On 30 September 2003 the right to manage provisions contained in the Commonhold and Leasehold Reform Act 2002 (“the Act”) came into force.
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The above-mentioned right to manage provisions created a new right to enable leaseholders of flats to take over the management of their building without the need to prove shortcomings on the part of the landlord and without the need to pay compensation for the exercise of the right. The landlord is, however, entitled to reimbursement of his reasonable costs in connection with the right to manage.
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The right to manage provisions brought into force by the Act must be exercised through a Right to Manage (RTM) Company. The Act defines an RTM company as a private company limited by guarantee whose Memorandum of Association states that its object, or one of its objects, is the acquisition and exercise of the right to manage the premises, which must be specified in the Memorandum and Articles of Association.
Companies (Tables A to F) Regulations 1985 do not apply to RTM companies. A model set of Memorandum and Articles for RTM companies is contained in The RTM Companies (Memorandum and Articles of Association) (England) Regulations 2003.
The Memorandum contained in the Statutory Instrument stipulates that the name of the Company must end with “RTM Company Limited”. The Articles specify that there must be at least two directors and at least two members at all times. Other than the subscribers, a member must be a “qualifying tenant” of a flat contained in the premises. A person is a qualifying tenant if he or she is a tenant of a flat under a “long lease”, i.e. one that is granted for more than 21 years. From the date on which the RTM company acquires the right to manage, landlords under leases of the whole or any part of the premises are entitled to become members.
To qualify for RTM, the building must be self-contained or, if part of another building, it must be capable of being redeveloped independently. The building may be part-commercial but the non-residential part must not exceed 25 per cent of the total floor area. The total number of flats held by qualifying tenants must not be less than two-thirds of the total number of flats contained in the premises.
Qualifying tenants representing at least 50 per cent of the flats in the building must become members of the RTM company before it can exercise the right to manage the premises. If there are only two qualifying tenants, both must become members of the RTM company.
It is vital to the RTM process that the company’s Statutory Registers are written up prior to the service of the Claim Notice.
The Act specifies detailed rules relating to the right to manage. Supplementary regulations prescribing the content of notices to be served under the Act are contained in the Right to Manage (Prescribed Particulars and Forms) (England) Regulations.
RTM companies are subject to the provisions of the Companies Act 1985 (as amended) with the exception of sections 2(7), 3 and 8 which do not apply.
Click here to return to our RTM page.
These notes are intended for general guidance only and individual advice should be sought as appropriate.
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