Advantages and Disadvantages of Right to Manage Companies

There are number of advantages and disadvantages of having The Right To Manage which are set out below.

The list is not exhaustive and we are happy to discuss whether a RTM is suitable for you on an individual basis.

Advantages

  • All qualifying leaseholders in the building have the right to become a member of the Right To Manage company and each member has identical voting powers.
  • The landlord cannot demand financial compensation because the RTM takes control of the building. However the landlord can re-charge his reasonable costs incurred in the handover process.
  • The lessees have control over the day to day running of the building with the associated benefits of potential cost savings. Hence the RTM gives the lessees the right to control the management and administration of the building
  • Only half or more of the qualifying leaseholders must agree to become part of the RTM
  • The RTM allows leaseholders to have the right to manage their block without proving that the landlord or managing agent are running the block inefficiently neither is there the requirement to apply to the Courts.
  • A RTM company does not have shares and therefore when a fat is sold there is not the requirement to issue a new share to the new owner and to cancel the share from the seller. Membership of the RTM is “granted” to all qualifying leaseholders.

Disadvantages

  • The Right To Manage company will require at least one director. The requirement for a company to have a company secretary was removed on 6th April 2008 under the provisions of the Companies Act 2006.
  • The director(s) of the Right To Manage is/are responsible to the members of the RTM to run the company on their behalf. Monies need to be collected from the members of the RTM.
  • The director(s) should run the day-to-day affairs of the RTM in a prudent financial manner. For example there should be a budget in place as well as business plans and cash flows.
  • The RTM will take up the director(s) time.
  • There will always be one or more lessees that do not agree with the way in which the block is being managed and the directors will be criticised.
  • Landlords will be able to recover their direct costs associated with the transfer of the management to the RTM.
  • Obviously not every leaseholder in the block has to join and so those that don’t join will still benefit from any efficiency.
  • The present landlord will be entitled to membership of the RTM and also entitled to vote.
THE FAST AND EFFICIENT WAY TO FORM A COMPANY

Company formations can be formed in as little as three working hours*.

HERE TO HELP...CALL 01273 831891

We are here to help you form your new Limited Company, so please feel free to call us.