The Right To Manage, or RTM, allows some leasehold property owners to take over management of the building – even without an existing agreement with the Landlord. It essentially puts the power in the hands of the leaseholders, should the landlord fail to fulfil their responsibilities to a satisfactory standard, but in fact, qualifying leaseholders can execute their right to manage for any reason – it doesn't have to be that the building is poorly managed.
The landlord will be sent a notice by the leaseholders if they plan to do this. Should it be successful, the leaseholders will assume responsibility for the following:
- Collecting/Managing service charges
- Upkeep of the building structure
- Upkeep of communal areas
- Handling complaints from tenants, residents etc.
To execute their right, leaseholders must form a Right To Manage company, following certain procedures. The company formed is the same as a limited company, and as such the necessary records will need to be kept in order to file the obligatory tax returns at the end of each year. The RTM can handle the business directly, or contract it out to third parties if they wish. Landlords are entitled to be members of the board, and votes are awarded round at the rate of one vote per flat owned.
Setting up an RTM
To set up an RTM you would follow the same procedures as for forming a limited company. The name of your company will need to be registered with Companies House and you'll also need to inform HMRC and file the necessary reports. All members who have agreed to director responsibilities will need to have their details passed onto Companies House, and at the end of each year you will need to file the businesses annual accounts, along with an 'annual statement' which confirms that your board members, and all other details are still correct.
Processing Tax Obligations
You must submit your companies records no later than 12 months after your companies first financial year. Generally, most flat management companies are considered as dormant, meaning you won't have to submit future records unless the companies function changes, or unless requested by HMRC. Whether your company is considered as dormant or not will depend on a number of factors, including:
- No profit is being made
- No dividends etc. paid to shareholders
- No activities other than related to the management of the property
- No sale of assets or anything else which may result in chargeable gains tax
You will receive confirmation in writing if HMRC deems your company to be dormant. If the nature of your business changes at all, in such a way that it might be seen as run-for-profit, you must inform HMRC of this to avoid potential huge tax debts and associated fines.