Can a Right to Manage Company be Used to Acquire the Freehold?

There can be a temptation to use a company that is already in place when looking to acquire the freehold to a block of flats.  However to be a validly formed Right to Manage Company (RTM Company), a company must adopt Articles of Association prescribed by statute. This means the constitution of a validly formed RTM Company is geared entirely towards exercising a statutory right to manage premises containing flats.

RM Company Articles

The RTM Company Articles will state that the purpose of the RTM Company is to bring a claim to acquire the right to manage, exercise management functions under the leases and provide services in relation to the premises amongst other things. The Company Articles will not authorise the RTM Company to acquire the property.

In addition, lessees within the block will be entitled to become members of the RTM Company and vote on company matters, even though they may not in some cases have contributed to the purchase price.

Lessees are therefore faced with a choice. They can either go through the laborious process of passing a members’ Special Resolution to completely replace the RTM Company’s Articles and file the required documents at Companies House or they can adopt the more cost effective approach of incorporating a new company limited by shares as the vehicle to acquire the freehold.

We regularly advise groups of lessees on the right to manage and collective enfranchisement and can provide advice on the best methods of achieving your aims. If you have any questions, would like formal advice or wish to set up a meeting with us then please contact:

Ricky Coleman – Solicitor in the Property Litigation Team at Dean Wilson LLP

01273 249251  rfc@deanwilson.co.uk