How to qualify for Right to Manage
In order to qualify for the right to manage, the premises must
- be a self-contained building or part of a building, with or without appurtenant property;
- contain two or more flats held by qualifying tenants (e.g. those with leases originally granted for more than 21 years); and
- have no less than two-thirds of the flats in the building held by such qualifying tenants.
Some premises are exempt from the right to manage, including those which contain more than 25% ‘nonresidential parts’. Where a development contains two or more buildings, you must make a separate claim (and a right to manage company) in respect of each building. HMO Fire Health and Safety
Setting up the Right to Manage Company
The first step towards exercising the right to manage is to set up the right to manage company (“the RTM Company”). Regulations prescribe the RTM Company’s constitution. Also, it should include in its name the words “RTM Co Limited”. The RTM Company is limited by guarantee.
Any qualifying tenant deserves to (but doesn’t have to) be a member of the RTM Company at any time. Particularly, a qualifying tenant only deserves to be a member of the RTM Company that relates to their building. Under the Companies Act 2006, a company need only have one director. However, larger developments are likely to appoint more than one director. How long does an eviction take?
How to exercise the Right to Manage
Before exercising the right to manage, the RTM Company must first have served notice of invitation to participate in all qualifying tenants, to invite the residents to join the RTM Company. This is a prescribed form of notice. The qualifying tenants have at least 14 days to respond. In order to then exercise the right to manage, 50% or more of the qualifying tenants must participate in the claim and join the RTM Company. For developments with two or more blocks, each building individually must have 50% or more of the qualifying tenants from each block participate. Buy to let mistakes
The RTM Company is then to serve a notice of claim on the landlord and any management company, stating that the RTM Company intends to acquire the right to manage. Again, this is a prescribed form of notice. The notice states a date, not earlier than one month, for each party who has received notice, to respond to the notice of claim with a counter-notice. The notice of claim also states the date that the RTM Company intends to take over management, which is not less than three months after the expiry of the date specified for the counter-notice. Evicting a tenant and recovering the rent
The Counter Notice
The landlord or management company doesn’t have to serve a counter-notice if they do not dispute the RTM Company’s right to acquire the right to manage. However, they may choose to do so. If the landlord or management company disputes the RTM Company’s entitlement, they should state so in the counter-notice. Grounds of challenge limit to circumstances in which the premises do not qualify or the RTM Company doesn’t have the right to acquire the right to manage. For example, due to defects in its constitution or some other procedural failing. Landlord Tax on holiday lets
Where there’s a dispute in the Right to Manage
Where the right to manage is disputed, the RTM Company must apply to the First-Tier Tribunal (Property Chamber) (‘FTT’), for a determination that it had rights to exercise the right to manage, within two months of the counter-notice. If none makes an application within this time, they deem the RTM Company to have withdrawn its claim notice. Therefore, the claim to acquire the right to manage comes to an end (although another claim can be commenced). How do mortgage lenders calculate affordability?
Acquisition of the Right to Manage
If there’s no dispute, the RTM Company will take over management on the date specified in the notice of claim. Where there’s a dispute in the entitlement but the FTT finds in the RTM Company’s favour, the RTM Company will take over management three months after the date of the determination.
The RTM Company acquires all the management functions of the landlord or management company set out in the leases, in respect of the qualifying flats and common parts only. This includes the maintenance responsibilities, the placing of insurance and the granting of approvals under the leases. The landlord or management company must hand over to the RTM Company all uncommitted service charges. The RTM Company does not collect ground rents on behalf of the landlord. It doesn’t even acquire the rights to forfeit the leases for any breach of covenant. This remains with the landlord. The Right to Manage Company must state in the notice of invitation to participate in the qualifying tenants whether it intends to appoint a managing agent, should the entitlement to claim the RTM be accepted. The RTM Company does not acquire the right to manage non-qualifying flats and commercial parts.
All existing management and maintenance contracts finish once the RTM Company takes over. This means that the RTM Company is not bound by them. The landlord must provide the RTM Company with all details of existing contracts, prior to the date of acquisition. Also, the RTM Company should notify those contractors whether it wishes to adopt those contracts. Once they exercise the right to manage, the landlord must become a member of the RTM Company. The RTM Company will also have ongoing duties to the landlord. They are not covered here. The RTM Company’s interest is also registered at the Land Registry as a notice. How to check if a property is gas safe
The Landlord’s Costs
The RTM Company is responsible for the reasonable costs that any person incurs by on whom the notice of claim is served (e.g. the landlord or management company), whether or not they acquire the right to manage. The RTM Company is also responsible for the reasonable costs the landlord or management company incur by in any FTT proceedings if the right to manage claim is dismissed by the FTT. The landlord or management company is not, however, responsible for the RTM Company’s costs if the landlord or management company unsuccessfully resists a right to manage the claim in the FTT. Bills included rent