Introduction

Becoming a director of a Right to Manage (RTM) company can feel exciting. You and your neighbours finally have control over how your block is run. But here’s the catch – it only works if you can collect the service charge. Without that money, there’s no budget for cleaning, insurance, repairs, or even the electricity in the hallway. In this blog, we’ll walk through the essentials every new RTM director needs to know about service charges, with practical tips to help avoid common pitfalls.

What does an RTM director actually do

An RTM director helps manage the building on behalf of all the leaseholders effectively standing in the shoes of the freeholder, but without actually owning the freehold title. This means overseeing service charge budgets, arranging repairs, dealing with contractors, and keeping accounts in order. It’s a voluntary role, but it comes with real responsibilities under both company law and landlord and tenant law.

Why service charge collection matters- and what if people don't pay?

The service charge is the lifeblood of the building. Without it, there’s no money to pay for essentials like buildings insurance, cleaning, or emergency repairs. If payments aren’t collected on time, the block can quickly run into debt, which affects everyone living there.

We call this the cashflow spiral. Because service charges are not for profit, what is not spent has to be given back as a balancing charge, S27 of the landlord and tenant act says so. And, if you have arrears so don’t collect all the money you budgeted and wanted to spend, then you cant spend it anyway, which means you have a larger surplus, and then have to give that back.

All this means that very soon, you end up with the money of the few good payers being stretched beyond what is reasonable, so like any company has to collect its sales invoices, collecting the service charge robustly is no less important.

If someone doesn’t pay, the RTM company has the right to take action to recover the debt. This usually starts with reminders, then formal letters, and if necessary, legal action through the county court. Ultimately, persistent non-payment can even lead to forfeiture of the lease, though that’s always a last resort. Clients of ServiceChargeSorted.co.uk which is run by the Ringley Group, a leading London managing agent, have the services of Ringley Law thrown in. This means RTM Co directors do not have to suffer the embarrassment of door knocking and asking their neighbours for money, and the continuity of professional debt collection means that a final notice, is a final notice and then a letter before action will be served invoking the waiting period pre-court where the leaseholder has to cite their dispute.

What records should RTM directors keep on service charges?

Good record-keeping is vital. Directors should keep copies of all service charge demands, receipts, invoices, and bank statements. Section 37 of the landlord and tenant act says that service charge money must be held in a trust account separate from the RTM company’s own funds. This means opening a normal business banking account for your RTM company will not cut it. Company business bank accounts hold money for the company, money that the bank can call upon to recovery its costs or losses. The difference is that when money is held in trust, even in the worst-case scenario a bank has no right of set off and cannot touch the trust funds held – in this instance the leaseholders service charge. Clear records not only keep things transparent but also protect directors if disputes arise.

How should an RTM company demand service charges?

Service charges must always be demanded in line with the lease. That means following the wording of the lease carefully – how the charges are calculated, when they are due, and how the demands must be served. If demands aren’t issued correctly, leaseholders can legally refuse to pay until they’re put right. Many pitfalls of incorrect service charge demands cannot retrospectively be put right. And, if a demand is invalid it can be deemed to not have existed which creates further problems, given the S20B regime, time is of the essence.

How can RTM directors make service charge collection smoother?

The key is communication and organisation. Send out demands on time, explain clearly what the money is being used for, and keep leaseholders updated about spending. When people feel informed and trust that their money is being managed properly, they’re far more likely to pay without fuss.

Being an RTM director is a rewarding role, but it’s not always easy. If service charges aren’t collected and managed properly, the whole system falls apart. By understanding the rules, keeping good records, and communicating openly with neighbours, new RTM directors can set their blocks up for success and make sure the building is safe, well-maintained, and financially stable.

Self-managing your block can work brilliantly—while everyone pays on time. But when finances get tight and money is needed, things can quickly become personal. As a director of a management company, Right to Manage company, or freehold management company, you don’t want to be chasing neighbours for money. That’s where ServiceChargeSorted.co.uk is the ideal solution.

Designed specifically for small blocks of flats, ServiceChargeSorted.co.uk lets you handle everything online: set your budget, upload invoices, and we take care of the rest—banking, service charge demands, accounts, arrears chasing, legal compliance, and more. And when payments aren’t made? Ringley Law kicks into action to handle the debt recovery process professionally and legally—so you don’t have to.

No managing agent required. No awkward conversations. Just a streamlined, effective way to run your block.