Owner-occupiers in an RTM management company

I generally post about techie stuff, weight-training, reviews or some random nonsense. This is none of those things. Apologies if it’s not what you expect here but this has taken up a lot of my life in the last few years and there’s precious little of real value about the subject to be found.

Back in January 2016 I moved from a freehold house to a leasehold apartment and became part of an RTM management company in the process.

An RTM company is a company set up under Right To Manage legislation, which allows the leaseholders in an apartment block to take over the management of the building from the freeholder (or their managing agent if they use one). There are pros and cons to doing this and I’ll let you research those yourself. This article assumes your RTM company is already up and running or at least under consideration.

An RTM company is a proper limited company that has directors, a secretary and of which each leaseholder is a voting member. They usually meet at least once a year for an AGM where decisions are made on a one-vote-per-flat basis and they may meet or at least communicate about decisions between meetings. In the absence of any formal direction from members, the directors will generally make decisions on behalf of the RTM company and they are responsible for the day-to-day running of things.

There are generally two types of leaseholder in an apartment block: owner-occupiers, who actually live in their leased flats, and landlords, who usually rent their flats out to tenants. These types of leaseholder may be split evenly or it could be that all or most of the leaseholders are of one particular type.

This article is pertains to situations where there are both types of leaseholder and where at least, say, 20% or 30% of them are owner-occupiers, such that they’ve got a voice that can and should hold influence. The angle of this article is to get the best representation for owner-occupiers in such situations.

In a good RTM company that has a reasonable proportion of owner-occupiers, the landlords will often — out of courtesy if not legal obligation — allow a lot of the decisions to be made by the owner-occupiers who, after all, call the place their home. Landlords hold the lease to make money by renting their property out. If their bottom line is unaffected they will often let the owner-occupiers hold sway with what’s done and when.

However, not all RTM companies have landlords who will let owner-occupiers make these decisions and conflicts can arise between the two types of leaseholder. In such situations, it’s up to the owner-occupiers to try and establish an influence that, in a fair world, they should really have by default.

This leads me to the first tip I have for owner-occupiers: don’t let the absent landlords determine what level of shit you live in. It is your home, not theirs. Fight to get things the way you want them.

If you have reasonable absent landlords, persuasion might be enough. If you have a majority of owner-occupiers, organise yourselves and use your vote. If you have neither of those things you’re in for a tough battle that you may not be able to win, but you should nevertheless try. As a last resort there are tribunals and such but I’ve never had to go down that route so I can’t comment about it and, in any case, the legal situation will ultimately always hold sway, which is strictly one vote per flat regardless of the type of leaseholder. This is not right in my opinion but it is the law and you may be stuck with it.

As I said above, an RTM company has directors who have a fair amount of autonomous authority to make decisions on behalf of the company where they have not been formally directed to follow a particular course of action by a vote.

Ideally, the majority of the directors should be owner-occupiers. There are no legal reasons why this should be the case but there are plenty of moral ones. The main one being that for the owner-occupiers it’s their home (and I can’t stress that enough), not just a source of income. Furthermore, the owner occupiers live there 24x7 and they know what’s going on with the building and what needs to be done; they are clearly in the best position to be directors. When owner-occupiers improve the building for themselves it usually improves things for the landlords’ tenants too but I’d argue the reverse is not always true.

This leads me to my seconds tip: the majority of directors should be owner-occupiers and at the very least they should have strong representation at board level.

Again, this is something that might be hard to achieve if you don’t have enough owner-occupier votes. Make no mistake, this is a power grab but it’s for the right reasons.

My final tip comes about as a way to help resolve conflict between the owner-occupiers and the landlords. We had a lot of that conflict here and, in a small management company of eight people like ours, personality conflicts are raw and relationships can quickly become strained. So my final bit of advice here is: use a managing agent. A managing agent provides a degree of separation and independence and their duty is to uphold the rules of the management company and this means they will chase up problems (and debts) dispassionately. Be warned though, they take most of their instruction from the directors, so implement my second tip about making sure the directors are owner-occupiers (above) before you hire a managing agent.

I have painted a grim picture here of a distinctly adversarial relationship between owner-occupiers and landlords. Of course this is not always going to be the case. It’s what we faced here but maybe we were just unlucky. I wrote this article because an internet search revealed very little help with these sorts of situations and I thought it might be useful for others to share my own experiences.

There are no guarantees here. When you become a leaseholder you sign a legal agreement and you are stuck with that, no matter how the apartment block turns out to be managed. I feel owner-occupiers should have priority influence over landlords by law, but they don’t. You need to do your research before signing your lease and you have no legal ‘out’ if you’ve made a mistake or failed to investigate things properly. However, none of that prevents you from trying to effect change for the better once you’ve signed up. There is nothing to stop you working within the rules and regulations of the management company to support the position of owner-occupiers.