This is a right for the leaseholders of a building containing flats to take over the management of the building from the freeholder, by setting up an RTM company. This right is made available by the Commonhold and Leasehold Reform Act 2002. A landlord can only reject/object this by serving a counter-notice, however this may only be overturned if one of the qualifying conditions are not met. I have noted the qualifying conditions below.
This right applies to leaseholders of a building or part of a building that contains at least 2 flats.
At least two-thirds of the flats contained in the building must be owned by those holding long leaseholds (leases more than a term of 21 years when first granted)
At least half of those holding long leaseholds must take part in the setting up of the RTM.
The non-residential areas must not make up more than 25% of the whole floor area of the building.
The building will not qualify is there are four or less flats and there is a resident landlord.
Once these qualifying factors and conditions are met, it is then possible to set up an RTM. A right to manage company (RTM), is responsible to all the leaseholders in the block for repairs, services, maintenance, insurance and management of the whole or part of the premises. Additionally, the company must be a private company by guarantee and its constitutional documents must state that one of the objectives or the sole objective of the RTM is to exercise the right to manage the premises. Also, there can only be one RTM at a building. If another is created, it will not have the right to manage the premises.
Claiming a Right to Manage
Before the setup, the RTM must give notice, which clearly identifies the freeholder landlord and invite participation to all qualifying tenants who haven’t agreed to be a member of the RTM.
No less than 14 days after giving notice for participation, the RTM must also give notice of its intention to claim the right to manage to every person who is a landlord under a lease of the whole or part of the demise, any other party to the leases as well as any person appointed to manage the premises at that time. The RTM must then give the qualifying tenants a copy of the notice, which can also be sent by email. The notice of invitation and notice of claim must be exact to the procedure rules.
To be successful in this claim, one must strictly adhere with the requirements of the statutory scheme. In some instances, the courts have overlooked the strict compliance and decided not to invalidate an RTM claim. However, these are very rare, and it is best to strictly comply with the requirements to avoid a negative outcome. Additionally, the RTM has the right to request any information that relates to the lease, which is needed to make the claim. Such request for information must be provided within 28 days after receiving the request. Additionally, if the freeholder can’t be located, the RTM may apply to the First-Tier Tribunal (Property Chamber) to obtain an order entitling it to acquire the right to manage.
Counter Notice
A counter notice claiming the RTM is not entitled to claim the right to manage, may be served on the RTM by anyone whom the claim notice has been served on. This notice must be served by the date stated in the notice and must meet the prescribed requirements.
Once received by the RTM, the company can apply to a First-Tier Tribunal to determine whether it is entitled to acquire the right to manage.
Withdrawal of a Claim
A claim can be withdrawn any time before the RTM acquires the right to manage, by serving a withdrawal notice to the people that were severed the initial notice of claim as well as all qualifying tenants of the block. Additionally, where a counter notice is served and no application for determination or an application was made then withdrawn, the claim will be deemed withdrawn.
Moreover, should a counter notice be served on an RTM company and the RTM responds by applying to a tribunal for determination but then withdraws this request, such notice does not terminate the proceedings at the First-Tier Tribunal. It is up to the Tribunal to determine whether to give consent to the withdrawal and dismiss the application.
Incurred Costs
The RTM is legally responsible for all costs incurred in relation to the claim. Including whatever the reasonable costs of the landlord may be. The RTM will also remain liable even where the application is withdrawn before the landlord serves a counter-notice. Furthermore, the RTM is liable for any costs relating to proceedings before the tribunal even where its claim for the right to manage is dismissed.
Acquiring the Right to Manage
If the process of serving a notice to claim by the RTM proceeds without service of counter notice, the RTM will acquire the right to manage on the date stated in the claim. Where a counter – claim is served and the First-Tier Tribunal to determine the RTM is entitled to claim the right to manage, the company will acquire the right to manage 3 months after the determination by the Tribunal. Additionally, upon acquisition, if there is any unspent service charge collected by the landlord or manager, this must be paid to the RTM.
Management
As soon as it is determined the RTM is entitled to claim the right to manage, it will take over all the management functions such as repairs, maintenance, services and insurance. However, this doesn’t include the rights of forfeiture and possession which remain in the discretion of the freeholder.
Notice
It is important to note as most leases require the leaseholder to get approval from the freeholder for certain actions, this power for authorization will pass on to the RTM however, the freeholders’ consent is still needed before authorization can be granted. The RTM is required to give the freeholder the following:
- 30 days’ notice for subletting, charging, assignment, improvements or making structural alterations.
- 14 days’ notice for other approvals.
If the freeholder doesn’t respond, it is assumed consent is authorized. If no notice is given, the RTM will not have the right to give any approval to the leaseholder. In such a case, the leaseholder is entitled to apply for an injunction, ordering the RTM to comply with the obligations. However, any objection to the notices by the freeholder can be appealed to the First-Tier Tribunal to give the final decision on the matter.