Acquiring the right to manage is just the start for an RTM company.

From the acquisition date onwards, the RTM company will assume responsibility for carrying out the management functions.

Management functions

Management functions are defined under the Commonhold and Leasehold Reform Act 2002, and are functions with regards to

  1. Services
  2. Repairs
  3. Maintenance
  4. Improvements
  5. Insurance

Essentially, from the acquisition date onwards, the only functions the RTM company cannot exercise are

  1. Functions relating to re-entry or forfeiture; and
  2. Management functions in relation to flats or other units which are not held under a lease by a qualifying tenant (e.g. commercial units etc.).

 

Management from the acquisition date

The transfer of the management functions to the RTM company does not modify the leases, or create new rights and duties.  The management functions which the RTM company will exercise are those set out under the lease.  The existing leases aren’t modified by the RTM’s acquisition of the right to manage.

 

Ground rent

The right to demand and collect ground rent does not transfer to the RTM company. This right remains with the landlord.

 

Tenant covenants

Once the right to manage has been acquired by the RTM company, it is obliged to keep a check on compliance with covenants.

If a lessee is in breach of any covenant in their lease, the RTM company is obliged to report this breach to the landlord.

There are time limits set down for this.  There are circumstances (e.g. if the breach has been remedied) where the RTM company doesn’t have to report the breach.

 

Service charges

The collection of service charges and transfer of any accrued uncommitted service charges will be a priority for the RTM company.

The RTM company will need to access funds so that it can actually manage the building and perform the management functions it now has responsibility to perform.

 

Moving forwards

These are just some examples of the issues an RTM company will face once it acquires management.

There are many more issues that the RTM company will need to take into consideration and deal with. If in doubt, professional advice and support should be obtained.

Management of a building requires a great deal of skill and expertise, so don’t be afraid to bring in the professionals!