Right to Manage Pros and Cons: A Complete Guide for Leaseholders
If you’re a leaseholder considering how to improve the way your property is managed, you may have heard about the Right to Manage. This legal right allows leaseholders to take control of property management decisions without purchasing the freehold. In this complete guide, we will explore the Right to Manage and its benefits, challenges, and eligibility, helping you understand whether it’s the right choice for you and your leasehold property.
What is Right to Manage?
Understanding the Right to Manage (RTM) is essential for leaseholders who want to have more control over how their leasehold property is managed. Established under the Commonhold and Leasehold Reform Act of 2025, the Right to Manage enables leaseholders to set up a company and take over the management duties from the landlord. This means leaseholders can handle important property management tasks, such as repairs, maintenance, and selection of contractors, without needing to purchase the freehold.
Advantages of the Right to Manage
The Right to Manage brings a variety of benefits to leaseholders. Here are some of the key advantages:
1. Greater Control Over Property Management
One of the primary benefits of the Right to Manage is the increased control it provides to leaseholders. By managing your leasehold property, you can ensure that services, repairs, and renovations are carried out according to your standards and preferences. This control allows leaseholders to create a more personalized and satisfactory living environment.
2. Cost Savings
Landlords and third-party property management companies typically charge high fees for their services. With the Right to Manage, leaseholders can choose cost-effective contractors and service providers, potentially saving a significant amount of money on repairs, maintenance, and other property management services. This financial flexibility makes RTM an attractive option for many leaseholders.
3. Improved Service Quality
When leaseholders manage their leasehold property, they can select service providers that prioritize high-quality services. This leads to better upkeep and maintenance of the building, ensuring that it remains in good condition and that tenants and residents are satisfied with the services they receive.
4. Transparency in Financial Management
By managing the property themselves, leaseholders gain full transparency over financial matters. This means they can monitor expenses, ensure that funds are allocated efficiently, and have a clearer understanding of how money is spent on property management.
5. Empowerment in Decision-Making
With the Right to Manage, leaseholders have the power to make decisions about their leasehold property that directly affect them. Whether it’s choosing contractors or deciding on property improvements, leaseholders are empowered to make decisions in the best interest of their community.
Challenges of the Right to Manage
While the Right to Manage offers many benefits, there are also challenges to consider before deciding if it’s the right path for you and your leasehold property.
1. Initial Setup Costs
Forming an RTM company and taking over the management of the leasehold property requires some initial investment in legal, administrative, and organizational setup. These costs can include legal fees, registration costs, and other expenses associated with creating and maintaining the RTM company.
2. Ongoing Management Responsibility
Once the Right to Manage is exercised, leaseholders become responsible for all property management duties. This means that they are accountable for ensuring the building is well-maintained, complying with legal regulations, and dealing with tenant issues. This increased responsibility can be time-consuming and may require additional management expertise.
3. Limited Scope of Control
It’s important to note that the Right to Manage does not transfer home ownership of the leasehold property. Leaseholders gain control over property management but do not own the freehold. This means they still have to work within the terms of their lease and adhere to certain limitations.
4. Potential for Disagreements Among Leaseholders
For the Right to Manage to be successful, a significant number of leaseholders must support the initiative. This can sometimes lead to disagreements if there are differing opinions about how the property should be managed or if some leaseholders are reluctant to take on the responsibilities of management.
Who Can Exercise the Right to Manage?
To qualify for the Right to Manage, certain conditions must be met:
- At least 50% of the leaseholders in the property must support the RTM initiative.
- A minimum of two-thirds of the property units must have leases that are longer than 21 years.
- The property must be a leasehold property, and the landlord must not be a local authority or certain other entities.
The Process of Exercising the Right to Manage
Understanding the process of exercising the Right to Manage is essential for leaseholders who are considering this option for their leasehold property. The journey involves several stages, each requiring careful planning and decision-making. Let’s explore the typical steps involved in exercising the Right to Manage.
Step 1: Assessing Eligibility
Before initiating the process, it’s crucial to determine if your property meets the necessary criteria for the Right to Manage. As mentioned earlier, at least 50% of the leaseholders must agree to pursue RTM, and two-thirds of the units in the property must have leases that are longer than 21 years. Additionally, the building must be a leasehold property, and the landlord cannot be a local authority or certain other entities. Once you confirm that your property meets these requirements, you can move forward.
Step 2: Forming the RTM Company
To exercise the Right to manage, leaseholders need to form a company that will take over the property management responsibilities. This RTM company will be composed of leaseholders who support the initiative. Setting up the company requires legal documentation, including the Memorandum and Articles of Association, which outline the rules and structure of the company. You’ll also need to appoint directors and ensure compliance with legal requirements.
Step 3: Serving the Notice of Claim
Once the RTM company is formed, you must serve a formal notice of claim to the landlord, notifying them that the leaseholders intend to exercise their Right to Manage. This notice must comply with specific legal requirements, and some timeframes must be followed. The landlord has a set period to respond to the notice, either accepting the claim or disputing it. If the landlord agrees, the transfer of management responsibilities occurs smoothly. However, if the landlord disputes the claim, the matter may go to a tribunal.
Step 4: Transitioning Management Responsibilities
Once the notice is served and accepted, the RTM company assumes responsibility for managing the leasehold property. This includes making decisions about the property’s maintenance, repairs, and other management functions. Leaseholders now have direct control over the property’s future, including decisions about finances, contractors, and improvements.
Step 5: Ongoing Management
The Right to Manage doesn’t end with the transfer of control. Ongoing management responsibilities will involve maintaining regular communication among leaseholders, overseeing property maintenance, and ensuring legal compliance. As an RTM company, leaseholders will need to stay informed about property management regulations and best practices to ensure smooth operations.
Is the Right to Manage Right for Your Property?
When considering whether to exercise the Right to Manage, it’s essential to evaluate your leasehold property’s specific needs. Take into account the willingness of other leaseholders to take on management responsibilities, the potential cost savings, and whether you have the necessary time and resources to handle the ongoing responsibilities.
Conclusion
The Right to Manage provides leaseholders with the opportunity to take control over their property management decisions, offering significant benefits such as cost savings, improved service quality, and greater control. However, it also comes with challenges, such as initial setup costs, ongoing management responsibility, and potential disagreements among leaseholders. Before proceeding with the Right to Manage, it’s crucial to consider whether you and your fellow leaseholders are ready to take on these responsibilities. If done right, the Right to Manage can be an excellent way to ensure the long-term success and satisfaction of your leasehold property.
