Moving to RTM: How do members check the powers of Directors

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    Originally posted by scot22 View Post
    Thanks for taking the time to post such a courteous and detailed response.
    Thank you. I am not always courteous to my few clients.
    I keep it to a few, as it's so much hassle getting them to do the right things, and they still want to run the place, even after crossing my palm with silver Groats to run the place for them.


      Originally posted by scot22 View Post
      Doesn't it depend on the contract ? Surely giving decision making to a MA take away from director responsibility. I can imagine a lot of blaming would take place. My simple understanding is that directors run things.
      Your simple understanding is on the right lines. There is a difference between decision making and management, though the two can overlap. It is also important not to confuse the obligations of a company with the obligations of the directors to a company. An RTM owes an obligation to the leaseholders to maintain the building in accordance with the leases. The RTM can delegate management functions to professional managing agents. The managing agent's functions include matters such as collecting maintenance contributions, organising repairs, making inspections, dealing with the leaseholders, keeping accounts and advising generally. It is of course possible to delegate some decision making, but no way should managing agents be given a free hand or the right to ignore the client's instructions. The terms of appointment should set out what the agent has authority to do and what he can spend without authorisation.

      Lease has an excellent guide:


        Appreciated Lawcruncher. That is how we operate. Thanks for link to Lease.


          The Managing Agent offering to provide "service charge administration" should comply to the RICS Residential Management Code which you can find online or buy a hard copy for about £25 from RICS Online Bookshop.



            Many thanks for this detailed response. It is exactly how I am viewing this process. Set up the RTM and appoint a Managing Agent and let them get on with it. My responsibility is that of oversight, making sure that the MA performs in the best interest of the building.

            Best wishes.


              One last question: Would the RTM company be required to register for VAT if its turnover (expenditures per annum recoverable from the tenants) goes above the threshold which is currently £85,000? If yes, would the “sales” (i.e. billing the tenants for their shares of the service charges) be subject to the standard VAT rate or would it be zero-rated?


                The RTM company should keep itself as non-profit company, by appointing a managing agent to operate the service charge account.

                An external managing agent company charges annual management fee per flat ( e.g £200 + Vat if the company turnover exceeds £85K)

                Other suppliers will apply VAT onto their supplies e.g electric company charges 5% VAT and sole trader window cleaner 0% VAT etc.

                The RTM never charges VAT on the service charge contribution paid under the lease. .


                  V.A.T. is added to invoices of sales or professional services rendered.

                  The R.T.M. does not sell anything, therefore cannot add V.A.T. to anything. Doing so would be illegal.

                  Leaseholders give / lend money to the R.T.M. company. The R.T.M. company or via an agent, decide what needs doing, on behalf of the R.T.M. company AND leaseholders, then use the leaseholders OWN money to get things done.

                  If some one gives you £ 2 to get a loaf -- for them, you get it an give the change to them. You dont produce an invoice and charge them V.A.T. on the money they gave you to get a loaf. ( because you did not sell a loaf to them, you got it on behalf of them )
                  That's why it's a Service charge demand, and not a Service charge invoice.


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