Setting up a Right to Manage company – qualifying criteria and process

If you own a leasehold flat or apartment, then you may have the right to manage the building your home is in. This is formally termed The Right to Manage. To claim your right, you must first check that you qualify for The Right to Manage, and if so, you will then need to form a Right to Manage company with other leaseholders to take responsibility for the management of your block. In this article we discuss the qualifying criteria as well as the company formation process.

Although the process is relatively straightforward, the qualifying rules and criteria can be complex.

Right to Manage criteria

To apply for the right to manage your building you must first check whether you qualify. You must meet the following criteria:

  • The building must be made up of at least two flats (leasehold houses do not qualify).
  • A minimum of two thirds of the flats in the building must be owned by leases that were for more than 21 years when first granted.
  • Any number of owners can set up an RTM company, but at least half of the flats in the building must be members of the company before it can take over management.
  • Non-residential areas in the building must assume no more than 25% of the building’s entire floor area. 75% of the building must be residential.
  • You may not qualify if there are fewer than four flats in the block and the freeholder lives in one of them i.e. if you are the landlord, you must live somewhere else. The exception here would be if the block were purpose-built as flats, rather than converted.
  • All the flats must be in one building. If your development has multiple blocks, You can form an RTM for only your specific block. Other blocks on the development may also follow the RTM process alongside yours.

Please note: If you live in council or housing association property then you cannot use Right to Manage.

The Right to Manage process

Once you have established whether you qualify to apply for The Right to Manage your building, you can start the Right to Manage process:

  • Set up an RTM company. This will need to be registered with Companies House and have proper Articles of Association laying out the company’s purpose and running of the company. The Articles are prescribed by law and a company will not be a valid RTM company for the purposes of the Act if it does not match these provisions. Forming the RTM company is a relatively simple operation which can be done by a solicitor, by a company agent or by the qualifying leaseholders themselves. Any number of qualifying leaseholders may set up the RTM company; it does not require the full number of participants at this initial stage, just enough to provide a board of directors.
  • Formally invite qualifying leaseholders to join. Once the RTM company has been registered, with its original members, it must then formally invite the rest of the qualifying leaseholders to join (no-one should be excluded for any reason including the landlord). The Notice Inviting Participation must be in writing and in the prescribed form. The notice may be served by post, or by simply delivering it to all the flats. All of those qualifying leaseholders who respond to the notice and who ask for membership must be enrolled as members of the RTM company.
  • Take care that those who respond are qualifying leaseholders. If the leaseholder lives elsewhere, you may need to track them down and invite then to join the company in order to meet the minimum numbers required.
  • Exercise the right to manage. 14 days after the notice of participation has been issued, The Right To Manage Company can exercise the right to manage the building. This is done by serving the Landlord with a Notice of Claim. This should include the names and addresses of qualifying lessees, dates for a counter-notice to be received from the Landlord, details of the qualification for the Right to Manage company and the date for the Right to Manage company to acquire the right to manage the property.
    Both the Notice Inviting Participation and the Notice of Claim need to be worded correctly with explanatory notes included. If you get them wrong, they will be invalid. We recommend getting professional help with these from a leasehold expert.
    Your landlord/freeholder can challenge a Right to Manage claim by sending a counter-notice within a month of receiving the notice to claim. If this happens you can apply to the First-tier Tribunal (Property Chamber), and they will rule on whether you have the Right to Manage. If you meet the qualifying criteria, it is unlikely you will be refused.
  • Reimburse Landlord costs. Once you have served the Notice of Claim, the Right to Manage company is liable for any reasonable costs incurred by any of the landlords or management companies during the process. Be sure to think about how you would cover this money before you start the process. There are smaller costs associated with the Right to Manage process such as the cost of registering your RTM firm with Companies House.

A Right to Manage can be complicated, so it is worth getting advice from a solicitor to ensure everything is done properly and avoid costly mistakes.

If you are still questioning whether Right to Manage is worth it, it is worth weighing up the pros and cons before beginning the process.

If all goes well and the freeholder does not challenge your claim, you should take over the management of your block four months after the date on the notice to claim. If you claim is disputed but the tribunal rules in your favour, your RTM company should acquire the Right to Manage three months after the tribunal decision is announced.