Following our recent Legal Updates regarding Recognised Tenants Associations (RTAs) (see here) and Right to Manage Companies (RTMs) (see here), we have been asked about the different powers that RTAs and RTMs have.

We have attached above the links to the two previous updates from April 2019, which look at the criteria for formation of a RTA and an RTM.

RTAs and RTMs - A Comparison

The table below sets out the main differences between RTAs and RTMs, in terms of the rights and powers that each have (this is not an exhaustive list):

As you can see, the powers of RTAs and RTMs are very different. In short, RTAs cannot make any decisions about the running of the development. They merely have the ability to be consulted, make nominations and to inspect relevant documentation in relation to matters that affect the development itself. However, the Landlord is not obliged to act on any suggestions made by the RTA.

On the other hand, RTMs take over all management responsibilities of the qualifying units of the development but does not replace the Landlord or inherit all their legal rights, such as the right of forfeiture.

To RTA or RTM?

Leaseholders may feel inclined to form a RTA in order to simply be more involved in the running of their development, but where they do not want to take on all the management responsibilities of a RTM. They will be able to see where their money is going and what it is being spent on and it could provide a more informed position to dispute charges that they may feel are unreasonable. Of course leaseholders have many of these rights already, but the RTA provides a collective voice to its members. Furthermore, forming a RTA comes at little if any cost to the residents, as there is a minimal charge imposed by the FTT (where the Landlord refuses to recognise the RTA).

Alternatively, leaseholders may be unhappy with the management of their development, and think that they could do a better job or that service charges collected could be better directed to other aspects of the development. To be able to do this effectively, forming an RTM would be the preferred route where acquisition of the freehold is not wanted or viable. The participating leaseholders (through the RTM) would have the ability to decide what monies are collected and where the funds are spent. Should the residents prefer not to have to run the development themselves, they can appoint their own choice of managing agents. The formation of a RTM does, however, come at a cost. In most cases legal advice is required and solicitors will assist in the formation of the RTM and exercise of the right to manage. In addition, the RTM will have to reimburse the Landlord’s reasonable costs incurred in dealing with the initial claim notice and exercise of the claim.

Summary

Often in a leaseholder’s eyes, their landlord is a distant figure and is not always best placed to make decisions on how to manage and maintain their development. For this reason, leaseholders may be inclined to exercise their rights and form a RTA or a RTM. As a RTM has significantly greater powers than a RTA, it will provide greater control and influence over the running of the development. However, the responsibility of managing the development and the costs involved are not always attractive to many leaseholders, which may make forming a RTA a more appealing route to ensure their voices are heard.

As always, should you have any questions in relation to the above update, please do not hesitate to contact us at info@kdllaw.com.

Disclaimer

This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.

If you have received this update in error or wish to unsubscribe from future updates then please email us at info@kdllaw.com.