Funding an RTM

RTMguy

I am a leaseholder in a block of 18 apartments. At the beginning of this year 12 out of the 18 leaseholders agreed to form an RTM, which subsequently successfully claimed the right to manage the block. A managing agent has been appointed to take over from the freeholder’s agent next month. The costs of the company formation, legal advice, etc has all been borne equally by the 12 members of the RTM.

The question now arises about funding the RTM henceforth. Its expenses are not likely to be great; off hand I can think only of bank charges, liability insurance for the Directors, and meeting costs. The managing agents intimate that the funding of the RTM cannot be done through the service charge on leaseholders. The alternative is to approach those leaseholders not members of the RTM, pointing out the benefits that have been brought to them at no cost to themselves, and asking them to contribute to the annual running costs. I can see difficulties if even one declines to co-operate. Besides which, some members are asking if their expenses thus far can be reclaimed through the service charge.

Does anyone have useful experience on this question?

G_M

The managing agents intimate that the funding of the RTM cannot be done through the service charge on leaseholders.

I doubt that.


Previously, the freeholder employed a managing agent to manage the building. The MA's costs came from the service charge I'm sure.


But check with leaseadvice here. (gov service)



or
https://www.leaseadvice.org/ (private)

RTMguy

Thanks. I'll do that

chunkytfg

Are you saying 'service charge' but mean Ground rent?

I always thought the Service charge was the total cost of the communal area running costs, management Co fees and possible sinking fund for major works.

Edit- You say the freeholder used an agent before? Do you have a copy of the accounts of the previous management agent? Does it have a breakdown of costs?

RTMguy

In this case, the Freeholder owned the management company that managed the block and the insurance broker that insured the building, all rather incestuous.

G_M

"Edit- You say the freeholder used an agent before? Do you have a copy of the accounts of the previous management agent? Does it have a breakdown of costs?"

00ec25

it is inconceivable that the management charge for the company does not come out of the service charge. That is part and parcel of it, and is why the company's shareholders are entitled to see the accounts and hold the company management to task if they are "generous" in their charges. Sounds like you picked an ill informed agent.

RTMguy

I think you misunderstand the query, which is about funding the RTM that gives instructions to the managing agent. On the face of it, the service charge paid by all leaseholders cannot include the costs of running the RTM. In practice, it seems it often happens that way, which is why the `Law Commission is said to be considering legalising it.

anselld

The RTM Co is responsible for carrying out the service responsibilities under the Lease, for which is is able to recover its costs from all Leaseholders.

The fact that is appoints a managing agent to conduct some activity is a matter of choice. It could equally self manage and appoint individual contractors for specific jobs, or indeed do activities itself.

It is not for the managing agent to dictate what can and cannot be recovered any more than they would be able to dictate to a Freeholder. It sounds like they need to be advised who they are working for.

eddddy

anselld wrote: »

It is not for the managing agent to dictate what can and cannot be recovered any more than they would be able to dictate to a Freeholder. It sounds like they need to be advised who they are working for.

It's not the freeholder, the Managing Agent or the RTM company that dictates what costs can be recovered via the service charge. It's the lease.

As RTMGuy says, most leases don't allow the recovery of RTM company costs via the service charge.

This website confirms:

Apart from issues like these, running an RTM Company also presents its own challenges. For example, it is unlikely that the leases will allow recovery of the RTM company’s running costs (secretarial fees, directors and officers insurance, etc) via the service charge, whereas most leases allow the landlord to do this. The FTT‘s view is that these costs would not usually be recoverable. If that is right, then RTMCo members need to know that they will be personally liable for these costs and the company needs to be sure that it has adequate alternative funds to meet its needs.

Link: http://www.flat-living.co.uk/advice/807-the-rights-and-wrongs-of-right-to-manage