A practical guide to ‘Right to Manage’ (RTM)

Leasehold reform is currently at the forefront of government policy. The malpractice by some management companies and landlords is becoming increasingly well documented, with leaseholders becoming more aware of their rights. As a result, ‘right to manage’ (RTM) claims are becoming more popular as a way for leaseholders to be in control and be involved in the running of the buildings in which they live.

What is a RTM claim?

A ‘right to manage’ (RTM) claim enables leaseholders to take over the management of their building through the creation of a ‘right to manage’ company (“RTM company”). Landlord consent is not required, and the landlord will still own the freehold to the building, with the leaseholders becoming responsible for the management of the building through the RTM Company.

What is the criteria for application?

At present, the Commonhold and Leasehold Reform Act 2002 (CLRA 2002) prescribes the qualifying criteria for a RTM claim as follows:

• A minimum of 50% of the leaseholders need to participate in the claim.
• The premises must consist of a self-contained building or part of a building, with or without appurtenant property.
• The premises contains two or more flats held by qualifying tenants.
• The total number of flats held by qualifying tenants is not less than two-thirds of the total number of flats contained in the premises.
• Where the building is mixed-use, the building cannot exceed more than 25% for commercial/non-residential use at present. The Leasehold and Freehold Reform Act 2024 (“the 2024 Act”) changed this criteria for mixed use premises in RTM claims to 50% non-residential parts. However, this provision of the 2024 Act has not become operative as yet.

Why lodge a RTM Claim?

Although RTM claims might often be brought as a result of poor management of the building or estate, these claims are actually classified as ‘no fault claims.’ This means that the RTM Company does not need to prove that the management company or landlord has mis-managed the estate in order to bring forward a claim.

Reasons you may make a claim:

• Transparency – leaseholders may desire more control over the fees involved with owning leasehold property, such as control over their service charges, insurance premiums, costs for major works just to name a few. Taking control over the management of the building can increase the transparency of these fees for the people who are responsible for payment of them, the leaseholders.
• Inclusion in Decisions/Control – leaseholders can be included in the day-to-day management of their building and some may argue who better to manage the estate than the persons residing on it themselves? Having the leaseholders manage the building means they have control over the most pressing matters and are more up-to-date on everyday management, such as maintenance for example.
• Absent Landlord – On some occasions the landlord can become absent, leaving a void in the management of a building. This can be rectified by bringing a RTM Claim, though this will require intervention from the First-Tier Tribunal.

What is the process?

As mentioned previously, landlord consent is not required and there is no burden on the RTM company to prove any mismanagement on the part of the landlord or management company.

A breakdown of the key stages of the RTM claim are as follows:

1. Establish eligibility – this is detailed under the criteria previously listed.
2. Creation of the RTM Company – the constitution of the RTM company is prescribed by statute, and the participating leaseholders will become members.
3. Invitation to Participate – The RTM company once incorporated, has to serve notice of invitation to participate on all the leaseholders giving them an opportunity to participate in the RTM claim. Unlike on a collective enfranchisement claim (purchase of freehold) where some leaseholders could be left out of the purchase, on a RTM application all leaseholders have to be invited to participate. If they do not wish to join, the RTM claim can still go ahead if at least 50% of the leaseholders are participating.
4. Serving the RTM claim notice – The RTM Company serves the RTM claim notice on the landlord, which notice confirms their intention to take over management of the building.
5. Landlord’s Counter-Notice – within one month of the RTM claim notice, the landlord may serve a counter-notice, either disputing or accepting the claim, and if it does not do so, will be deemed to have admitted the RTM claim. If the correct procedure is followed, it is very difficult for a landlord to dispute or delay the claim.
6. Handover – The RTM Company will take over management of the building on what is known as the acquisition date, being at least 3 months after the date for service of a counter-notice where the right to manage is admitted/agreed.

How can we help you?

The process of a RTM claim is complex and full of pitfalls if not handled correctly. Here at Blacks we can assist with all aspects of the claim, from the formation of the RTM Company, right through to the registration of the completed RTM on the landlord’s title.

If you require any advice, please email or call our specialist Leasehold Enfranchisement & Management Services (LEMS) team today on 0113 207 0000.