A Right-to-Manage (RTM) company is used by tenants (leaseholders) who wish to take over the management of the building they share with the landlord (freeholder). It is a specific type of limited-by-guarantee company (meaning not-for-profit), typically used where leaseholders want more control over the upkeep and day-to-day operations, such as maintenance, repairs, and service charges.
RTM companies are a great solution to poor property management and communication between the landlord or managing agents and tenants. Below, the UK’s leading company formation agent, Quality Company Formations, explains more.
How RTM companies work
When a private landlord rents properties within a building, a third-party managing agent typically controls them. Agents handle everything from communicating with tenants to maintenance and repairs. They also usually manage multiple buildings rather than just one.
However, these relationships can often become challenging to navigate. Communication can be slow, tasks can take a long time to complete, and overall property management can be poor, leaving the leaseholders powerless and frustrated.
In this case, the Commonhold and Leasehold Reform Act grants leaseholders the legal right to do so without needing permission or proving mismanagement. Note that RTM companies only apply to a building (i.e. a block of flats); you cannot form an RTM company for a single property or an estate with multiple blocks of flats. In this case, each block would have its own RTM company.
What do RTM companies manage?
Like any other limited company, RTM companies have members (leaseholders) and directors. The directors are responsible for the daily management of the company, including:
- Collecting service charges from leaseholders
- Acquiring building insurance
- General maintenance of the building and communal areas
- Arranging repairs and improvements to the building
- Handling complaints and resolving disputes
The articles of association explain exactly how the company is run and managed and each person’s role within the organisation.
How RTM companies improve property management
If the existing relationship between leaseholders and managing agents is complex, forming an RTM company can help improve general property management. Here’s how:
- Financial control: Leaseholders manage the service charges and expenses associated with maintaining the building. This is especially beneficial if the existing management company imposes an unreasonably high service charge or changes it without notice.
- Decision-making powers: As building managers, RTM companies have the autonomy to make decisions. This allows them to swiftly and efficiently implement repairs and improvements and choose their preferred service providers, ensuring they achieve their desired service quality.
- Equality: RTM companies make collective decisions on all aspects of property management. This means all decisions are fair and equal.
- Drive change: Poor relationships with managing agents can make everyday life harder. However, leaseholders can drive positive change for all by taking over and forming an RTM company.
In summary, forming an RTM company allows the board to manage their building how they see fit. It’s a far more balanced process than relying on a third-party company, which can often stall progress and reduce effective property management.
How to form an RTM company
Setting up an RTM company is similar to registering a limited company. Follow these two simple steps.
- Check your eligibility
Start by checking if you qualify to set up an RTM company. This will depend on the building and the leaseholders:
- The building must contain at least two flats
- A minimum of two-thirds of those flats must be leasehold and have a lease of longer than 21 years
- At least 75% of the whole building must be residential (this excludes shops with two flats above it)
- At least 50% of the leaseholders must agree to be RTM members
- Register your company
You then need to register your company with Companies House. To do this, you’ll need to provide:
- A suitable company name
- A registered office address
- A registered email address
- A description of business activities
- Directors’ (at least one required) and guarantors’ (at least one required) details
- Details of People with Significant Control (PSC)
Registration is usually relatively quick, with many companies formally registering on the same day.
Conclusion
Dealing with third-party property managers can be tricky. If you’re experiencing poor property management, forming an RTM company with your neighbours could be a great solution. It’ll give you the independence and financial control to make quick, fair, and effective decisions.
The quickest and easiest way to set up an RTM company is via a company formation agent like QCF. They’ll check your application, submit it to Companies House, and deliver your incorporation documents. If you don’t have a suitable location for your registered office address, you can also use their registered office address service.