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1. Flat management companies
A flat management company is set up to manage a property divided into a number of separate flats.
Each flat owner usually has a lease of their own flat. But they can also be a member of a management company that owns the freehold (or lease) of the entire building.
Each flat owner is a member of the company. This means the flat owners have their say in running the building.
If the members own shares in the company, they usually transfer their shares to the new owners when they sell their flat. It’s common practice to have this condition in the company’s articles of association. This makes sure that the limited company represents the interests of all the current flat owners. It also means the company remains a separate legal entity, regardless of who holds its shares.
Leaseholders can also set up an RTM limited company. This gives them the ‘right to manage’ the building they live in.
A limited company can also be set up to own and manage the common parts of a development, made up of separate units under ‘commonhold’. This type of company is called a commonhold association.
Property management law is different in Scotland. Read the Scottish government’s guidance on property factors.
2. Right to manage (RTM) companies
RTM companies allow long leaseholders in blocks of flats to take over the management of their building.
Leaseholders must set up a limited by guarantee company to carry out the management functions.
The constitutional rules of an English RTM company are set out in The RTM Companies (Model Articles) (England) Regulations 2009. These rules apply to all existing and proposed RTM companies.
RTM companies do not exist in Scotland, or Northern Ireland.
3. How to register (incorporate) a flat management or RTM company
You can register your company online. It costs £50 and there are built-in checks to help you avoid errors.
Your application must include:
- bespoke articles of association
- additional information if using a sensitive word or expression
An RTM company must also:
- have a name ending ‘RTM Company Limited’ (or the Welsh equivalent)
- be limited by guarantee
You can also register your company by post - but it takes longer to process postal applications.
4. Commonhold associations
Commonhold is a form of freehold land ownership, which is an alternative to long leasehold ownership of flats and other interdependent properties. It combines freehold ownership of a single property (a unit) in a larger development, with membership of a limited company that owns and manages the common parts of the development.
For example, a block of flats where each flat is a unit - and all other parts (such as the hallway) are commonhold.
The constitutional rules of commonhold associations registered in England and Wales, are set out in The Commonhold Regulations 2009.
Commonhold associations do not exist in Scotland or Northern Ireland.
4.1 How to register a commonhold association company
You must register your company by post. The name of your company must end with ‘Commonhold Association Limited’ (or the Welsh equivalent).
To register by post, it costs £71 and you’ll need to send us:
- application to register a company (form IN01) and the correct fee
- memorandum of association
- bespoke articles of association (you must tick option 3 in section A7 of the form IN01)
- additional information if using a sensitive word or expression
The postal address and payment instructions are on the form.
It takes longer to process postal applications.
5. More information
RTM companies and commonhold associations were introduced under the Commonhold and Leasehold Reform Act 2002.
The Leasehold Advisory Service (LEASE) provides free legal advice on residential leasehold property in England and Wales. Their website includes advice and contact information.
The Department of Communities and Local Government (DCLG) is responsible for RTM companies in England.
The Welsh Government is seeking to introduce amended regulations for Welsh RTM companies in Wales as soon as possible. For more information, email alyn.williams@wales.gsi.gov.uk or call 01685 729191.
The Ministry of Justice is responsible for commonhold associations.
The Leasehold Advisory Service (LEASE) provides free legal advice on residential leasehold property in England and Wales.
