The new Right to Manage (RTM) rules for flat owners

The right to manage rules in the Commonhold and Leasehold Reform Act 2002 have long given the right to leaseholders of flats to take over the management responsibilities. However, the Leasehold and Freehold Reform Act 2024 has made this slightly cheaper and easier for flat owners to do this.

In this blog post, I explain what the right to manage is, how it differs from share of the freehold and commonhold, the steps to follow to exercise the right to manage, the new rules that came into effect on 3 March 2025, and 10 practical pointers for anyone thinking of exercising the right to manage.

Here’s the video version of this blog post:

What is the Right to Manage?

The Commonhold and Leasehold Reform Act 2002 gave flat owners the right to take over the management of their building from the freeholder by, transferring responsibilities to what’s called a Right to manage what’s called an “RTM company”, which is a company limited by guarantee which is owned by the leaseholders.

The building must have at least two flats. If it’s part of a larger building, it should be capable of being managed independently. All qualifying leaseholders must be given the opportunity to become members.  

The RTM company can either manage the property themselves, or appoint new managers to manage the building.

Exercising the right to manage doesn’t change the ownership of the building, just the in which way it is managed.

It’s therefore different to a share of the freehold where flat owners set up a company to buy the freehold. It won’t change any ground rent payable, but will give the flat owners more control over the service charge.

>> Related Post: The latest news on the reform of ground rent

What is an RTM company?

The first step in the process is for leaseholders to set up an RTM company, which will get the right to manage and take on responsibility for the management, not the individual leaseholders. The individual leaseholders may change over time, but the company will remain in place.

The RTM company must have articles of association that comply with statutory requirements, set out in The RTM Companies (Model Articles) (England) Regulations 2009, and have the words “RTM Company Limited” in its name.

How does RTM differ from share of the freehold?

The right to manage doesn’t change the ownership of the building. The ownership structure stays the same; it is just the question of management that is affected by the right to manage.

It therefore differs from a share of the freehold where flat owners set up a company to buy the freehold. Although it won’t change the amount of any ground rent payable, it will give the flat owners more control over the service charge.

How does RTM differ from commonhold?

The right to manage differs considerably from commonhold, which what the government is planning to introduce for new flats in a new Leasehold and Commonhold Bill.

With commonhold, the flat owners (called unitholders) have the freehold of their flat and have a share in the company that owns the building. Whereas with the right to manage, it is still a leasehold property, subject to a lease and relevant legislation, including the payment of ground rent.

>> Related Post: Commonhold and plans to ban the sale of new leasehold flats

The steps to follow to exercise the right to manage

This is a brief overview of how to exercise the right to manage: 

Notice of invitation

Once the RTM company has been set up, it must serve a notice to all qualifying leaseholders, inviting them to join.

The notice needs to have certain information about the process and the company’s intentions, as set out in Section 78 of the Commonhold and Leasehold Reform Act 2002. 

Claim Notice

After at least 14 days from the invitation notice, the RTM company can serve a claim notice to the freeholder saying the company intends to acquire the right to manage, in accordance with Section 79 of the Commonhold and Leasehold Reform Act 2002.

The notice needs to include a deadline for the freeholder to challenge the notice by a “counter notice”. This is called the counter-notice deadline.

The claim notice will include a date saying when the RTM company intends taking over, which must be at least 3 months after the counter-notice deadline.

Acquisition Date

Assuming there are no complications, with the freeholder disputing the claim notice, the RTM company will take over the management responsibilities. 

>> Useful resource: Leasehold Advisory Service – the Right to Manage

What are the new right to manage rules?

The Leasehold and Freehold Reform Act 2024 made two important changes to the right to manage rules to make it a little easier and cheaper for leaseholders to take on the right to manage.

Increase in non-residential limit

Until March 2025, a building would be disqualified from the right to manage if more than 25% of the internal floor area of the building was non-residential, ie commercial.

However Section 49 of the Leasehold and Freehold Reform Act 2024, which came into effect on 3 March 2025, increased this threshold to 50%.

This change allows more mixed-use buildings to qualify for the right to manage.

Liability for the freeholders’ costs

Until 3 March 2025, the leaseholders had to pay the reasonable costs of the freeholder during the process.

However, Section 50 of the Leasehold and Freehold Reform Act has now come into force which means that the freeholder will pay their own costs.  

10 practical tips for leaseholders considering the right to manage

Here are 10 practical pointers for anyone thinking about exercising the right to manage:

1. It’s a big deal and comes with a lot of responsibilities. Unless the building is small (no more than, say, six flats), it might be better to get a professional managing agent to do the day-to-day management. Even if it’s a smaller block, you’ll need someone who is happy to do be good at admin and understands property management.
2. It’s a false economy to try to save money by cutting back on essential maintenance. It may also put you in breach of the covenants in the leases. 
3. Draw up a planned maintenance programme for a 25-year period with professional help, so it covers short term and longer term maintenance, eg the roof, windows if that’s not down to the individual flat owners.
4. Build up a reserve fund to pay for the items in the 25-year budget, and take a long term view.
5. Company administration. Running a company comes with a lot of obligations and duties. You’ll need to find people willing to be directors and a company secretary, and be responsible for all the admin, budgeting, preparing accounts and filings at Companies House, making decisions about long-term maintenance, contractors. 
6. Be prepared to take some flack from the other flat owners. Even if you do a good job, there may be some of the flat owners who aren’t happy with what you do. Some might not agree with your decisions and may even not pay their service charge.
7. Be ready to hit the ground running. The process is complicated and you need to be ready to take over responsibility for everything from the date in the notice. If you have a lift in the building, you’ll need to take over the contract with the company that maintains the lift, and give them notice about the transfer.
8. There’ll be other contracts for the door-entry system, for cleaning, gardening, caretaking or other direct services, or for the provision of supplies. There might even be a caretaker, as there was with this development. Any employees would be transferred under TUPE (The Transfer of Undertakings (Protection of Employment) Regulations 2006).
9. Think about whether the RTM company should have professional management as there’s a lot to managing a large block.
10. Get specialist legal advice, and plan, plan, plan.