Forming a Right To Manage company can be very beneficial because they allow leaseholders to take full control over how their building is managed.
However, forming a Right to Manage Company (RTM) isn’t without costs. Right to manage costs can range from things like administrative fees for incorporation, right down to weekly, monthly and annual maintenance fees, as well as insurance costs and can become expensive.
If you’re thinking of forming a Right To Manage Company, you and your fellow leaseholders should be aware of a number of costs before beginning the process. To help you decide whether to press ahead with formation, we’ve detailed them below.
Right To Manage Costs
Land Registry Costs
Land registry costs are incurred as part of the changeover of responsibilities once a Right to Manage Company is incorporated.
They are currently charged at a per flat basis of £3, which is something to account for should the residential block house many apartments.
As part of the RTM process, Right to Manage Companies are incorporated just like any other company, which means Companies House will charge registration fees. Currently, the fee is £12.
On top of initial incorporation costs, other administrative costs Right to Manage companies should be aware of include general administrative fees like the costs of posting letters to other leaseholders and landlords, as well as changing correspondence on things like letterheads, legal documentation or general advertising collateral.
Legal Fee Costs
Landlords do not need to approve or give permission to the formation of a Right to Manage Company. Due to this, landlords can dispute the Right to Manage company’s attempt to take responsibility for the building through a legal process.
This is done through legal first tier tribunal proceedings, which are likely to incur costly solicitors fees. In addition, should the Right to Manage Company lose the tribunal, those who initiated the formation process are held liable to pay all costs which relate to the tribunal proceedings.
Building Maintenance Costs
Another right to manage cost an RTM company must be aware of is once it officially takes control of its residential block, it is held responsible for the maintenance, servicing and accounting of the building. Such maintenance costs could relate to costly repairs, services and even routine seasonal maintenance checks.
On the other hand, if the Right to Manage company directors do not wish to handle the maintenance of the property, they can instruct a property management company to oversee the maintenance on their behalf.
Property management agents, like us at Scanlans Residential Property Management, can take control of the management of repairs and maintenance and handle administrative and accounting tasks. However, a property management company will need to be paid for the provision of their services and costs between agents can vary wildly, so it’s important to ascertain what residents can afford as costs will need to be recouped through their service charges.
Landlord Reimbursement Costs
Right to Manage Companies can begin without a reason, and without the permission of a landlord. Because of this, it is a mandatory requirement that Right To Manage companies reimburse any losses and costs that current landlords incur, whether the Right To Manage Company is eventually incorporated or not.
Right to Manage Insurance Costs
Other important costs to take into consideration are insurance costs. Insurances are necessary for Right to Manage Companies and the types of insurance needed can be expansive. The four general types can however be found below.
Correct Coverage Insurance
Insurance policies for residential blocks vary wildly. Because of this, some insurance providers offering cheap deals may be providing insufficient cover for the needs of a block, so Right to Manage Companies must check that their level of coverage is correct.
Right to Manage directors can find out more about what to check their insurance policies against in our free complete guide to Right to Manage found here.
Directors and Officers Insurance
Once appointed, Right to Manage Directors can be held liable for their actions when they’re working on behalf of the block’s residents.
To protect against this, Directors and Officers Insurance covers legal defence costs, as well as compensation and civil liability charges should a director be accused of wrongful acts.
Engineering and Inspection Insurance
Engineering and Inspection Insurance Policy are policies offered by specialist insurers, and enable directors to meet legal recommendations for regular lift inspections and other engineering maintenance checks.
In the event of a terrorism incident occurring on a residential block and no insurance is found to be in place, Right to Manage directors could pay liabilities of up to £250,000.
Therefore terrorism policies are imperative and recommended as they cover against significant damages incurred to the property, as well as protecting against acts of terrorism on the property such as residents producing harmful materials or a resident being a target.
Is your company ready to take over Right to Manage?
At Scanlans Property Management, we have the team and experience to support Residential blocks that require a managing agent. From booking repairs to scheduling regular maintenance, as well as ensuring the building and company adheres to legislation and regulations, we have what it takes to ensure the smooth management of your building.
My Scanlans will give you all the latest updates, documents and status on your property from your Personal Property Manager service.