How We Helped an RTM Company Put £100,000 of Reserve Contributions on Hold

Brief

The leaseholders had successfully exercised the Right to Manage and the RTM company was waiting for its acquisition date. During that gap, the year's service charge budget included a reserve fund contribution of approximately £100,000 and demands were issued to leaseholders. The directors were concerned about paying a large reserve contribution to management that was shortly to end, with no clarity on what the money would be spent on or how any balance would transfer. We were appointed as incoming managing agent to handle the transition.

The situation before we took over

• •The RTM claim had succeeded but the acquisition date had not yet been reached, so the outgoing management remained responsible day to day
• •The budget for the year included a reserve fund contribution of approximately £100,000, demanded from leaseholders during that gap
• •No supporting schedule of planned works had been shared with the directors to explain how the reserve figure had been arrived at
• •The directors were unclear how any collected reserve balance would be dealt with at the acquisition date
• •Several leaseholders had raised queries and some payments were being withheld, creating a risk of arrears carrying into the new management
• •No agreed handover plan, timetable or document list was in place

Actions taken

• •Confirmed the RTM acquisition date and set out, in writing, what each party would remain responsible for before and after that date
• •Wrote to the outgoing managing agent and the freeholder's representatives to open a professional, non-confrontational dialogue about the disputed reserve contributions
• •Requested the supporting information behind the reserve figure, including the planned works it was intended to fund and the basis of the apportionment
• •Proposed that recovery of the disputed 2026 reserve contributions be placed on hold pending the handover, so the incoming RTM company could review the position with its own advisers
• •Kept the leaseholders informed with plain-English updates so that queries were answered consistently and expectations were realistic
• •Set out a structured handover request covering service charge accounts, bank balances, arrears schedules, contracts, compliance records and health and safety documents
• •Advised the directors on where the questions raised were management matters and where they were legal questions for the RTM company's solicitors
• •Prepared an opening budget and reporting framework for the RTM company from the acquisition date, so the block had a clear financial starting point

Outcomes

• •Recovery of the disputed 2026 reserve contributions, in the region of £100,000, was placed on hold while the RTM handover progressed
• •The question of underlying liability was left open for the RTM company and its legal advisers to consider after acquisition, rather than being resolved under pressure during the transition
• •Leaseholders received consistent written explanations of the position, which reduced the volume of individual disputes
• •A documented handover timetable and information request replaced an unstructured process
• •The RTM company started its management period with a clear opening budget, a known arrears position and a defined list of outstanding items
• •Day-to-day services and contractor arrangements continued without interruption through the transition

Before and after

Why the gap between an RTM claim and the acquisition date matters

Exercising the Right to Manage does not transfer management on the day the claim succeeds. There is a statutory gap between a successful claim and the acquisition date, and during that period the existing management remains responsible for running the building, setting budgets and demanding service charges.

That gap is where most of the practical problems in an RTM transition appear. Budgets set shortly before an acquisition date can include items the incoming RTM company will inherit but had no part in deciding, and reserve fund contributions are the most common example. The directors are then asked to take over a building with a financial position they did not create and may not yet fully understand.

Our role in this case was a management one: to reduce the number of decisions being made under time pressure and to make sure the RTM company took over with the facts, the records and its options intact.

How we approached the disputed reserve contributions

We did not treat this as a dispute to be won. We treated it as a transition to be managed properly.

The practical question was simple: should a substantial reserve contribution be collected and held by management that was about to hand the building over, when the works it was intended to fund had not been set out and the incoming RTM company would be responsible for delivering them? Rather than press for an answer on liability, we proposed that recovery be paused while the handover completed.

That approach kept the position open. It avoided leaseholders paying a large sum into an arrangement that was ending, avoided the RTM company inheriting a contested arrears ledger, and left the underlying legal questions to be considered properly by the RTM company's own legal advisers once it was in control of the building.

• •Ask for the supporting detail behind a reserve figure before arguing about the figure itself
• •Separate management questions from legal questions early, and say clearly which is which
• •Keep correspondence professional; an incoming agent has to work with the outgoing party to get a clean handover
• •Communicate one consistent written position to all leaseholders rather than answering queries individually

What we handed the RTM company at acquisition

None of this is unusual work. It is the ordinary content of a properly run handover, which is exactly why its absence causes so much difficulty in RTM transitions.

• •A written summary of the disputed reserve position and what remained to be decided
• •Service charge information, bank balance details and an arrears schedule as provided at handover
• •A contractor and contract schedule, with service continuity confirmed
• •Compliance and health and safety records received from the outgoing management, with gaps listed
• •An opening budget for the RTM company's first management period
• •A short list of outstanding items with owners and target dates

What directors in a similar position can take from this

• •Appoint your incoming managing agent before the acquisition date, not after it. The useful work happens in the gap.
• •Ask for the works schedule behind any reserve fund contribution. A reserve figure without a plan is difficult for anyone to assess.
• •Get the handover request in writing early, with a list of documents and a timetable, so progress can be tracked.
• •Take legal advice on liability questions. A managing agent can manage the process and the information; it cannot determine what is legally payable.
• •Keep leaseholders informed in writing. Most disputes during a transition are caused by silence rather than disagreement.