If you are a leaseholder and flat owner, your block of flats may be run by your freeholder or landlord, or by their managing agent. This can be frustrating if matters are not dealt with efficiently, if service charges escalate, or if leaseholders feel they have little control over day-to-day management.
The Right to Manage allows qualifying leaseholders to take over many management functions without proving fault by the landlord. This article explains what the Right to Manage changes, who can claim, how the claim process works, and what leaseholders should prepare before taking responsibility for the building.
Summary
- What is the Right to Manage and Why It Exists
- What RTM Changes and What It Doesn’t
- Eligibility Checklist: Building Qualification, Mixed-Use Limits and Resident Landlord Exceptions
- Who Can Claim: Qualifying Tenants and the Participation Threshold
- Setting up the RTM Company
- The RTM Claim Process Step by Step
- Landlord Challenges and Disputes
- The Handover in Practice
- Running the Building After RTM
- Costs and Funding
- Common Pitfalls
- Reform and Policy Developments
What is the Right to Manage and Why It Exists
The Right to Manage is a legal right under which flat owners can take over the administration of their block of flats from the freeholder, also referred to as the landlord. The right arises under the Commonhold and Leasehold Reform Act 2002, with some amendments to the process added in the Leasehold and Freehold Reform Act 2024.
It is not necessary for your freeholder to be doing a bad job for you to exercise your Right to Manage. The right exists to give qualifying leaseholders more control over how their building is managed, provided the building and the level of participation meet the legal requirements.
If you and your fellow leaseholders take over the running of your block, you will be responsible for the management functions, administration and upkeep that pass to the RTM company.
What RTM Changes and What It Doesn’t
Right to Manage changes who is responsible for most day-to-day management functions, but it does not transfer ownership of the freehold. The landlord keeps the freehold and the right to receive ground rent where this is due under the lease.
Management functions that may pass to the RTM company include:
- Arranging repairs and maintenance
- Arranging buildings insurance
- Maintaining common areas, such as hallways, parking areas and gardens
- Ensuring compliance with health and safety requirements, such as electrical inspections and fire safety rules
- Maintaining company and financial administration, including Companies House and HM Revenue & Customs requirements
- Setting and collecting service charges and sinking fund contributions
- Taking appropriate steps to recover service charge arrears
- Dealing with breaches of lease and requests for consent, such as subletting or alterations
- Keeping detailed records, including financial records, company administration records and records of decisions
- Preparing and filing annual accounts
There is a separate right to purchase the freehold, known as collective enfranchisement. A premium would usually be payable to the freeholder if leaseholders exercise that option, so some flat owners consider Right to Manage as a more limited alternative.
Eligibility Checklist: Building Qualification, Mixed-Use Limits and Resident Landlord Exceptions
Your building must meet specific qualification rules before you can use the Right to Manage. The key checks are the type of building, the proportion of residential use, the number of flats held by qualifying tenants and whether the resident landlord exception applies.
To be eligible for the Right to Manage, no more than 50% of the total internal floor area of the building should be used for non-residential purposes. At least two-thirds of the flats must also be held by qualifying tenants.
Where a block contains four flats or fewer, is not purpose-built, and the landlord lives in one of the flats, the Right to Manage may not be available. This is often referred to as the resident landlord exception.
Setting up the RTM Company
A Right to Manage company must be set up before the claim can proceed. The company becomes the legal body responsible for claiming and then carrying out the management functions.
It is good practice for leaseholders who want to join the Right to Manage process to enter into a participation agreement. This can clarify each person’s commitment, how costs will be shared, when payments will be made and how decisions will be taken.
All qualifying leaseholders should receive a formal notice inviting them to participate in the Right to Manage. The company should also appoint suitable directors and set up governance arrangements before it takes on contracts, bank accounts or service charge administration.
Who Can Claim: Qualifying Tenants and the Participation Threshold
A qualifying tenant is generally a leaseholder with a long lease, that is, one that was originally granted for a term of more than 21 years. You do not usually need to live in the flat to participate.
The RTM company must have the required level of participation before it serves the claim notice. In practice, qualifying tenants who hold at least half of the flats in the building should be members of the RTM company before the claim proceeds.
This participation check should be carried out carefully. If the RTM company does not have enough qualifying tenants involved, the landlord may be able to challenge the claim and the process may need to start again.
The RTM Claim Process Step by Step
The RTM claim process usually moves from participation planning, to forming the company, to serving formal notices, then to the counter-notice stage and handover. Each stage has deadlines and formal requirements.
- Participation notice: qualifying tenants should be invited to participate.
- Company setup: the RTM company should be incorporated and governed properly.
- Claim notice: a formal Notice of Claim is served on the freeholder and any other required parties.
- Counter-notice: the freeholder normally has one month to serve a counter-notice if they object.
- Handover: if no valid objection is made, management transfers on the acquisition date stated in the claim notice.
Because of the obligations the company will take on, leaseholders should prepare before the acquisition date. Insurance, contractor information, service charge accounts and management records should all be considered in advance.
Landlord Challenges and Disputes
A freeholder can challenge a Right to Manage claim only on limited grounds. The most common issues concern whether the building qualifies, whether the RTM company is validly constituted, whether the participation threshold is met and whether the claim notice was correctly drafted and served.
Potential grounds of challenge include:
- The building does not qualify because more than 50% of the internal floor area is non-residential
- The company set up by those seeking to exercise the Right to Manage is not legally compliant
- The building does not have enough qualifying tenants, or the RTM company does not have the required level of participation
- The Notice of Claim was not correctly drafted or served
- The resident landlord exception applies
Where the freeholder serves a counter-notice, the RTM company must usually apply to the First-tier Tribunal (Property Chamber) within two months if it wishes to dispute the objection. If it misses this deadline, the Right to Manage claim may come to an end and the process may need to be restarted.
The Handover in Practice
If the claim succeeds, management functions transfer automatically on the acquisition date. In practice, the RTM company should use the period before that date to obtain records, understand contracts and prepare for continuity of services.
The RTM company should serve an information notice on the freeholder. The freeholder or managing agent must then provide relevant records and documents within the required timeframe, and service charge money that has been collected but not spent should be transferred by the handover date.
Contractor notices should also be dealt with so that maintenance, cleaning, insurance and other building services continue without unnecessary disruption. From the acquisition date, the RTM company is responsible for management decisions, including buildings insurance.
The freeholder has a right to become a member of the RTM company, but this does not prevent leaseholders from taking over the management functions that properly transfer.
Running the Building After RTM
After Right to Manage is acquired, the RTM company must run the building properly. Leaseholders should decide whether they will manage the block themselves or instruct a managing agent to carry out the day-to-day administration.
If leaseholders manage the block themselves, the people involved need enough time and knowledge to keep records, instruct contractors, collect service charges, deal with arrears and respond to leaseholder enquiries. If the management company falls behind, Companies House penalties, poor record keeping or unresolved disputes can make future flat sales more difficult.
If you have concerns about capacity, the RTM company can engage a managing agent to handle matters at its instruction. The directors remain responsible for oversight, budgeting and decisions made on behalf of the company.
Costs and Funding
Right to Manage involves setup costs, legal costs and ongoing management costs. Leaseholders should budget before the claim starts, agree how contributions will be collected and allow for the landlord’s reasonable costs where these are recoverable.
Costs may include:
- Setting up the RTM company
- Drafting a participation agreement and obtaining signatures
- Checking the legal title and lease terms
- Drafting and serving the Notice of Claim
- Considering any counter-notice and advising on the response
- The freeholder’s reasonable legal costs
- Ongoing company filings, accounting costs and the cost of a managing agent if one is appointed
To control risk, leaseholders should agree a budget before serving the claim notice, collect contributions promptly, check the participation threshold, keep a contingency for objections and make sure key notices are reviewed before service.
Common Pitfalls
Technical mistakes can derail a Right to Manage claim even where leaseholders broadly qualify. The RTM company should check the formal requirements carefully before notices are served.
Common pitfalls include:
- Using the wrong company structure or unsuitable articles of association
- Failing to invite all qualifying tenants to participate
- Miscalculating the participation threshold
- Serving the claim notice on the wrong landlord or omitting a required party
- Describing the premises inaccurately in the claim notice
- Missing the deadline for a tribunal application after a counter-notice
- Starting the claim without a plan for insurance, funds, contracts and records on the acquisition date
Leaseholder disagreements can also cause practical problems after transfer, particularly around arrears, service charge budgets, proposed works and breaches of lease. A clear decision-making process should be agreed before the company takes on management.
Reform and Policy Developments
Reform in this area is intended to make leasehold management more accessible and reduce procedural barriers for flat owners. The Leasehold and Freehold Reform Act 2024 contains provisions affecting Right to Manage, including changes aimed at cost, scope and procedural issues.
Leaseholders should check the current commencement position before relying on any reform provision, as some changes may depend on regulations or staged implementation.
Even where the policy direction is more leaseholder-friendly, careful preparation remains important because notice errors, missing records and unclear budgets can still cause delay and cost.
Contact Our Landlord and Tenant Solicitors
Right to Manage claims can affect service charge budgets, insurance, records and relationships between leaseholders. Witan’s landlord and tenant team can review eligibility, check proposed notices and advise on responding to a counter-notice or tribunal application.
For more information on related disputes, see our residential property disputes solicitors page.
To discuss a Right to Manage issue, call 0300 303 2071, email info@witansolicitors.co.uk or complete our contact form. We have offices in Birmingham, Northampton, London and Wellingborough.
