What is the Right to Manage (RTM)?

The Right to Manage allows leaseholders of flats to take over the management of their building from the landlord or existing management company—without needing to prove fault or mismanagement. It gives leaseholders control over services like maintenance, repairs, insurance, and service charges by forming a Right to Manage company (RTM company).

To qualify:

• At least 50% of the flats in the building must participate.

• The building must contain at least two flats.

• No more than 25% of the building can be used for non-residential purposes (e.g., shops).

• Leaseholders must have long leases (usually over 21 years).

What responsibilities does the RTM company take on? Does this mean we manage the building ourselves?

We’ve decided to appoint a local firm, Haus, who have extensive experience with ‘Right to Manage’ buildings. If at any point we’re not satisfied with their service, we can cancel the contract and switch to a different managing agent.

What’s the difference between being a member and a non-member?

A member of the RTM Company has the right to vote at General Meetings, stand for election to the board, and participate in key decisions affecting the management of the building.

A non-member, on the other hand, does not have voting rights or involvement in the internal decision-making of the RTM Company. However, they are still bound by the same lease terms and are managed by the appointed managing agent in precisely the same way as members. The RTM Company takes over the landlord’s management functions, and this applies to all leaseholders, regardless of membership status.

Membership is entirely voluntary but encouraged for those who wish to have a say in how their development is run.

How were the first RTM directors chosen?

The first directors of the RTM Company are the volunteer founders who initiated the RTM process. As there are no established procedures involving and agreed to by all leaseholders to elect a Board, the initial Board members have volunteered to establish the RTM Company and initiate the process of acquiring members.

Until the successful RTM process has been completed, the directors’ role is to coordinate the campaign to acquire fellow owners’ support. Once RTM is completed, the intention is that the Board will transition to an elected, representative governing body.

What are the legal obligations of RTM directors?

The legal obligations of Directors have been established through statutes, regulations, and case law that is long established in English law:

Duty of Care and Skill: Common law duty requires Directors to act with ‘the care an ordinary man would take in the same circumstances on his own behalf and with the skill expected from someone with their ‘particular knowledge and experience’.

Fiduciary Duty: Directors must act honestly, in good faith and in the company's best interest. They must ensure that they do not have any conflict of interest and make it known if they do.

Statutory Duty: Directors must comply with various statutory duties imposed by legislation.

If the Managing Agent (i.e. the company managing the building) meets all its obligations, the RTM directors should have no day-to-day responsibilities. However, the RTM directors remain legally liable, and thus, they are insured against claims of negligence or incompetence through Directors & Officers Insurance.

Are RTM directors paid?

No. It is a voluntary role.

What are the governance guidelines for the Board?

Directors share a common aim: to ensure the owners get the best value for money and the best-in-market service from their chosen managing agent.

A good managing agent (the company managing the building) will challenge any director who is not seen to be fulfilling their fiduciary duty or is generally disruptive to the smooth running of the Board.

Good communication and transparency are vital.  The leaseholders must be confident that the Board is acting in the wider group's best interests and shared aims. This involves publishing board meeting minutes on the portal and holding regular meetings with leaseholders, typically every six months. Owners can vote directors off the board if they feel a director is not acting in the best interest of the development.

Can you clarify how the RTM Board will collaborate with the managing agent?

The RTM Board is primarily responsible for hiring and overseeing a Managing Agent to manage the property. The Board and the Managing Agent will agree on the terms of engagement, which will outline the professional relationship, expectations, and deliverables.

As the RTM Company has the leverage, it can set favourable terms and fees that benefit both the Managing Agent and the owners and residents. This ensures a clear understanding of responsibilities and effective management of the property.

Furthermore, the RTM Company will specify a set of KPIs (Key Performance Indicators)

What is the process for agreeing on work and keeping costs reasonable?

The RTM Board will establish a reasonable spending limit for unexpected repairs to monitor general maintenance expenses. If the amount exceeds this limit, obtaining approval from the Board will be necessary.

For major works that cost any leaseholder more than £250, the usual Section 20 Consultation will be applied. The RTM Board and managing agent must still comply with the lease terms regarding the property's maintenance.

However, they can make beneficial financial decisions, such as prioritising essential work and delaying non-essential ones to reduce the overall cost for the owners.

What is the structure of the RTM Board? How are decisions made? Is a quorum required to ensure decisions are made fairly and with sufficient consideration?

Each RTM Board Director has one vote, and any Director can call a board meeting by giving notice of not less than seven days. Meetings do require a minimum quorum of two Directors. A proper record of decisions made should be kept.

Is there a requirement to hold meetings regularly, document or otherwise take notes, etc.?

Regular meetings are not required, but they are recommended for good governance. Members can also call general meetings with the agreement of 5% of the membership.

How often will the Board positions change? How long can each Board member stay in the role? How are they appointed?

No legal requirement states how long a director can serve on a company's board. However, the company's articles can be amended through a special resolution. You could, for example, set a maximum term of two years for directors. Following this term, directors would need to be re-elected at a general meeting to continue serving on the board.

For more information, please see the Leasehold Advisory Service