Right to Manage - The need to know for new directors

But with control comes responsibility. Directors of RTM companies are not simply enthusiastic volunteers; they are now legally responsible for managing complex residential properties. The role requires more than common sense and goodwill, it demands an understanding of property law, company law, finance and regulation. 

Taking over management functions 

When a RTM company takes over management on the acquisition date, it assumes a broad range of functions previously carried out by the landlord or their managing agents. These include overseeing repairs, maintenance, and improvements, providing services such as cleaning or grounds maintenance, insuring the building, and collecting service charges. The RTM company is also responsible for approving and enforcing lease covenants, a task that can involve sensitive disputes between neighbours.

This might sound daunting, but it is also where RTM companies can add real value. Directors who approach their duties thoughtfully and seek professional advice where needed can transform a building’s management culture, delivering transparency, responsiveness, and trust that may have been previously lacking. Leaseholders often know their building best. They live with the decisions made every day and are well placed to make informed choices.

That said, there are boundaries. RTM does not mean that leaseholders own the building. The landlord remains in place and retains specific legal responsibilities, including collecting ground rent, managing non-residential parts of the building and exercising powers of forfeiture and possession. The RTM company’s powers, while extensive, are clearly defined and limited by law.

The key responsibilities 

Financial stewardship 

RTM companies are responsible for collecting and managing service charges, consulting on major works and maintaining full financial records. Service charges must be properly recoverable under the lease, reasonable, and demanded within strict statutory requirements. Every service charge demand must be accompanied by a Summary of Rights and Obligations (prescribed by legislation) and must generally be made within 18 months of costs being incurred. Directors must also be prepared to defend the service charge budget, before leaseholders, and, if challenged, potentially before the First-tier Tribunal. When things go wrong, enforcement may be necessary. While the RTM company can sue for arrears, it cannot forfeit leases. In serious cases, the landlord must step in. 

When major works are planned, or where long-term contracts such as appointing a new managing agent are proposed, Section 20 consultation is often required, even when a reserve fund is being used. Failure to consult properly could lead to the RTM being unable to recover the full spend. 

Approvals 

RTM directors must take care when handling leaseholder applications, for example to sublet, carry out alterations, or assign a lease. While the power to grant these approvals transfers to the RTM company, the landlord must be given formal notice in advance: 30 days’ notice for approvals relating to assignment, subletting, placing a charge on the lease, parting with possession, alterations or changes of use, and 14 days for all other approvals. If the landlord objects, consent cannot be granted by the RTM company until the objection is withdrawn or the matter is decided by the First-tier Tribunal. These are legal processes with strict timeframes, not informal discussions.

Enforcement of covenants 

Alongside financial duties, RTM companies are also responsible for enforcing leaseholder covenants. Whether it’s nuisance behaviour, unauthorised alterations or subletting breaches, the company must monitor and address issues fairly and consistently and report unresolved breaches to the landlord. Ignoring breaches undermines the lease and the RTM company’s position.

Meetings and governance 

Directors must hold board meetings, maintain accurate minutes, and formally instruct and follow up on external advice. Internal discussions, without a managing agent, are useful to establish board positions in advance of formal decisions. Meetings with the managing agent should be based on a shared agenda and result in clear actions with responsibilities and deadlines.

Annual budgeting must clearly separate company expenses, such as legal fees, from service charge expenditure. Both need to be managed transparently and in accordance with the lease. 

Building safety

Since the Grenfell Tower tragedy, building safety has become a central concern in property management. The Building Safety Act 2022 imposes duties on ‘higher-risk buildings’ (generally over 18m or seven storeys with at least two residential units), with additional measures for buildings over 11m or five storeys. If your building qualifies, you will need to appoint an accountable person who is legally responsible for managing safety risks to residents. All RTM directors should keep fire safety under regular review and ensure their company is familiar with developing guidance. 

Data protection 

RTM companies are subject to the UK GDPR and the Data Protection Act 2018. Directors must issue privacy notices to leaseholders, ensure leaseholder data is stored securely and verify that contractors (for example, managing agents) handle data compliantly. Breaches of data protection can result in fines and reputational damage, so it’s important this area is not overlooked. 

Getting support

While RTM directors take on significant responsibility, they are not expected to know everything. Most RTM companies appoint professional managing agents and can seek legal or financial advice where needed. 

There is also growing support. Resources such as the LEASE website, training from The Property Institute, and Tribunal guidance documents provide practical help. 

Ultimately, the success of an RTM company depends on its directors. Buildings run by engaged RTM companies often see improved maintenance standards, more predictable service charge budgeting, and a stronger sense of community.

Shabnam Ali-Khan is a Partner at Russell-Cooke and Kerrina Grey is a trainee in the property law and conveyancing team. Russell-Cooke is a corporate member of ALEP (the Association of Leasehold Enfranchisement Practitioners).