Do managing agents arrange the RTM?

This could be a very short article as the answer is that many do………but this is almost always caveated, and I will cover these points later.

The question is, should managing agents arrange the right to manage (RTM)?

Alan Draper, managing director of Common Ground Estate and property management believes that they shouldn’t.

“I know the process and have arranged the RTM in the past, however, on two occasions, I made minor technical errors which lead to increased legal costs for my clients. Common Ground refunded these legal costs, however, the lesson learnt was that RTM claims should be left to the experts; not necessarily lawyers, but companies that do this as a regular activity rather than on an ad-hoc basis in order to gain management business.”

“I knew that my process errors had led to increased legal costs for my clients and I both admitted the mistake and paid the associated legal costs, however, how would the lay person know if your prospective managing agent had made a costly error? Legal costs are normal in the rtm but errors in process will substantially increase these.”

The main reasons to use a specialist RTM practitioner are as follows:

1. Greater chance of success
   Many freeholder and larger managing agents have legal teams dedicated to defending RTM claims and it pays to do this as even the slightest error in a claim can elicit a valid counter notice
   Those practitioners that perform this service regularly are more likely to have defined procedures to ensure accuracy in producing solid claim notices that cannot be challenged.
2. Reduce the risk of excessive legal bills
   The Commonhold and Leasehold reform act allows for the freeholder to issue a counternotice should the claim not fulfil a fairly limited criterion. So long as the freeholder doesn’t behave vexatiously, then the legislation allows them to claim back the freeholders’ legal costs.
   Whilst the smallest of administration errors might not necessarily prevent the RTM being granted, if the freeholder is able to issue a counter-notice due to errors in the claim notice then this would not be regarded as vexatious, and the applicants will have to cover the freeholders’ legal costs.
   Upon receipt of a counter notice, the applicant has two choices.
   a. Start the application again
   This will incur further legal fees as the freeholder has to check the second application as well
   b. Apply to the First Tier Tribunal (FTT).
   Again, this will incur legal fees, and the applicants will have to cover the freeholders’ legal costs in defending their counterclaim at the FTT
3. Reduce the legal risk
   The foundation of the RTM process is the leaseholders’ statutory right to take control of the management of their building, free from undue influence or coercion. Agreeing to help with RTM on the condition of securing a management contract creates a significant conflict of interest.
   The freeholder could argue that the RTM process is being abused if it appears to be primarily for the benefit of a third party (such as a managing agent seeking a guaranteed contract). This could be viewed as an abuse of the statutory framework, which is intended to empower leaseholders, not commercial entities.
   Additionally, many managing agents will ask that a minimum term contract apply in return for arranging the RTM and this will very likely be a breach of section 20 of the Landlord and tenants act 1985 if the proposed management fee would cost any leaseholder more than £100 per annum, then the managing agent could not legally ask the client to enter a management agreement that exceeds 12 months. This concept has been tested in the courts through Corvan properties vs Mahmoud.
4. You can run a proper tender process
   The tender process for appointing a managing agent should be based on the agents ability to fulfil both management obligations and you’re desired approach to management. By agreeing a (likely illegal) muti-year contract, if the agent doesn’t perform, you will either have to pay an early termination fee or put up with unsatisfactory management until expiry of the contract.
   There are a number of excellent RTM practitioners, and we approached one to comment on what you should look for in a good RTM practitioner.
   Shula Rich (https://www.shularich.co.uk/) commented as follows
   “Look for someone you know you can trust; who will quote you a fixed fee with no ‘extras’. Are they experienced enough to stand up for you against any unwilling freeholders? Are they going to be there after RTM for any queries; and are they truly independent? Don’t tie yourselves up with any RTM service if they want your block as part of their portfolio. This is the way they get their costs back after your ‘free’ RTM service. There truly is no such thing as a free RTM”