How Right to Manage Works

Right to Manage Companies – The Procedure
Exercising the right to manage (or RTM) is a relatively simple procedure. It does not involve getting the landlord’s consent or applying for a court order. Although there are legal costs involved in forming right to manage companies and in addition the tenant must pay the landlord’s costs in regard to responding to the notice (see below), they do not have to pay the landlord a fee for exercising their rights to manage.

These are the steps qualifying tenants must take in order to exercise their right to manage:

Step 1 – Create the company
Right to manage companies must be created and registered at Companies House. The qualifying tenants must become members of the company and it is limited by guarantee (as there is no share issue). When creating the company the tenants will have to decide who will become directors and which member will become the company secretary. This information is also registerable.

Step 2 – Inform the other tenants
Newly registered right to manage companies should serve notice on the remaining tenants in the building inviting them to become members of the company.

The company cannot exclude particular tenants and must invite everyone. The company must wait at least 14 days after inviting the other tenants before it serves notice on the landlord (Step 3).

Step 3 – Serve notice on the landlord
Notice of the right to manage should be served on the landlord with details of the right to manage company. The landlord is given one month to respond to this notice and potentially issue a counter-notice. The takeover date for the right to manage company should be 3 months from the end of the reply period. Therefore the quickest this process can be completed is 4 months from the date of notice.

If the landlord approves of the application then he/she will have to serve notice on the current management company and any contractors that may work on the building.

Each member of the newly created UK RTMcompany is joint and severally liable for the landlord’s costs in dealing with the claim (i.e. each of them are liable for up to the full amount of the landlord’s costs).

If the landlord is absent and the tenants receive no response to the claim, this does not mean that they cannot proceed with the right to manage action. They must, however, show that they took all reasonable steps to contact the landlord and have had no success. They must then bring the claim before the Leasehold Valuation Tribunal which should grant the right to manage accordingly.

Step 4 – Receipt of a counter-notice
The landlord must have sufficient reason to deny the right to manage claim and serve a counter-notice. A good reason would be that the building does not qualify for the right, or not enough tenants have signed up as members of the company.

If the landlord does return a counter-notice he/she could dispute the claim to the right to manage. Unfortunately, this normally results in taking the claim before a Leasehold Valuation Tribunal which will delay the process significantly. Fortunately although it is relatively unusual, bringing a matter before Leasehold Valuation Tribunal can significantly add to costs – in particular as the Tribunal is in effect a court, most tenants are reluctant to represent themselves and usually instruct solicitors on their behalf.

Step 5 – Serving an information notice

Before acquiring the right to manage, participating tenants must collect all the necessary information from the landlord about the property so that they can ensure effective management of the building. This involves serving an ‘Information Notice’ on the landlord for him/her to respond to. It is also normal practice at this time to instruct a surveyor to examine the building.

Finally don’t forget that as well as giving you new rights, exercising your right and forming right to manage companies does bring with it new responsibilities. Click here for more information about right to manage responsibilities.

Thinking about exercising your right to manage – contact us today
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