The Right to Manage (RTM) process involves several costs, both initial and ongoing. Understanding these costs is crucial for effective financial planning and ensuring that the RTM Company operates smoothly. Below is an overview of the various costs associated with the RTM process and ongoing management:
1. Initial Costs
The initial costs of setting up the RTM Company and transitioning management responsibilities include:
Consultancy Fees: The consultancy will charge fees for their services, including guidance on forming the RTM Company, serving legal notices, and managing the transition process. These fees are a one-time expense and are crucial for ensuring that the RTM process is completed correctly.
Legal Fees: Legal advice may be required to handle the legal aspects of the RTM process, including preparing and serving notices, and addressing any disputes with the freeholder. Legal fees can vary depending on the complexity of the process and the extent of legal support needed.
Tribunal Costs (if applicable): If the freeholder challenges the RTM claim and the matter goes to a tribunal, there may be additional costs for legal representation and tribunal fees.
Administrative Costs: Costs related to the administrative aspects of the RTM process, such as printing and mailing notices, and any other incidental expenses.
According to the consultancy the fees to set up RTM for us will be in total of £XXX, that is excluding the potential tribunal costs.
2. Ongoing Management Costs
Once the RTM Company has taken over management responsibilities, there will be ongoing costs associated with the day-to-day operations of the building:
Management Company Fees: The RTM Company will engage a professional management company to handle daily tasks such as maintenance, repairs, and financial management. The fees for these services will be part of the regular operating costs of the building.
Maintenance and Repairs: Routine maintenance and repair costs, including contracts for cleaning, gardening, and any necessary repairs. These costs are essential for keeping the building in good condition.
Insurance: The RTM Company will need to arrange and maintain appropriate insurance coverage for the building, including property insurance and public liability insurance.
Utilities and Services: Ongoing costs for utilities such as water, electricity, and gas, as well as other services like security and waste management.
Service Charges: The RTM Company will collect service charges from leaseholders to cover the building’s operating costs. It is important to manage these charges effectively to ensure that they cover all necessary expenses without exceeding reasonable limits.
3. Contingency Fund
It is advisable for the RTM Company to maintain a contingency fund to cover unexpected expenses or emergencies. This fund helps ensure financial stability and allows for prompt response to unforeseen issues, such as urgent repairs or major maintenance needs.
4. Budget Planning and Oversight
The RTM Company will be responsible for budgeting and financial oversight. This includes preparing annual budgets, monitoring expenses, and ensuring that all costs are managed within the agreed limits. Regular financial reports will be provided by the management company, and the RTM Company will review and approve these reports to ensure transparency and accountability.
5. Potential Cost Savings
One of the benefits of RTM is the potential for cost savings. By managing the building ourselves, we can directly negotiate with service providers and avoid some of the markups that might be added by external managing agents. Effective management and oversight can lead to more efficient use of funds and potentially lower overall costs.