What Are Leaseholder Rights to Manage the Property?

Leaseholders in England and Wales often live in buildings where a freeholder or managing agent handles property management responsibilities such as repairs, maintenance, insurance and service charge administration. While many leaseholders are content with this arrangement, some may feel that management is poor, overly costly or does not reflect leaseholder priorities. For these leaseholders, there are statutory rights and structured processes that enable them to take a more active role in managing their property - most notably through the Right to Manage (RTM) and related mechanisms. This article explains those rights, how they work in practice, who qualifies, and the steps involved in exercising them.

Why Leaseholders May Want Management Control

In a leasehold arrangement, the freeholder or landlord typically owns the land and building, and leases flats or maisonettes to individual leaseholders. The freeholder is commonly responsible for certain property management functions, including:

• Repairs and upkeep of structure and common parts;
• Administration of service charges;
• Arranging buildings insurance;
• Dealing with complaints about communal aspects of the property.

However, where leaseholders disagree with how these duties are being performed - for example, where management quality is poor or service charges are high - they may wish to assert control over management decisions. UK law provides mechanisms for leaseholders to do this without necessarily buying the freehold.

The Right to Manage (RTM): A Principal Leaseholder Right

What Is the Right to Manage?

The Right to Manage (RTM) is a statutory right, introduced under the Commonhold and Leasehold Reform Act 2002, that allows qualifying leaseholders of flats to take over management functions from the freeholder without demonstrating fault or mismanagement. It is a no‑fault right, meaning leaseholders do not have to prove that the current landlord or managing agent has acted improperly to claim it.

Once the right is acquired, leaseholders form a Right to Manage company (RTM company) - a private company limited by guarantee - which becomes responsible for management duties previously performed by the landlord or managing agent. The freeholder retains ownership of the building but management functions shift to the RTM company.

Qualifying Criteria for the Right to Manage

Building and Leaseholder Requirements

To qualify for the Right to Manage, certain conditions must be met:

• The premises must be a self‑contained building or a part of a building (such as a distinct block of flats).
• The building must contain at least two flats held by qualifying tenants.
• At least two‑thirds of the flats must be long leases (typically originally granted for more than 21 years).
• At least half of the total flat owners (qualifying leaseholders) must agree to become members of the proposed RTM company.
• The building must not be dominated by non‑residential floor space beyond the statutory limit (historically 25%, increasing to 50% under upcoming reforms).
• Certain exemptions apply, such as where a local authority is the immediate landlord or where there are too few flats and a resident freeholder; these narrow circumstances are specified in legislation and practice guidance.

These criteria ensure that the right is available primarily in blocks of flats, rather than houses or mixed developments.

Setting Up a Right to Manage Company

1. Establish the RTM Company

Leaseholders must form a Right to Manage (RTM) company, which will legally undertake management responsibilities. This involves:

• Registering the company at Companies House;
• Drafting and adopting Articles of Association specifying management purposes;
• Appointing directors (usually leaseholders) and establishing governance arrangements.

The RTM company must be structured so that all qualifying leaseholders have the opportunity to participate; leaseholders cannot generally be excluded.

2. Serve Notice of Claim

After forming the RTM company:

• Leaseholders serve a notice of invitation to participate on all long leaseholders in the building;
• After an appropriate interval (often at least two weeks), the RTM company serves a Section 78 notice of claim on the freeholder and any other landlords under leases for the property.

The notice must comply with statutory requirements and include prescribed explanatory notes. Errors in these notices can make a claim invalid, so many leaseholders seek professional assistance at this stage.

3. Responding to Counter‑Notices

The freeholder may react to the notice of claim by serving a counter‑notice, for example if they believe the building is not eligible. In that event:

• Leaseholders can apply to the First‑tier Tribunal (Property Chamber) in England (or the Leasehold Valuation Tribunal in Wales) to determine whether the RTM rights are properly exercisable.

If no valid counter‑notice is served, the RTM company can acquire the right to manage on the date specified in the notice of claim or as determined by the tribunal.

What Happens After the Right Is Acquired?

Transfer of Management Functions

Once the RTM right is acquired:

• The RTM company assumes responsibility for management functions such as repairs, maintenance, insurance, service charge administration, and related contractual duties.
• Any unspent service charge funds held by the former manager or freeholder must generally be transferred to the RTM company.
• The freeholder must provide management information and contracts to the RTM company.

However, the RTM does not assume powers of forfeiture or possession, which remain with the freeholder.

Approvals and Ongoing Administration

Where leases require approvals (for example, for alterations), the RTM company gains the power to grant such approvals but must follow statutory notice requirements and may face applications to the Tribunal if disputes arise.

Related Leaseholder Rights and Alternatives

Appointing a New Manager

If the building is poorly managed, leaseholders can apply to the First‑tier Tribunal to appoint a new manager on the basis of mismanagement, even without forming an RTM company. This remedy requires demonstrating unsatisfactory management, such as unreasonable service charges or failure to comply with approved codes of practice.

Recognised Tenants' Associations

Leaseholders may form a Recognised Tenants' Association to collectively represent common interests, which can, among other things, arrange for professional inspections of documents and properties and provide a structured voice in negotiations.

Risks, Costs and Practical Considerations

Costs

Although the RTM right itself does not require payment of a premium to the freeholder, leaseholders must cover:

• Legal and professional fees for company formation and advice;
• Companies House registration costs;
• Ongoing administrative costs for managing the building directly or via a managing agent.

Recent changes under the Leasehold and Freehold Reform Act 2024 may remove some obligations, such as paying the freeholder's costs in certain RTM claims, potentially reducing financial barriers.

Governance and Responsibilities

Taking on management responsibility is significant. Leaseholders must be prepared to handle:

• Maintenance and repair contracts;
• Insurance procurement;
• Financial accounting for service charges;
• Compliance with lease terms and statutory obligations.

Many RTM companies choose to appoint professional managing agents while retaining overall control.

Key Takeaways

Leaseholders in England and Wales have structured rights to take control of property management:

• The Right to Manage (RTM) allows qualified leaseholders to form an RTM company and take over management functions from the freeholder without proving fault.
• Eligibility depends on building and leaseholder criteria, including flat numbers, lease lengths, participation levels and commercial space limits.
• The process involves forming a company, serving statutory notices and, if necessary, involving the Tribunal.
• After acquisition, the RTM company manages services, repairs, insurance and administration, although the freeholder retains ownership and ultimate rights like forfeiture.
• Alternatives such as tribunal appointment of a manager or forming a tenants' association also exist.

Understanding these rights empowers leaseholders to address poor management, achieve greater transparency over service charges, and influence how their building is run.