rtm companies
📖 What is rtm companies? Meaning and definition
An RTM company, or Right to Manage company, is established under the Commonhold and Leasehold Reform Act 2002. Its primary function is to acquire the management functions of a building, meaning it takes on the responsibilities for maintaining common areas and collecting service charges from tenants. This transfer of management can impact who is responsible for receiving notices, such as improvement notices, which should then be served on the RTM company rather than the original landlord.
Once an RTM company acquires management, it becomes the entity to whom service charges are payable. This means that any payments made to the previous landlord for service charges, especially those for previous years, cannot typically be set off against amounts owed to the RTM company after the acquisition date. The RTM company effectively steps into the shoes of the landlord for many management purposes.
However, the powers of an RTM company are not absolute. While it can enforce certain tenant covenants, it generally cannot exercise functions related to re-entry or forfeiture of a lease. This distinction is important because it clarifies that while an RTM company manages the building, the ultimate ownership and some specific landlord powers, like forfeiture, remain with the freeholder or original landlord.
📋 Requirements
- The building must be under the management of an RTM company.
- The RTM company must have acquired management functions under the Commonhold and Leasehold Reform Act 2002.
- The RTM company is responsible for collecting service charges from tenants.
📝 Procedure
- An RTM company is formed by leaseholders.
- The RTM company acquires management functions for the building.
- The RTM company takes over responsibility for common parts and service charge collection.
- Notices, such as improvement notices, are served on the RTM company.
- The RTM company enforces untransferred tenant covenants, but cannot exercise re-entry or forfeiture.
💡 Examples
- A local council needed to serve an improvement notice for common parts of a building; instead of serving it on the landlord, they had to serve it on the RTM company managing the property.
- A tenant tried to offset previous service charge payments made to the landlord against new service charges owed to the RTM company, but this was not allowed after the RTM company had taken over.
- An RTM company sought to enforce a tenant covenant, but found it could not pursue re-entry or forfeiture, as these powers remained with the original landlord.
- A building's residents formed an RTM company to manage their flats, including the collection of contributions to reserves for future maintenance.
📚 Legal basis
- Housing Act 2004
- Commonhold and Leasehold Reform Act 2002
❓ Frequently asked questions
What does 'RTM' stand for?
RTM stands for 'Right to Manage'. It refers to the legal right of leaseholders to take over the management of their building.
Who should an improvement notice be served on if there's an RTM company?
If a building is under the management of an RTM company, an improvement notice requiring work to common parts should be served on the RTM company, not the original landlord.
Can I set off payments made to the old landlord against service charges owed to an RTM company?
Generally, no. Once an RTM company has acquired management, you cannot set off amounts paid to the previous landlord for service charges against amounts payable to the RTM company, especially for previous years.
Does an RTM company have the power to re-enter or forfeit a lease?
No, an RTM company cannot exercise any function of re-entry or forfeiture, even though it can enforce other untransferred tenant covenants. These specific powers typically remain with the original landlord.
What types of functions does an RTM company acquire?
An RTM company acquires management functions, which include responsibilities for common parts of the building and the collection of service charges, including contributions to reserves.
Where can I find the legal basis for RTM companies?
The legal framework for RTM companies is primarily found in the Commonhold and Leasehold Reform Act 2002.