Right to Manage

The powers assumed by a RTM company on the acquisition date should be fully understood. They are follows:

1. Subject to the exclusions mentioned in paragraph 7, if the right to manage is acquired by the company, the company will be responsible for - (a) the discharge of the landlord's duties under the lease (b) the exercise of his powers under the lease with respect to services, repairs, maintenance, improvements, insurance and management.
2. Subject to the exclusion mentioned in paragraph 7(b) if the right to manage is acquired by the company, the company may enforce untransferred tenant covenants.
3. If the right to manage is acquired by the company, the company will not be responsible for the discharge of the landlord's duties or the exercise of his powers under the lease - (a) with respect to a matter concerning only a part of the premises consisting of a flat or other unit not subject to a lease held by a qualifying tenant; or (b) relating to re-entry or forfeiture.
4. If the right to manage is acquired by the company, the company will have functions under the statutory provisions referred to in schedule 7 of the Commonhold and Leasehold Reform Act 2002.

This means that after RTM has been acquired, the landlord still has right of re-entry at the end of the lease, but his right of forfeiture is limited to non-payment of ground rent only.

The risks of RTM

Can RTM put leaseholders in a worse situation than they were previously? It is possible. You must be careful.

Here in Hastings a management agent advertises that he will set up RTM for a fee of £340.00 and mentions a fixed management charge of £3.00 per week. When people respond to this ad, he invites them to his office and suggests that if they give him the management contract for the premises, he will acquire RTM free of charge. He then produces a short list of names of ultra satisfied leaseholders. The list is short and the names are always the same. In signing the management contract the leaseholders have effectively signed away their rights to reasonableness of charges. The management agent contacts the landlord with this excellent news and right to manage is quickly ushered through without any fuss at all and the leaseholders quickly find themselves facing massive bills for which they have contracted themselves.

What should be the aims of right to manage?

The aims of Right to Manage should be twofold:

1. Save huge amounts of money on service charges (In over 90% of cases where Selcha Trading Ltd has acquired RTM for its members, savings on the building insurance premiums in the first year alone pays for the whole cost of setting up RTM.
2. Ensure that the landlord never again gains one penny from the premises other than his ground rent - landlords cannot survive on the income produced by ground rent alone so you force him into a long term loss making situation if he is to re-enter at the end of the lease.

Where leaseholders fully understand the powers and opportunity that RTM brings them, they can expect fierce opposition from the landlord and his lawyers. Where the application is done properly and where the premises qualifies under the legislation, RTM cannot be denied. Selcha Trading has proved that time and time again.

What RTM companies must do if they are to succeed

In appointing a management agent they should have him sign their contract and not the other way round.

This contract must have to key provisions:

1. There must be absolute right of an audit, both formal and informal. All receipts for services paid by the managing agent must be open to inspection by the RTM company.
2. The contract should be renewable on an annual basis.