Forming Right to Manage (‘RTM’) Company under Commonhold and Leasehold Reform Act 2002

Forming Right to Manage (‘RTM’) Company under Commonhold and Leasehold Reform Act 2002

Forming an RTM company is a process that allows leaseholders to take over the management of the building from the freeholder.

There is a step-by-step process of setting up an RTM company:

Check building eligibility:

  • the building must consist of at least 2 flats
  • at least 2/3 of the flats must be leasehold
  • the leases must have originally been granted for at least 21 years

Leaseholder eligibility:

  • at least 50% of the qualifying leaseholders must agree to participate in the RTM process
  • commercial or non-residential parts of the building must not exceed 25% of the total floor area

Form the RTM company:

  • it must be a company limited by guarantee and must be registered with Companies House
  • the leaseholders who wish to participate should become members (shareholders) of the RTM company
  • at least 2 directors (leaseholders) to manage the company

Notify leaseholders:

  • once the RTM company is formed, invite all qualifying leaseholders to become members – at least 50% must support the RTM
  • send out a notice to all leaseholders explaninag what RTM is, the implications, and how they can join

Serve the Claim Notice to the freeholder:

  • send out a formal Claim Notice to the freeholder and the current management company, informing the freeholder of the RTM company’s intention to take over the management of the building and wait for the freeholder’s response
  • the freeholder has the right to respond within 1 month of receiving the Claim Notice – they may either accept or dispute it.
  • Normally, the freeholder has 3 months to respond to the Notice of Claim. If the freeholder cannot be found, this waiting period still applies.
  • if the freeholder disputes the RTM, they must do so within 1 month period. The dispute may go to the Property Chamber for resolution.

Take over management from the freeholder:

  • after the Claim Notice is accepted, the RTM company can take over the management of the building on the date specified in the Claim Notice (the date must be at least 3 months after the Notice is served)
  • RTM company can request the transfer of all management information (for example, service charge accounts, maintenance schedules and contracts with other suppliers)
  • RTM company is now resposible for the management of the building including, maintenance, insurance and collection of service charge.

If you have any enquiries in relation to setting up a RTM company or have disputes with a RTM company, please get in touch with us at 020 8240 9018 or info@jypartnerssolicitors.com.

Buying Property by Auction

The process of buying a property by auction is a little different from a normal purchase as basically when someone makes the winning bid at a property auction, they ‘exchange contracts’ with the seller the moment the gavel falls. Therefore, auction buyers must complete their legal due diligence on the property before the auction.

Auctioneers will make available an auction legal pack, containing key documents such as the title deeds, local authority searches, property forms, and the conditions of sale. This helps identify any potential legal issues, such as restrictions, defective leases, missing consents, and other legal issues that could affect the property’s value or future use.

The buyer’s solicitors carry out a review of the pre-auction legal pack to advise the buyer on any potentially serious legal issues. Auction legal packs may contain a range of documents, and a review typically covers an in-depth analysis of the following:

  • Official copy of the title register
  • The title plan
  • Conveyancing searches
  • Lease (if leasehold)
  • Planning permission documentation
  • Property information form (TA6)
  • Fixtures and contents form (TA10)
  • Special conditions of sale
  • Energy Performance Certificate (EPC)
  • Tenancy agreements
  • Other relevant information

A review of a property auction legal pack is crucial to identify potential issues, ensuring buyers make informed decisions before bidding. Sometimes auction legal packs are only completed and available for review a few days before the auction date.

The legal pack review legal work is charged separately from the auction conveyancing legal work required if you win the auction. The seller pays a solicitor to compile the auction pack and the buyer will not normally be expected to pay the auction house for a copy of the auction pack. If you win the auction, however, you will typically have to pay the seller for the property searches, which you would normally have to pay for when buying a property.

If you have any enquiries regarding buying a property by auction, please contact our property solicitors at 020 8240 9018 or info@jypartnerssolicitors.com.

Prenuptial Agreement for a Couple

A prenuptial agreement, also known as a premarital agreement, is a written contract that a couple enters into before marriage.

It outlines how the couple’s assets will be divided if they divorce.

Premarital agreements can also help couples control and select many of the legal rights they gain when they marry.

In England and Wales, premarital agreements are not legally binding, but they can be persuasive and are likely to be upheld depending on the case providing the courts are satisfied that both parties freely entered into the agreement with full understanding of the implications.

In the UK, premarital agreements can help couples protect assets such as:

  • Pre-owned assets
  • Expected inheritance
  • Trust funds
  • Assets left to children from a previous marriage
  • Their partner’s debt.

Premarital agreements can also help make the divorce process more efficient by avoiding lengthy court battles and legal disputes. This can save time and money and make the divorce process less stressful for everyone involved.

When considering a premarital agreement, you can consider things like:

  • What would happen to money in joint accounts and jointly purchased property? 
  • What would happen to savings earned during the marriage? 
  • What would happen to pensions? 
  • How would debts be dealt with? 
  • Would either party pay or receive maintenance, and if so, for how long? 
  • What events might require the agreement to be reviewed? 
  • What arrangements would be made for any children, both financially and practically? 

To be legally enforceable, a premarital agreement must be contractually valid.  This means that there must be no factors that cast doubt on the free will of either party or the level of information they had when entering the contract.  Evidence of mistake, misrepresentation, duress, or undue influence may cause the agreement to fail.  As regards the level of information couples are advised to give full disclosure of their assets to each other before entering the agreement.

Where full financial disclosure has been given, the courts are more likely to uphold the arrangements set out in a prenuptial agreement in subsequent financial proceedings ancillary to divorce, although it should be emphasised that the couple cannot ‘contract out’ of the courts power to review the financial arrangements and step in following a divorce if one of the party’s needs are not being met.

As a preliminary to setting up a prenuptial agreement, we would invite a couple to:

  • prepare schedules of assets and liabilities.
  • consider what protections you wish to put in place as regards pre-marriage solely owned assets e.g. savings, property, pensions, inheritance, Trusts, stocks and shares etc.
  • consider what you want to happen as regards assets acquired during your marriage either jointly or in your sole names.
  • what is to happen as regards debts?
  • provision for children
  • any other matters particular to your circumstances

If you have any questions regarding prenuption agreement, please contact our family law solicitors at 020 8240 9018 or dorothy@jypartnerssolicitors.com.

Life Interest Trusts in Wills for Spouses, Civil Partners or Unmarried Partners

Life Interest Trusts in Wills for spouses, civil partners or unmarried partners. 

The technical term for a life interest arising under a Will is an “immediate post-death interest”. Life Interest Trusts give a particular beneficiary the legal right to receive the income from, or to use property comprised in the trust. This right normally lasts throughout the beneficiary’s

lifetime. Sometimes the right terminates earlier, for example on the beneficiary’s remarriage, or if the trustees exercise any overriding powers under the Will. The beneficiary is often referred to as the life tenant.

In addition to the life tenant’s right to receive the income from, or to use any property (including the home) comprised in the trust, the trustees will usually be given a power to advance some or all of the capital in the trust to the life tenant and the beneficiaries entitled after the life tenant’s death (referred to below as the ultimate beneficiaries). The trustees will not be required to exercise such a power, but will be able to do so if they consider it appropriate.

The Will specifies what will happen to the remaining assets held in the trust on the life tenant’s subsequent death (to the extent that any power of appointment has not been exercised). The life tenant does not have outright ownership of the trust assets and the trustees will retain control. The life tenant can benefit from the trust assets, while the capital is preserved for the ultimate beneficiaries. The trust assets will not pass under the life tenant’s own Will.

While income can be paid to the surviving spouse (the life tenant) throughout their lifetime, capital can be preserved for the children of the former marriage or civil partnership. A further use of such a trust is to control the level of income for purposes of means tested benefits, with protection in the context of care home fees.

If you have any enquiries regarding setting up a life interest trust in your will, please get in touch with us at 020 8240 9018 or fill in the enquiry form on our website.

Setting Up a Charity in the UK and Tax Implications

SETTING UP A CHARITY IN THE UK

There are 6 steps to setting up a charity.

1. Find trustees for your charity

You usually need at least 3. Trustees are responsible for the operation of your charity. They must show they understand their legal requirements.

2. Make sure the charity has ‘charitable purposes for the public benefit’

Your charity must have ‘charitable purposes’ that help the public (known as being ‘for public benefit’).

Charitable purposes include: relieving poverty; education; religion; health; saving lives; citizenship or community development; the arts; amateur sport; human rights; religious or racial harmony; the protection of the environment; animal welfare; the efficiency of the armed forces, police, fire, or ambulance services

You must run your charity in a way that’s consistent with and supports its purposes – and only those purposes. Your charity can have more than one purpose, but it can’t have any purposes that aren’t charitable.

3. Choose a name for your charity

The official name of your charity is known as its ‘main name’. Your charity may also have a ‘working name’ which is another name it uses. Your charity’s main name or working name must not be the same as or too similar to the main or working name of an existing charity and must not be misleading.

4. Choose a structure for your charity.

There are 4 common charity structures and we can help you to choose an appropriate structure for your charity:

Charitable company: Your charitable companies will have to be limited by guarantees rather than shares when you register. Trustees have limited or no liability for a charitable company’s debts or liabilities.

Charitable incorporated organisation (CIO): A CIO is an incorporated structure designed for charities. You create a CIO by registering with the Charity Commission. You do not need to register with Companies House. Trustees have limited or no liability for CIO debts or liabilities.

Charitable trust: A ‘charitable trust’ is a way for a group of people (‘trustees’) to manage assets such as money, investments, land, or buildings.

Unincorporated charitable association: An ‘unincorporated charitable association’ is a simple way for a group of volunteers to run a charity for a common purpose. Unincorporated charitable associations cannot employ staff or own premises.

Your charity must have a governing document which is setting out:

  • its charitable purposes (‘objects’)
  • what it can do to carry out its purposes (‘powers’), such as borrowing money
  • who runs it (‘trustees’) and who can be a member
  • how meetings will be held and trustees appointed
  • any rules about paying trustees, investments and holding land
  • whether the trustees can change the governing document, including its charitable objects (‘amendment provisions’)
  • how to close the charity (‘dissolution provisions’)

As a trustee, you must have a copy of your charity’s governing document. Refer to it regularly because it tells you how to run your charity. For example: how many trustees are needed to make decisions, how to recruit them and how to run trustee meetings; how to look after your charity’s money, land, property, or investments and keep accounts and how to resolve internal disputes.

Register as a charity if your annual income is over £5,000 or if you set up a charitable incorporated organisation (CIO).

TAX RELIEF FOR CHARITIES

As a charity you can get certain tax reliefs. To benefit you must be recognised by HM Revenue and Customs (HMRC). Charities do not pay tax on most types of income as long as they use the money for charitable purposes. You can claim back tax that’s been deducted, for example on bank interest and donations (this is known as Gift Aid).

Your charity may need to pay tax if you’ve:

  • received income that does not qualify for tax relief;
  • spent any of your income on non-charitable purposes; or
  • You need to complete a tax return if your charity has tax to pay.

LEAVING A GIFT TO A CHARITY IN YOUR WILL

You can leave anything you own to charity. There are no restrictions as to what can and can’t be left to charity in your will.

You can donate:

  • a fixed amount
  • an item
  • what’s left after other gifts have been given out ‘residuary estate’
  • Your donation will either be taken off the value of your estate before Inheritance Tax is calculated or reduce your Inheritance Tax rate if 10% or more of your estate is left to charity.

Gifts to qualifying charities are themselves exempt from IHT regardless of the value of the gift. However, if a gift to charity in a Will meets certain conditions, the lower rate of 36% IHT can apply to the taxable part of an individual’s estate.

The reduced rate of 36% applies where the individual leaves at least 10% of their net estate, known as ‘the baseline amount’, to charity. In simple terms, the baseline amount is the entire estate in an individual’s sole name (not including assets held in trust, or joint assets that pass by survivorship) less debts, funeral expenses and certain IHT exemptions – such as the nil rate band, currently £325,000. 

TAX RELIEF ON LIFETIME GIFTING OF LAND OR BUILDINGS TO A CHARITY 

A gift can be made to any approved charity, and you’ll need to contact the charity to ensure it can accept the proposed gift. Once the charity has confirmed it can accept the gift the property can be transferred to it. To claim the tax relief, you obtain a certificate from the charity containing a description of the land or buildings.

You must give the whole of your beneficial interest in a property, which means that you cannot live in it. An individual donor deducts the relief when they calculate their income for the tax year in which they make the gift.

For an outright gift, the amount you can deduct is the value of the net benefit to the charity at the time you give or sell them the qualifying investment, plus any incidental costs (for example brokers fees or legal fees), less any money or the value of other benefits you or a person connected with you (such as a relative or connected company) receive in consequence of you giving or selling the qualifying investment to charity.

Outright gifts and bequests to charity are completely free of Inheritance Tax. You’re not liable to Capital Gains Tax or Corporation Tax on capital gains when you make a gift of assets, such as land or stocks and shares, to charity. Charities do not need to pay Stamp Duty on acquisitions of land or buildings. 

What the recipient charity does with the gift is entirely for the charity to decide. The investments can be sold immediately, or at a later date, and the proceeds used for charitable purposes, or they can be retained by the charity as an investment.

Discretionary Trust

Alternatively, you can leave a cash legacy or share of your estate to a discretionary trust which includes charities as potential beneficiaries. The executors/trustees of your Will would then have the discretion as to how much of the gifted sum should pass to charity. 

They can also decide which charities to benefit. Whilst the executors/trustees will have discretion, you can leave a letter of wishes providing guidance as to which charity or charities you wish to benefit and by how much.

If you need further legal advice on setting up a charity, please contact us at 020 8240 9018 or fill in the enquiry form on our website.