Right to Manage: leaseholders taking over building management

If you own a leasehold flat and your landlord or managing agent is failing to maintain the building, not spending service charge money properly, or making management decisions you disagree with, you may be able to use the Right to Manage (RTM) to take control of how the building is run.

What is the Right to Manage?

The Right to Manage is a legal right under the Commonhold and Leasehold Reform Act 2002. It allows qualifying leaseholders to take over the management of their building from the landlord, without having to prove the landlord has done anything wrong, and without having to buy the freehold.

If you exercise RTM successfully, a company formed by the leaseholders (the RTM company) takes over the management functions. The freeholder keeps ownership of the building, but loses the right to manage it.

Who can use the Right to Manage?

To qualify, the building must meet certain conditions:

• At least two-thirds of the flats must be held on long leases (originally granted for more than 21 years)
• At least 50% of the qualifying leaseholders in the building must want to join the RTM company
• No more than 25% of the floor space in the building may be commercial (shops, offices, etc.)
• The building must be a self-contained building or part of one that can be managed independently

Some buildings are excluded, for example, conversions containing fewer than certain numbers of units managed by a resident landlord living in the building.

What does an RTM company take over?

The RTM company takes over obligations that were previously held by the landlord, including:

• Managing repairs and maintenance to the building
• Arranging buildings insurance
• Setting and accounting for the service charge
• Appointing and instructing managing agents and contractors
• Granting approvals for alterations and subletting under the lease

The RTM company does not acquire the freehold, so the landlord still owns the building and can still grant new leases.

The process: step by step

1. Form an RTM company, this is a company limited by guarantee, set up specifically for this purpose. It must include at least one qualifying leaseholder as a member.
2. Invite participation, every qualifying leaseholder in the building must be invited to join the RTM company and given at least 14 days to respond.
3. Serve a claim notice, a formal notice served on the landlord (and anyone else with a relevant interest, such as a managing agent or head lessee). The notice states that the RTM company intends to acquire the right to manage.
4. Landlord's response, the landlord has one month to serve a counter-notice accepting or rejecting the claim. If they reject it, they must give a reason.
5. Dispute to the First-tier Tribunal, if the landlord disputes the claim, you can apply to the tribunal to determine whether the RTM conditions are met.
6. Acquisition date, if the claim succeeds, management transfers to the RTM company. Under the current process, this is at least three months after the claim notice was accepted.

What are the costs?

The main costs of claiming RTM are:

• Setting up the RTM company (a small company formation fee)
• Legal advice for drafting and serving the notices correctly
• The landlord's reasonable costs of dealing with the claim (currently payable by the RTM company)
• Tribunal fees if the landlord disputes the claim

The right is intended to be accessible without a full court case, but getting the notices right is important. Mistakes in the process can lead to the claim failing.

What happens if the RTM company struggles to manage the building?

Once you have RTM, you are responsible for the management. This means:

• Collecting service charges properly and holding them in trust
• Keeping accounts and having them certified
• Complying with lease terms
• Maintaining buildings insurance
• Following health and safety requirements for communal areas

Many RTM companies appoint a professional managing agent to do the day-to-day work, you just have oversight and decision-making power instead of the landlord.

Disrepair and RTM

If you are pursuing RTM because your landlord has allowed the building to fall into disrepair, failing to fix the roof, damp in communal areas, broken lifts, structural problems, RTM gives you the management control to fix those issues going forward. But if disrepair has caused you direct loss (damage to your flat, health effects, a reduction in the value of your lease), you may also be able to make a separate disrepair or negligence claim against the original management.

When should I contact Support for Tenants?

If your flat has disrepair that the landlord or managing agent has ignored, damp, leaks, structural problems, call us on 0800 030 4669. A disrepair claim is separate from RTM and can run alongside it.

No upfront cost. You only pay if you win, and the fee comes out of the compensation, not your pocket. If you don't win, you pay nothing.

Sources

• Commonhold and Leasehold Reform Act 2002 (legislation.gov.uk)

Related articles

• Leaseholder service charge dispute
• Section 20, leaseholder major works consultation