Routine upkeep of communal areas like the communal hallways and stairs among others
- Upkeep and maintenance of the entire structure of the property
- Taking into account every complaint coming their way especially from other leaseholders regarding the building
Every qualifying leaseholder is allowed to use the Right to Manage (RTM) for whatever reason they find appropriate, meaning that they don’t have any obligation of proving that the property is in bad shape due to damage.
The RTM Companies
For the leaseholders to use their right, they have to set up the Right to Manage Company and strictly follow procedures which have been laid down, speak to an expert service charge accountant, they will have the expertise to set up a company for you to proceed with the RTM process. In this case, the RTM company has the liberty to manage the property directly or hire a managing agent to take up the task. You as the landlord have all the right to become a member of the Right to Manage Company. Your membership gives you the power to vote on crucial matters affecting the company. However, you have at least one vote but the number of votes cast in your favour will depend largely on the number of flats you own in a given building.
For Example: Assume there are a total of twenty flats in a particular block. Out of those, sixteen are already owned by leaseholders but the remaining four are fully owned by you although rented out on what is known as assured shorthold tenancies. In this case, you will only get four votes whereby each vote will represent each of the four flats that you own or rent out if you are renting out you should speak to a good rental accountant who can guide you in the best ways of saving tax while increasing your income. The Right to Manage company has no choice but to pay for any incurred costs in the course of the management transfer processes regardless of whether it manages the building or not.
For you to qualify for the Right to Manage, you need to fulfil the following:
- The building or property should be flats (keep in mind that houses don’t qualify)
- At least two by third of the flats within the building should be leasehold including those leases that were initially going beyond 21 years at the time they were granted
- At least (75 per cent) of the property must be residential-meaning that in case there’s a shop within the building, it is obvious that it cannot occupy more than 25 per cent of the entire floor area
- You will have to relocate elsewhere if there are fewer than four flats in that particular block-except where the block was intentionally constructed as flats only rather than transformed from a different type of building
- Any number of property owners can easily set up the Right to Manage Company on the condition that half of the total number of flats within the building are members of the company prior to taking over management.
After setting up the RTM company, the leaseholders will reach out to you. This way, you may get the right to information notice right from the company itself asking you for the relevant information they may require to make a claim of their RTM.
The notice of Claim
The moment you receive the notice of claim it simply means that the Right to Manage Company has an intention of taking over full management of your property. Therefore, the RTM will tell you this:
- The date on which you are to respond by
- The date the Right to Management company intends to start managing your property
- Accept the claim or Make a dispute
- You can learn more about disputing here, the notice of the claim will inform you of the exact time of making your claim. Keep in mind that the deadline for doing that cannot be less than a month from the time you receive the notice.
- Disputing the Claim
It is right for you to dispute the claim but you only need to serve the counter-notice to the RTM company. The notice should clearly show the reasons why the company shouldn’t manage the property. However, you may dispute the claim on condition that:
- The building/property doesn’t qualify
- The RTM company’s failure to comply with all legal requirements
- The members of the RTM company don’t own half the flats within the building.
Otherwise, you may not dispute the claim using any other reason rather than those highlighted above.
The Leasehold Valuation Tribunal
In case the RTM members assume that you are wrong then the company will have to apply directly to the Leasehold Valuation Tribunal (LVT). This is done before the two months are over after submitting the counter-notice. Afterwards, the LVT will make the decision as to whether the RTM company should manage the building or otherwise.
- Building Management Transfer
Should you accept the RTM company’s notice (https://www.gov.uk/right-to-manage-a-guide-for-landlords/notices) or go ahead to dispute the claims using this link, but if the LVT decides against your wish then the management of the property will have to transfer to the Right to Manage company. If you have a RTM, remember it comes with a lot of statutory responsibilities, speak to a reputable Service Charge Accountant to make sure you are covered. In this regard, the date on which the RTM company takes control of the building is referred to as the date of acquisition. And this date will be:
- That date indicated on the claim notice, that is if you decide to accept the claim
- Three months after the decision made by the LVT becomes final-where your disputed claim doesn’t go through
- Three months of the agreement -in case you had disputed the claim only to come to the agreement with the Right to Manage Company later.
Remember, on the date of acquisition you should transfer any cash in your possession from the services charges as soon as possible.
The Right to Manage Company should take the task of telling you everything within the 30 days prior to approving the following:
- The assignment (That is, selling or making the transfer of the flat to someone else’s name)
- A sublet
- Changes to the leaseholders
But should the lease need your consent, the RTM company will need to give you a month’s notice before approving the following:
- Changes in the whole of the building
- Changes to use of the property
For additional approvals, the RTM company needs to inform you at least two weeks in advance.
The RTM process can be complicated, forming a company and adding members in it can become even more complex, it is wise to have a reputed Service Charge Accountant on your side. Clear House Accountants are specialized Service Charge Accountants who have years of experience working with Landlords, Developers, Property Management Companies and Directors of RTM’s. We have complete service charge accounting outsource services which should help you focus on the effective management of your development. Speak to us if you are looking for effective service charge accounting solutions.
Jibran Qureshi FCCA is the Managing Director of Clear House Accountants, and has over 10+ years of experience in practice and across multiple industries. Jibran’s educational background includes a Master’s in Financial Strategy from Oxford University and an Executive MBA from Hult International Business School. His experience in Financial Strategy, Tax Planning, Operational Consultancy and Performance Reporting guide his cognizant approach to leading Clear House and its clients to the future. It was this dexterity that led him to be Enterprise Nation’s Top 50 Advisors.
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Over the past decade, innovative disruptions have changed the way businesses work, everything from cloud software, innovative business models, to AI and machine learning, have impacted how businesses operate, grow, and expand.
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