If you’re a leaseholder in the first stages of considering forming a Right To Manage (RTM) company, to take over the management of the block of flats that you live in, RTM comes with some important issues to consider, so we’ve put together a few ‘at a glance’ things to think about to help you decide whether to proceed.
- Set out what it is you want to achieve by setting up a RTM company. If the overall aim is to save money, it’s worth doing some homework to see if this can be achieved. For example, reducing essential services could result in a bigger expense in the longer term, when repairs and improvements need to be done. It is worth getting a realistic appraisal of the state of the finances for your block to see where savings could be made and where repairs may be needed over the longer term.
- What is the RTM company prepared to do? Taking over the general upkeep of the property will not come without some issues. Consider carefully what the company is prepared to take on as a duty or liability that might otherwise sit with the freeholder, and what you may consider would be better outsourced to a managing agent, such as ensuring compliance. Determine who will be responsible for things like decision making, financial control, and reinforcements of lease covenants. Do you have leaseholders experienced in these areas who would be comfortable to take these on? A competent agent can be on hand to advise, and remember, you still call the shots as the agent will work for your RTM company and answer to you as directors of that company.
- The RTM company will be expected to comply with all manner of legislation. There are all sorts of pitfalls for the unwary in this regard and it is often better to have a managing agent on hand to advise on these matters rather than having legal or health and safety consultancy bills to pay throughout the year.
- The leaseholders will need to be familiar (or learn about) company procedures and other technical matters such as budget control and legal requirements. Prior experience of these types of matters would therefore be advantageous.
- There may be difficult situations that arise between other leaseholders, which will have to be dealt with sensibly and calmly.
- There may be leaseholders who default on payments, which will also fall under your remit. It’s worth thinking about how comfortable you might feel when dealing with these situations.
- Setting up the RTM company is relatively simple. Companies house has more details on how to do this. What might be more difficult is getting the right level of support for the initiative as not everyone on the block may be comfortable with this approach. There are legal hurdles to overcome during the process and bills to be paid. It may be beneficial to speak to an agent before embarking on this journey, who would be familiar with the process and may be in a position to offer assistance.
Hopefully these points will have helped you to decide next steps, but if you’d like to talk through anything in more detail, why not contact us using the form below. We could even arrange an informal meeting of residents for you, to look at the pros and cons before going ahead. We advise many RTM companies, and we work with property lawyers that specialise in this area.
Jennifer Holmes, Head of Marketing, Fexco Property Services