David Andrew | Changes to Right to Manage: What Leaseholders and Freeholders Need to Know

Significant changes to Right to Manage (RTM) are set to take effect from 3 March 2025, giving leaseholders more control over the management of their buildings. These reforms, introduced under the Leasehold and Freehold Reform Act 2024, aim to make it easier and more affordable for leaseholders to take over management responsibilities. While this is a positive step for many, it also brings new challenges that both leaseholders and freeholders need to consider.

One of the key changes is the expansion of RTM eligibility for mixed-use buildings. A mixed-use building is one that combines both residential and commercial spaces—for example, a block of flats with shops or offices on the ground floor. Previously, leaseholders could only exercise RTM if the non-residential part made up no more than 25% of the total floor area. This threshold has now been increased to 50%, meaning more leaseholders in mixed-use buildings will be able to take control of their building’s management.

Another major change is the removal of the freeholder’s ability to recover legal costs when an RTM claim is made. Previously, leaseholders had to cover the freeholder’s legal fees, which could make RTM an expensive and unappealing option. With this financial barrier removed, leaseholders may feel more encouraged to pursue RTM.

There is also a new prohibition on passing on non-litigation RTM costs to leaseholders through service charges. This means that freeholders will no longer be able to charge leaseholders for legal costs related to non-litigation matters, such as challenges to the RTM claim or the administrative processes around it. This provision ensures that leaseholders won’t bear the cost of these legal proceedings through their service charges, offering them more protection and supporting the trend of leaseholders taking greater control of their properties.

Additionally, the legislation introduces a shift in the jurisdiction for RTM-related disputes, moving them from County Courts to the First-tier Tribunal (Property Chamber). The Tribunal is a specialist body that handles property-related matters. By moving disputes to the Tribunal, it’s expected that issues will be resolved in a more efficient and accessible manner. This could lead to quicker resolutions, reduced costs for leaseholders, and a more consistent approach to decision-making in RTM cases.

For leaseholders, these changes offer an opportunity to take control of building management. Many leaseholders look to RTM to gain more transparency over service charges, maintenance costs, and long-term planning for their buildings. However, managing a building isn’t necessarily cheaper. Leaseholders should be aware of the potential costs involved in running a property themselves, including maintenance, insurance, legal compliance, and the financial planning required to ensure the building’s future upkeep. While self-management can potentially save on certain costs, unexpected expenses can also arise.

For freeholders, these reforms represent a shift in responsibility. While some may welcome a reduced involvement in day-to-day management, it also means less control over critical issues such as insurance negotiations, long-term maintenance planning, and service charge disputes. Additionally, freeholders can no longer recover legal costs related to RTM claims, which could affect their financial planning.

At David Andrew, we recognise that while these changes to RTM legislation can be a positive step for leaseholders looking to take control of their building’s management, it’s not without its complexities. Particularly when leaseholders within the same building have different priorities, budgets, or levels of interest in taking over management. Some may want to invest in improvements, while others might prefer to minimise costs. Disagreements over major works, insurance providers, or long-term planning could lead to challenges. Without careful financial planning and a clear strategy, there’s a risk that buildings could become under-maintained or subject to rising costs over time.

It's also important to note that managing a building involves more than just decision-making. It comes with legal obligations, safety regulations, and emergency planning. Many leaseholders will still need to hire professional agents to help with the ongoing management, which could reduce the savings from taking control. Leaseholders should be fully prepared and seek expert guidance before pursuing RTM to ensure they’re ready for the responsibility.

These changes mark a significant shift in the leasehold landscape. While they open up more options for leaseholders, they also come with new challenges. Both leaseholders and freeholders should carefully evaluate their options and understand the long-term implications. At David Andrew, we strongly encourage leaseholders to seek professional advice before pursuing RTM to ensure they’re well-equipped for the responsibilities involved.