UK Company Formation

Property Management Company

Right to Manage (RTM) Companies and Property Management Companies

Right to Manage companies give qualifying tenants in England & Wales the right to take over the management of the building in which their flats are situated. They do not need to prove that the freeholder/landlord is at fault or has mismanaged the building. However a Right to Manage company cannot acquire or own the building. 

A Property Management Company is appropriate where the leaseholders share a building that has been separated into individually owned and occupied units, or where leaseholders or freeholders of units within a development share common amenities such as private roads, pumping stations or grounds  ("the facilities") and the company may own the property that it manages. 

Form a Property Management Company   Form a Right To Manage Company

 

Right to Manage Company or Property Management Company - which company is right for you?

 

What is a Right to Manage Company?

  • RTM companies give qualifying tenants in England & Wales the right to take over the management of the building in which their flats are situated.
  • They do not need to prove that the freeholder/landlord is at fault or has mismanaged the building.
  • A RTM company cannot acquire or own the building.

What is a Property Management Company?
A property management company is appropriate where:

  • The leaseholders share a building that has been separated into individually owned and occupied units.
  • Leaseholders or freeholders of units within a development share common amenities such as private roads, pumping stations or grounds  ("the facilities").
  • The company may own the property that it manages.

The company will (among other things); 

  • Manage and maintain common parts i.e. staircases, halls, gardens, drive-ways, roads, and other access-ways
  • Collect service charges and arrange services – cleaning, decorating, lift maintenance, window cleaning
  • Pay insurance, maintenance costs, professional fees, rates, taxes etc.
  • Purchase or own the freehold i.e. become the landlord, as necessary.

Can a Right to Manage Company be limited by shares or by guarantee?

By Guarantee - RTMs must be limited by guarantee as per the legislation laid down in The Commonhold & Leasehold Reform Act 2002

Can a Property Management Company be limited by shares or by guarantee?

By Shares.

If it is a share company, the company normally issues one share to each flat owner. Each share will have a nominal value and upon payment for the share each applicant shall be entitled to and then become a member of the company and can vote as a member.

By Guarantee.

This is the simplest form of management company to administer. This is because it is much easier to deal with changes of ownership (the outgoing tenant automatically ceases to be a member when the incoming tenant is admitted as a member) so there is no need to physically transfer shares. Members have one vote for each unit they hold.

Benefits of a Right to Manage Company

  • By taking over the management of their building the tenants will be able to undertake any repairs or maintenance that the landlord had previously neglected.
  • They may also be able to reduce excessively high service charges.
  • Flats in well-managed blocks are usually easier to sell and because they are well managed are likely to be more harmonious places in which to live.

Benefits of a Property Management Company

The benefits of a well-run property management company with on-site directors who communicate regularly with the unitholders are:

  • Problem tenants can be dealt with more quickly and effectively.
  • Tenants have someone to talk to right away.
  • The tenants as a whole have more control over maintenance of the shared areas/facilities and level of service charges.
  • Decrease tenant turnovers.
  • On-time rent.
  • Less stress

What should you bear in mind with a Right to Manage Company?

  • An RTM company requires 50% or more of the qualifying tenants to sign up before it can apply for the right to manage.
  • Incorporation requires at least one director and two members who are qualifying tenants.
  • Directors who are appointed should not take their responsibilities lightly.
  • All Directors will have to commit their time and energy to the RTM Company
  • Remember the freeholder/landlord will be entitled to a vote as well.
  • The company name must end in "RTM Company Limited"

What should you bear in mind with a Property Management Company?

  • At least two directors required so that control does not rest with one person
  • Typically set up by either the developer as the development takes place and prior to the sale of any unit, or by residents in order to purchase the freehold
  • Specific articles can be drafted to meet the needs of mixed developments i.e developments with house and a block of flats. The articles can provide different classes of shares and voting rights for the different property types.
  • Failure to file accounts and returns at Companies House on time may lead ultimately to the company being struck off.
  • If the company is struck off whilst it owns the freehold, the freehold will pass to the Crown as bona vacantia and the tenants may be unable to sell their units
     
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