Guide · Your company
RTM company, RMC or freehold company: what's the difference?
RTM companies, residents' management companies and freehold companies compared: where their powers come from, who can join, what each owns and controls.
Last reviewed by Phil, founder3 min readPlain text (Markdown)
The short answer
An RTM company gets its powers from the right to manage legislation and takes over management from the landlord without owning the building. A residents' management company (RMC) gets its powers from the leases, which name it as responsible for managing the building, and may or may not own the freehold, while a freehold company owns the freehold and so is the landlord. All three are usually owned and run by the leaseholders, and all must follow the same service-charge rules.
Key facts
- RTM company: powers from statute; manages but doesn't own; ground rent stays with the landlord; can't forfeit.
- RMC: powers and duties from the leases; often set up by the developer; may also own the freehold.
- Freehold company: owns the building and is the landlord, with all the landlord's rights.
- All three must follow the service-charge rules: reasonableness, Section 20, the 18-month rule, demands, trust money.
- All three are companies with Companies House duties: filings, accounts and records.
At a glance
| RTM company | Residents' management company (RMC) | Freehold company | |
|---|---|---|---|
| Where its powers come from | The right to manage legislation | The leases | Owning the freehold |
| How it's usually set up | By leaseholders, to claim the right to manage | By the developer, then handed to residents | By leaseholders, to buy the freehold |
| Owns the building | No | Sometimes | Yes |
| Is the landlord | No, but treated as the landlord for service-charge law | Only if it owns the freehold | Yes |
| Ground rent | Stays with the landlord | Goes to the landlord (or to the RMC if it owns the freehold) | Goes to the company |
| Lease extensions | No | Only if it owns the freehold | Yes |
| Can forfeit a lease | Never | Only if it's the landlord | Yes, within strict legal limits |
| Company type | Private company limited by guarantee | Guarantee or shares | Guarantee or shares |
| Articles | Prescribed by law | Its own | Its own |
| Who can be a member | Qualifying leaseholders; landlords from the acquisition date | As its articles and the leases say | As its articles say, usually the flat owners |
RTM company
An RTM companyRTM companyA private company limited by guarantee, set up by leaseholders, whose object is to acquire and exercise the right to manage their building. exists to claim and exercise the right to manage. It must be a private company limited by guarantee, its name must end "RTM Company Limited", and its articles are set by regulations. It manages the building but doesn't own it. See What is the right to manage?.
Residents' management company (RMC)
An RMCResidents' management company (RMC)A company, usually owned by the leaseholders, that is named in the leases as responsible for managing and maintaining the building, whether or not it also owns the freehold. is named in the leases as responsible for some or all of the management: typically repairs, insurance, services and the service charge. Leases often require each buyer to join the company and sign a deed of covenantDeed of covenantA deed signed by someone buying a flat, promising the landlord or management company that they will keep the promises in the lease.. On new developments, the developer controls the RMC until the flats are sold, then hands it to the residents. Many RMCs hire a managing agent; many self-manage.
Freehold company
A freehold companyFreehold companyA company owned by the leaseholders of a building that owns the building's freehold, and so is the landlord under the flat leases. owns the building, usually after the leaseholders bought it together (collective enfranchisementCollective enfranchisementThe legal right of qualifying leaseholders of flats in England and Wales to join together and buy the freehold of their building, even if the freeholder doesn't want to sell.) or the developer transferred it. It's the landlord, so it has every landlord's right, including ground rent, lease extensions and enforcing the leases.
What they all have in common
- Service-charge law applies in full: reasonableness, Section 20Section 20 consultationThe legal process of consulting leaseholders before carrying out works, or signing a contract of more than 12 months, that will cost any one leaseholder more than the set threshold., the 18-month ruleThe 18-month rule (Section 20B)The rule that a leaseholder doesn't have to pay service-charge costs that were incurred more than 18 months before they were demanded, unless they were warned in writing within that time that the costs had been incurred and would be charged., lawful demands and holding the money on trust.
- Fire safety: the company that controls the common parts is usually the responsible personResponsible person (fire safety)The person or organisation in control of a building's common parts in connection with a business or undertaking, who is legally responsible for fire safety there under the Fire Safety Order..
- Company duties: filings, accounts, records and directors' duties under the Companies Act 2006. See Directors' duties and Companies House filings.
- The RICS Code applies to self-managed RTM companies and RMCs.
This is general information, not legal advice. Every building and lease is different. For free initial advice, contact LEASE (The Leasehold Advisory Service): https://www.lease-advice.org/
Questions people ask
What is the difference between an RTM company and a residents' management company?
An RTM company gets its powers from the right to manage legislation and takes over the landlord's management functions. An RMC gets its powers from the leases, which usually name it as the company responsible for managing the building. An RMC can own the freehold; an RTM company that buys the freehold stops being an RTM company.
Can a block have both an RMC and an RTM company?
Yes. Where an RMC named in the leases manages poorly, leaseholders can still claim the right to manage. The RTM company then takes over the management functions of both the landlord and the RMC.
Is share of freehold the same as a freehold company?
Usually. 'Share of freehold' normally means the leaseholders own the freehold together through a company in which each is a member or shareholder. In some small buildings, the leaseholders own the freehold as individuals instead.
Sources
- Commonhold and Leasehold Reform Act 2002, s.73 (RTM companies)
- Commonhold and Leasehold Reform Act 2002, s.96 (management functions)
- Leasehold Reform, Housing and Urban Development Act 1993, Part 1 Chapter 1 (collective enfranchisement)
- Companies House: About flat management companies, RTM companies and commonhold associations
- GOV.UK: Set up a property management company