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.