Right To Manage Companies – More than one building

Business Update Insolvency

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Right to Manage (“RTM”) Companies where the property under management
consists of more than one building

(How to best clear up the mess following the Triplerose Court of Appeal decision)

Managing agents of residential flats will be aware of the Court of Appeal decision of Triplerose Ltd v 90 Broomfield Road RTM Co Ltd [2015} which prevents a single RTM company exercising the right to manage over multiple buildings.

Now for a site with say 3 self-contained buildings, the leaseholders will need 3 separate RTM companies.

As the Triplerose decision has retrospective effect, it means that the existing RTM company which has been happily managing multi block property for the last few years NEVER had the legal right to manage. This begs the question about what to do with the existing RTM?

This retrospective impact will no doubt cause sleepless nights for both RTM directors and managing agents alike with the possibility for misfeasance claims being brought against them personally. This is all the more likely where there has been a falling out between leaseholders or if the RTM board constitution did not always represent the different buildings equally.

Clearly the old RTM company (“OldRTM”), typically a company limited by guarantee, cannot be used going forward. It has too many potential liabilities attached for any of the leaseholders to seriously consider recycling it as a legal entity for one of the buildings.

The cheap option, of course, would be to pay all of its outstanding bills and apply for it to be struck off at Companies House. But when was cheapest ever best? A striking off would still leave OldRTM open to claims and any claimant could apply for it to be restored to the register. That means the directors and the managing agents have no assurance of finality until the statutory 6 year period has passed. Indeed, where the expenditure on different buildings was not historically equal, the future segregation with a board for each building is likely to antagonise matters and bring and claims to the surface.

For the peace of mind of directors and agents alike, we would therefore recommend a Members Voluntary Liquidation, (“MVL”) of OldRTM. This is a solvent liquidation which has the benefit of being completely upfront with the members. It also includes a formal notice to claim within 1 month of the liquidation which serves as a “put up or shut up” to potential claimants. Whilst it is still theoretically possible for a claimant to apply to Court to have a liquidated company restored to the register at Companies House, the hurdle is considerably higher. From the perspective as managing agent, (and PI policy), they can continue as agent of the multiple RTMs which are now managing the property safe in the knowledge that a line has been drawn.

As a firm of Chartered Accountants and Licenced Insolvency Practitioners, Gibson Hewitt can deal with the whole MVL process for you from commencement to conclusion. We have expertise in RTM liquidations and can assist with the requisite board and members meetings as required as well as incorporate the new RTM.

If you would like more information, please contact Lynn Gibson of Gibson Hewitt today on 01932 336149 or email lynn@gibsonhewitt.co.uk.