RTM (Right to Manage) and RMC (Resident Management Company)
In the case of Right to Manage the landlord continues to own elements of the building. The Commonhold & Leasehold Reform Act 2002 gives leaseholders no-fault right to take over management of their building. They do not have to buy the freehold and any superior leasehold interests. RTM is based on the transfer to a leaseholder owned company of management, not ownership. This means there will still be some oversight and possible ground rent due to a landlord.
Once RTM has been exercised the residents take over management functions including services, repairs, maintenance, improvements and insurance.
The RTM is structured in accordance with the scheme of the resident leases.
One of the issues recently brought to our attention is the fact that RTM does not displace the landlord’s ownership of it’s retained property i.e. the common parts, roof, structure and exterior of the building. This is where the issue of implied rights can become muddy.
In a County Court decision in which the RTM Co had management functions, including work on the roof, it was ruled that RTM did not prevent the landlord from developing the roof, the roof space and airspace above to create something like an additional flat. Therefore the landlord can still make further development of the property. RTM directors need to be aware of this situation.
The conclusion drawn was that generally though RTM is cheaper RMC (by collective enfranchisement) is better. This is a matter of perspective. If a building has a lot of flats you may be able to be sure of always having a directorship to manage the building. But if this becomes a problem, the residents can always fall back on the landlord to take back management of the building and this ensures the building and its common parts are kept in good order.