Reform Uncertainty Drives RTM
Why more leaseholders are taking control and how this shapes future financial and management decisions
Over the past year I have seen more leaseholders move towards Right to Manage (RTM) in response to changes in leasehold reform. It is an interesting example of how uncertainty – primarily in response to the long-awaited draft Commonhold and Leasehold Reform Bill but also the enactment of the Leasehold and Freehold Reform Act (LAFRA) can become a catalyst in its own right.
As of 27 January, the new Draft Bill has now been published, albeit many questions surround its scrutiny throughout consultation, parliamentary passage and likelihood of actually entering the Statute Book before the next general election. So in that respect, uncertainty remains.
What has changed under LAFRA
LAFRA has already made RTM easier. Since 3 March 2025, section 49 increased the non-residential limit from 25% to 50%, so many more mixed use buildings now qualify. The costs position has also changed so that leaseholders will generally no longer be required to pay the freeholder’s legal costs in an RTM claim.
Why uncertainty pushes people towards control
Is the uncertainty surrounding leasehold reform increasing RTM claims? I would be cautious about claiming a single cause, but in practice I am seeing more groups reach for RTM as a ‘control now’ solution. Some are concerned about what later reforms may mean for service charge transparency and accountability. Others conclude that waiting rarely improves management in the short term.
There is also a market logic. The ongoing leasehold debate has heighted issues around service changes which can include the adequacy of reserve funds, the pace of repairs, the credibility of the long-term maintenance plan and whether the block remains straightforward to insure. A well-run building is easier to finance and easier to sell. RTM can therefore be a value-protection decision as much as a consumer rights decision.
Mixed use buildings are the pressure point
The move to a 50% non-residential threshold brings more mixed use property into the RTM frame.
Whilst the statutory RTM does not include commercial units, but relates only to residential units, groups of leaseholders are likely to welcome the opportunity to exercise a RTM a mixed use property. Leaseholders can sometimes feel sidelined in mixed use buildings and so may well be attracted by the idea of managing the residential parts themselves, but without having to address the complexities of managing the commercial units for commercial tenants with different operational needs and commercial aims, not least in terms of rental income.
Control comes with responsibility
RTM can be seen as an attractive half-way point, because it does not require leaseholders to buy the freehold of the property but at the same time, it gives them more control. Directors become responsible for appointing contractors, collecting service charges, keeping accounts, consulting on major works when required and enforcing covenants fairly. However, it is not a shortcut to simpler ownership.
It also comes with further risk. Building safety expectations have tightened since Grenfell, and insurance placement is more specialist than it once was. Decisions that feel like ‘cost savings’ can quickly turn into higher premiums, compliance risk or deferred works that reduce value.
For that reason I am wary of any narrative that frames RTM as ‘cutting out the middleman’. For many buildings, professional management remains essential. The difference is that leaseholders can choose it, instruct it and scrutinise it. ALEP’s guidance for new RTM directors is clear that good outcomes depend on governance, proper processes and knowing when to seek expert support.
Implications for investors and development
For investors, RTM is increasingly part of the risk profile, especially for mixed use assets. More buildings qualify and the costs barriers are lower, so the likelihood of a claim has risen. This does not make mixed use less investable, but it does put a premium on robust documentation and management structures that can cope with transition. Many future disputes stem from ambiguity rather than bad faith.
A cautious, workable next stage
I support leasehold reform that improves transparency and accountability, and I also support a phased, workable approach to any wider shift towards commonhold. But I also see it as an important step in the potential move towards commonhold: one which demonstrates the risk as well as the opportunities to residents.
With a Commonhold Bill now clearly within view, it will be interesting to see whether this increased interest in RTM is retained, or if residents opt to bide their time and convert to commonhold. My inclination is that many will continue to see RTM an effective solution which combines the benefits of both leasehold and commonhold.
ALEP is keen to work with government in the Bill, but also in strengthening leasehold where it still exists and advising on how commonhold can be expanded without destabilising the market.
Most members agree that RTM can deliver better outcomes for leaseholders and, by extension, for the wider market. But it works best when it is approached as a long-term management decision, backed by financial discipline and professional stewardship.
By Katherine Simpson, Partner at Edwin Coe LLP
Kindly shared by Association of Leasehold Enfranchisement Practitioners (ALEP)
