Leaseholder’s welcome changes to the Right to Manage regime
The current right to manage (“RTM”) regime is governed by the Commonhold and Leasehold Reform Act 2002 (“CLRA 2002”). The RTM allows qualifying residential leaseholders of flats to come together collectively to take over the management of their building. Following a successful claim, the RTM company (which is owned and run by the leaseholders) will take over the management functions under their leases which would include managing repairs, maintenance, improvements and insuring the building. The leaseholders then have greater control over the service charges incurred for the building and payable by the leaseholders.
Since our update on 18 February 2025, further provisions of the Leasehold and Freehold Reform Act 2024 (“LAFRA 2024”) came into force on 3 March 2025 following the Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025. This has introduced changes to the qualifying criteria and costs provisions relating to the RTM.
The latest developments will be welcome news for leaseholders who are considering a RTM claim for their building, as more buildings now qualify and there are limits on the landlord’s ability to recover its costs of the process.
The changes of note are:
- The increase in the non-residential limit on RTM claims from 25% to 50%.
This limit relates to the internal floor area of the commercial and residential occupied parts of the property and excludes the common parts. Previously, under CLRA 2002, where the commercial parts of the building exceeded 25%, the residential leaseholders could not exercise the RTM. This limit has now been increased to 50% and so, where the residential parts now make up over 50% of the internal floor area, they will meet the RTM qualification criteria.
This increase in the limit means that more mixed-use buildings will now qualify for the RTM, even those that were purposely designed and built to avoid the building qualifying for the RTM post-2002.
- Limiting costs recovery for landlords when leaseholders exercise the RTM.
Previously, the RTM company and its members (the leaseholders) would be liable to pay the costs of the landlord in the RTM claim following service of the claim notice. Now the landlord will bear its own costs of the process, except in limited circumstances. The landlord will be unable to recover its non-litigation costs following service of the claim notice, unless the claim is withdrawn and the Tribunal orders that these are paid by the RTM company. The Court or Tribunal also has the power to order that the RTM pay the landlord’s litigation costs.
- The amendment of the model articles of association for RTM companies.
The new model articles can be found in RTM Companies (Model Articles) (England) (Amendment) Regulations 2025 (SI 2025/13) and RTM Companies (Model Articles) (Wales) (Amendment) Regulations 2025 (SI 2025/126).
There remains a number of provisions in LAFRA 2024 which have not yet come into force and will require secondary legislation to be passed. These provisions relate to leaseholders’ rights to enfranchise and include the following:
- The increased non-residential limit from 25% to 50% in order to qualify for a collective enfranchisement claim;
- The right to extend leases of houses and flats to 990 years (previously 50 years for houses and 90 years for flats);
- The new calculation for valuing the premium payable by leaseholders for lease extensions, which is likely to reduce the premium payable;
- The ban on new leasehold houses; and
- The introduction of residential leasehold and estate management regulations and mandatory redress scheme.
The Government intends to introduce the Commonhold and Leasehold Reform Bill later this year and it will be interesting to see whether this goes further than LAFRA 2024 in giving leaseholders greater rights.
If you own a leasehold property and would like advice on a right to manage claim or enfranchisement, or you are a landlord in receipt of such a claim, please contact Pippa Garrod in our Property Litigation team: [email protected]
