The Right to Manage (RTM) Companies – Leasehold Properties

News | 16 December 2020

The Commonhold and Leasehold Reform Act 2002 provides a right for leaseholders to acquire the landlord’s management roles by transfer to a company which the leaseholders set up. This is then known as the ‘Right To Manage (RTM) Company’.

The right was introduced, not just as a means of seizing control from landlords, or managing agents, but also to empower leaseholders, who generally hold most of the value in the property/block concerned. Therefore, it allows those leaseholders to take accountability and responsibility for the management of their block.

There are certain conditions that must be met in order to qualify for the Right to Manage. One of which is at least two-thirds of the flats must constitute ‘qualifying tenants’.

A ‘qualifying tenant’ is a leaseholder whose lease was originally granted for a term of more than 21 years.

The required minimum number of qualifying tenants must be equal to at least half the total number of flats in the block. Please note that these requirements are non-exhaustive.

The ‘right to manage’ is exercised through an RTM Company, not by the leaseholders in their individual capacity, however the leaseholders will most likely exercise control over the Company. This option is beneficial as the leaseholders in the block will change over time, but the RTM Company can remain in place.

The RTM Company, like any other Company, must have Articles of Association that govern how the Company is run and functions. For advice on how to incorporate this form of Company and the required Articles of Association please contact a member of our team.

This article is for general information only and does not constitute legal or professional advice.

Please contact a member of the ‘Commercial and Corporate Team and/or Leasehold Enfranchisement Department’ for more information on our advice helpline.