The Right To Manage allows the owners of flats to appoint the manager for their apartment block. RTM was introduced in England and Wales in 2002, since when a few thousand blocks have taken it up. As there is no effective legal right to inspect invoices behind the service charges for flats, the power to replace the manager is generally the only available means of preventing unvouched or fraudulent charges.
But: who should be allowed to prevent RTM? That is, which people should collectively or individually be empowered by law to compel others to suffer being defrauded, exploited or overcharged?
Minimum participation rate
RTM works by transferring a block of flats' management rights and obligations to a leaseholder-controlled company, the "RTMco", the leaseholders being the owners of the flats. All UK-registered companies must have at least one member, and so at least one of the flat owners must opt-in to being a member. These members, however many there turn out to be, elect directors, who appoint a manager. Despite the simplicity and clarity of this arrangement, attempts to muddy the waters about it are so frequent that they practically constitute a minor literary genre in their own right (see the link below about the "Agency Canard").
So the minimum number of flat owners who must be members of the RTM company is one. And membership is not particularly burdensome. However, for the RTMco to claim the management rights in the first place requires it to have had no less than half the flats represented in its membership on the day that it made its claim. Consider the following worked example: for a building with sixty flats, an RTMco would start with two or three leaseholders as founding members. They would then recruit at least half of the flat owners, i.e., thirty members, and get them formally signed up as members of the RTMco. The RTMco could then make its claim to manage the building. That takes a few months to kick in, but it will still occur even if most of the RTMco members subsequently resign.
- incorporating an RTMco takes just one flat owner
- claiming the management of the building requires half the flat owners
- but retaining the management long-term requires again just one flat owner.
Why should there be a "half the flat owners" hurdle in the middle of the process? If the other flat owners are dissatisfied with the RTMco, they should join it and sack its directors. After all, all the flat owners have a statutory right to be members of the company; I've never come across a case where the directors of the RTMco have refused a valid request for membership. If they did, they open themselves up to being sued. If this is a genuine problem, which is unlikely, then refusal of a valid membership application should simply be criminalised on the same lines as almost all other breaches of company directors' duties are: a strict liability offence punishable by a daily fine.
The only parties who benefit from this fifty percent hurdle are the outgoing managers. The only effective remedy for bad managers under UK leasehold law is replacing those managers. The harder it is to replace them, the easier it is for them to overcharge. Therefore the hurdle should be minimised: reduce the participation threshold from "not fewer than half the flats" to "one". To do otherwise is to incentivise mismanagement.
Analogy: jury duty
Nothing about being in an RTM company really imposes a "duty" as opposed to a right. The dishonest conflation of the right to manage with the obligation to participate in management is the core of "Agency Canard" detailed in the link at the bottom. We don't say "if you get the power to choose who your electrician is, that means you have to train as an electrician and do the work yourself". But that's basically what people try to say about managing blocks of flats: the power to choose who your managing agent is somehow the obligation to do that work yourself. It's piffle.
Nevertheless, someone has to serve as a director of the RTM company. It doesn't have to be a flat owner, though that is probably the norm. It definitely doesn't have to be any specific flat owner, though.
Where this leaves us is with a nebulous and largely spurious sense of obligation hanging in the air when it is contemplated to obtain control over the management of a block of flats.
But fundamentally this is a collective governance issue. No-one seriously claims that people have a right not to serve on juries, or that because some people aren't willing to be members of Parliament or local councils, that no-one else should be allowed to. But that's very similar to arguments made against RTM, and in practice, the fifty percent hurdle is just a disguised restriction on RTM: the less one likes RTM, the higher one wants the hurdle to be. Effectively, one's saying "I don't want to serve on a jury so even people who would be happy to do so shouldn't be allowed to either."