Company Formation Specialists

Right To Manage Company (RTM)

Right to manage companies allow flat owners (i.e. tenants, leaseholders etc) to take over the responsibility for the management of their building. If you live in a building where the freehold is not already jointly owned by you and your fellow leaseholders, you can now take advantage of the new rights to buy the freehold or to manage the building yourselves.

The process is referred to as Right to Manage (RTM), hence the name Right to Manage Company and was brought about by the Commonhold and Leasehold reform Act 2002. The act offers leaseholders a greater degree of security and control over their homes.

RTM's do not require tenants to prove any failings of the landlord in respect of the management of their property. RTM companies are classified as a private company limited by guarantee formation (non profit making). Its memorandum and articles of association must match that prescribed by legislation. These are in a long form, as Table A of the Companies Act 1985 is specifically disapplied by the Act.

All RTM company formations end with ".....RTM Company Limited" followed by the address of the property.

The criteria for forming an Right To Manage Company are as follows:

• The building must be self-contained or capable of being redeveloped independently.
• Minimum of two flats must participate.
• At least two thirds of the flats must be let to qualifying tenants, ie tenants with a long lease of more than 21 years.
• The RTM company must be comprised of at least 50% qualifying tenants of the building before it can manage the property. The minimum number of qualifying tenants must be equal to no less than half the total number of flats on the premise.
• The premises may be part commercial as long as it does not exceed 25% of the total floor area.

The formation of a Right to Manage Company and the appointment of the company directors and secretary is the first of a set procedure to be followed before tenants can begin to manage their own affairs. The entire process will take a few months. It is important to ensure that professional guidance is sought each step of the way as minor errors can further delay matters.