• Property5
  • Property6
  • Property3
  • Property9
  • Property8
  • Property4
  • Property1
  • Property7
  • Property2
  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9

Powers and responsibilities of an RTM Company

By Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002, qualifying long leaseholders of flats are entitled to establish and join a “Right to Manage Company” (“RTM Company”) which can take over management of their building from their landlord or other party managing the building (hereafter referred to as “the Landlord”). In this article, we will look at the powers and responsibilities that the RTM Company and the Landlord have respectively after an RTM Company takes over management.

Powers/responsibilities of RTM Company

The RTM company takes over from the Landlord in relation to management functions. Generally, these include:

  • Granting approvals, for example for alterations or a disposal.

    • When the RTM Company deals with approvals it must give at least 14 days’ notice of its proposed decision to the landlord in most instances; 30 days’ notice is required in the case of assignment, underletting, charging, parting with possession, the making of structural alterations or improvements or alterations of use.

  • Enforcement of covenants.

    • The RTM Company is responsible for enforcing covenants under the leases. Any obligation owed to a leaseholder is also owed to the Landlord.

    • The RTM company must keep under review any breaches by a tenant and report the same to the Landlord.

  • Obtaining insurance.

  • Dealing with repairs, maintenance and improvements.

  • Collecting service charges and managing any accrued service charges.

  • Dealing with other general management and services e.g. arranging for cleaning of common parts.

Powers/responsibilities excepted to the Landlord

The Landlord continues to have the right and power to deal with: -

  • Re-entry and forfeiture; and

  • Functions concerning only a part of the property or other unit not held by a qualifying tenant.

In addition, the Landlord retains rights linked to its property rights in the building. Therefore, it can for example in certain circumstances alter/develop the building, notwithstanding that it could be some degree have an effect on the management of the same.

Key considerations

When setting up an RTM company you should be prepared for the ongoing management requirements that will follow. Particularly in carrying out the management responsibilities set out in the lease which you will be agreeing to take over. There is often a lot of work involved and it is important to understand the obligations and commitment when signing up.

It is important that an RTM company and its directors have the support of solicitor and an experienced managing agent who are familiar with acting for these companies. Particularly, as there are statutory procedures which have to be followed for certain functions, set out above, which apply only when there is an RTM company. Failure to follow the process correctly or notify the landlord of requests for consent or breaches of covenant could result in consents or actions taking by the RTM company being deemed invalid.