Right to Manage Costs

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    Right to Manage Costs

    Hi,

    I am part of a residents association that is exploring right to manage (RTM).

    We are a 30 flat block in the Ealing area.

    We want to get advice on the process so how much should we be expecting to pay for our legals?

    I'm also aware we have to pay for freeholders legals which I estimate at £3k based off comments elsewhere on the forum. Is that realistic?

    Our block is 1930's build which had an extension on it some time after but we also have a separate building (garages with some flats on the upper level).

    I understand we will need two RTM's as each building needs to be done separately. Is that correct? Will that potentially double the freeholders legal costs?

    Is it typical for the residents association that assumes management to pay a salary to its key members? e.g. treasurer, chair etc?

    100% of flats may not participate and I understand that costs of RTM can't directly come out of the service charge. To get around this, and in order for fairness, I'm thinking of giving a small salary to the residents who paid for the RTM process equivalent to the extra money they have to put in because not everyone financially contributed.

    Thanks in advance!




    #2
    There is a free guide to RTM which can be downloaded from www.lease-advice.org.

    To set up RTM, you should get support from 51% of leaseholders in each building ..

    Comment


      #3
      https://www.lease-advice.org/advice-guide/right-manage/

      Comment


        #4
        Originally posted by Gordon999 View Post
        There is a free guide to RTM which can be downloaded from www.lease-advice.org.

        To set up RTM, you should get support from 51% of leaseholders in each building ..
        Thanks for taking the time to respond. I have done a lot of reading and am familiar with the site you mentioned. I had some specific questions I hoped someone might be able to help with.

        Comment


          #5
          Originally posted by Pariah81 View Post
          Hi,

          I'm thinking of giving a small salary to the residents who paid for the RTM process equivalent to the extra money they have to put in because not everyone financially contributed.
          You can't do that, as where is the money going to come from ?
          You cant give them back the money they gave towards the RTM - as then WHO pays for the RTM legal fees ? - You ?
          It can't come out of the service charges.
          You can pay ONE of the Directors, say $ 500 per year to administer ( and being the company sectretary as well as a director, but with ALL leaseholders approval - maybe with 51% approval ).

          Directors of RTM and RMC companies normally don't get paid. I didn't get paid anything initially, but did after 3 years of none conformance of agent and eventual sacking of the agent. - they gave me the money they paid the agent and stated I did a better job than the agent.

          Unless you have members that are fully conversant with the R.I.C.S. code of practice, and all the other legal stuf that has to be done ( fire and safety inspections, asbestos inspectioons, companyhouse rules and time limits on submitting accounts, etc, etc. ) you need a managing agent, and not let 30 flats be managed by possibly untrained leaseholders.

          I think that the RTM can only be done for ONE building, not two, and you just pay 50% / 30% of the grass ciutting etc, but if it's just garages, that belong to the leaseholder under your proposed RTM application, they are not living areas, and will come under the the original RTM domain, and possibly be demised to leaseholdrers with them having to repair same garages.

          Depends what is in the lease.


          Comment


            #6
            I suggest that you contact a specialist who has previous experience of forming RTM Companies, there are some who charge nothing as long as they are appointed managing agent for one year, I am aware of some who do put the costs of forming the company through the service charges.

            £3,000 for the freeholder's costs seems to be high, a specialist has advised that £500 is the average charge and in at least one case on here, there was no charge at all.

            The RTM Company is not permitted to pay salaries under the standard set of Articles, so if you wish to make such payments, you would need to hold a meeting of members and amend the Articles. The RTM Company would then need to register as an employer and it would need to operate PAYE. There is nothing to stop the Company from reimbursing expenses.

            Comment


              #7
              Originally posted by Gordon999 View Post
              To set up RTM, you should get support from 51% of leaseholders in each building ..
              The requirement is 50%.

              e.g. from LEASE -

              The required minimum number of qualifying tenants must be equal to at least half the total number of flats in the building
              There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.

              Comment


                #8
                Originally posted by Gordon999 View Post
                There is a free guide to RTM which can be downloaded from www.lease-advice.org.

                To set up RTM, you should get support from 51% of leaseholders in each building ..
                Interesting....I have one lease in a total of 3 blocks totalling 34 flats. All managed under one managing agent appointed by the FH.
                But each block, whilst seemingly are all connected there are 3 separate blocks of about 11 flats in each. Each block has both front and back entrance, and unique stairs to each block. So no common areas are accessible from other blocks. The block that I live in has more owner occupiers in it than the other blocks, most of whom would gladly get rid of the managing agents if we could. Other blocks mainly rented out and leaseholders not interested in an RTM. Is it possible for us to do our own RTM and manage what would be a pretty small number of interested people?

                Comment


                  #9
                  Yes, you should be able to. We did something similar for one of two blocks with same name just different flat numbers. First step is to get 6+ owners to take part and form a company to serve the notice. A reluctant freeholder will fight every step so you may need professional help to get it right.

                  Comment


                    #10
                    ERMmmm....it would be very interesting especially as our Freeholder, who owned the company that Managed the building gave the contract to another fringe company, and the fees doubled to £10k pa....and if 12 of us leave that will cause fee problems for the remaining 2 flats, but not our problem....will investigate the opportunity

                    Comment


                      #11
                      Originally posted by doobrey View Post

                      The requirement is 50%.

                      e.g. from LEASE -
                      Yes , many years ago I was organiser to buy the freehold , some leaseholders agreed to participate but when the time came to pay their share of the purchase funds, they dropped out..

                      Comment


                        #12
                        Originally posted by Gordon999 View Post

                        Yes , many years ago I was organiser to buy the freehold , some leaseholders agreed to participate but when the time came to pay their share of the purchase funds, they dropped out..
                        Reminds me of a riddle from the book by Feldman and Spratt - Five Frogs on a log

                        Five frogs are sitting on a log.
                        Four decide to jump off. How many are left?
                        Answer: Five
                        Why?
                        Because there's a difference between deciding and doing.

                        Comment


                          #13
                          Originally posted by ram View Post

                          You can't do that, as where is the money going to come from ?

                          My understanding was that the service charge can include the cost of maintaining the RTM company.

                          Originally posted by ram View Post

                          You cant give them back the money they gave towards the RTM - as then WHO pays for the RTM legal fees ? - You ?

                          e.g.
                          30 leaseholders
                          £9000 total cost for RTM
                          15 leaseholders contribute £600 each
                          director, secretary and admin are appointed from leaseholders and are paid £300 each for one year.
                          Roles rotate and 3 new leaseholders come on board, rinse and repeat.

                          These roles would oversee/work with the managing agent

                          Comment


                            #14
                            Originally posted by eagle2 View Post
                            I suggest that you contact a specialist who has previous experience of forming RTM Companies, there are some who charge nothing as long as they are appointed managing agent for one year, I am aware of some who do put the costs of forming the company through the service charges.

                            £3,000 for the freeholder's costs seems to be high, a specialist has advised that £500 is the average charge and in at least one case on here, there was no charge at all.

                            The RTM Company is not permitted to pay salaries under the standard set of Articles, so if you wish to make such payments, you would need to hold a meeting of members and amend the Articles. The RTM Company would then need to register as an employer and it would need to operate PAYE. There is nothing to stop the Company from reimbursing expenses.
                            Thanks. Useful info.

                            Comment


                              #15
                              Originally posted by Pariah81 View Post
                              Thanks. Useful info.
                              Originally posted by eagle2 View Post
                              if you wish to make such payments, you would need to hold a meeting of members and amend the Articles. The RTM Company would then need to register as an employer and it would need to operate PAYE. There is nothing to stop the Company from reimbursing expenses..
                              As I stated previously in another thread, I was paid for my services from the Service account as a Company secretary, Director and Manager ( - No managing agent ) with the agreement of all the leaseholders, ( be it total of only 6 ).
                              We did not change the articles, nor register me as an employie nor operate PAYE for me.

                              HOWEVER, if you are PAYING a managing agent ( a good one, if they even exist ! ) there is nothing for the directors to do, as the agent sorts out any problems, issues notices etc etc, so again there should be nothing for the diretors to do, and not be paid if you have a managing agent.

                              I would object to paying directors when paying for an agent to run the place !
                              You may get complaints about paying directors, as well as an Agent, so be very careful with your plan to pay the directors etc., etc.

                              If an agent runs the place, then directors do NOT get paid.
                              If no agent, then the dirctors can get paid, with leaseholder agreement. But you state your case that instead of paying an agent about £ 6000 (that's the most you should pay ) you are paying £ 2000 for inhouse service instead.

                              But you mention director, secretary and admin are appointed from leaseholders. I hope you don't mean a Company secretary, as the Agent is normally the Company secretary.
                              What's the "Admin for, when you have directors ? to administer.

                              you also state "Roles rotate and 3 new leaseholders come on board"
                              There is no advantage to dismissing current director, secretary and admin, then to put in charge a completely new set of people who wont know the background of the place. -- NO, you leave in the people who do their job correctly, and not just rotate / bring in 3 different people each year or so.

                              You are running a business, not a fad or plaything.

                              Well, that's my take on the matter, digest or dismiss as you please.



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