Right to Manage: A Complete Guide for Leaseholders
Everything you need to know about the right to manage process, from right to manage qualifying criteria and RTM company formation to ongoing right to manage company directors responsibilities. This guide explains the 6-step process, right to manage costs, and the right to manage pros and cons under the Commonhold and Leasehold Reform Act 2002.
What Is the Right to Manage?
The right to manage is a statutory right introduced by the Commonhold and Leasehold Reform Act 2002 that allows qualifying leaseholders to take over the management of their building without having to prove fault on the part of the landlord or existing managing agent. It is one of the most powerful tools available to leaseholders who want greater control over how their building is maintained, how service charges are spent, and which managing agent is appointed.
To exercise the right to manage, leaseholders must form a right to manage company (also known as an RTM company) and follow a prescribed statutory process. Once the RTM company acquires the management functions, it becomes responsible for all aspects of building management that were previously handled by the landlord, including service charge collection, insurance, maintenance, and compliance.
The right to manage is distinct from a residents management company (RMC), which is typically established by the developer when a building is first constructed. An RMC usually exists from the outset and holds management obligations written into the leases, whereas an RTM company is formed later by leaseholders who wish to take control from an existing landlord. The difference between an RMC and an RTM is important: an RMC derives its authority from the lease, while an RTM company derives its authority from statute.
Do You Qualify? Right to Manage Qualifying Criteria
Not every building is eligible for the right to manage. The Commonhold and Leasehold Reform Act 2002 sets out specific right to manage qualifying criteria that must be met before an RTM company can serve a claim notice. Understanding these criteria is the essential first step in the process.
The qualifying conditions apply to both the building itself and the leaseholders who wish to participate. If your building meets the criteria below, you are likely eligible to exercise the right to manage.
- The building must be a self-contained building or part of a building, with at least two flats held by qualifying tenants on long leases (leases originally granted for more than 21 years)
- At least two-thirds of the total number of flats in the building must be held by qualifying tenants - for example, in a block of 12 flats, at least 8 must be held on qualifying long leases
- The non-residential floor area must not exceed 25 percent of the total internal floor area of the building, which means the right to manage is not available for predominantly commercial premises
- The building must not be on the exempt list, which includes properties within a cathedral precinct and certain National Trust buildings
- The right to manage is available regardless of whether the building is freehold or leasehold, and it applies to both purpose-built and converted blocks of flats
- Right to manage shared ownership leaseholders can participate as qualifying tenants provided their lease meets the long lease requirement
If you are unsure whether your building qualifies, our team can review your lease and building structure to confirm eligibility before you commit to the process. Call us on 0161 371 7190 for a free initial assessment.
The RTM Process Step by Step
The right to manage process follows a prescribed statutory procedure set out in the Commonhold and Leasehold Reform Act 2002. Each step must be completed correctly, as procedural errors can invalidate the entire claim. Here is how to set up a right to manage company and acquire the management functions for your building.
Step 1
Form the RTM Company
The first step is RTM company formation. The right to manage company must be incorporated at Companies House as a company limited by guarantee, using prescribed articles of association. The company name must include "RTM Company" and the company must be formed for the specific purpose of exercising the right to manage in relation to the building. This typically takes a few days and costs a small Companies House filing fee.
Step 2
Invite Participation from Qualifying Tenants
Once the RTM company is incorporated, a notice of invitation to participate must be served on all qualifying tenants in the building who have not already become members. This notice gives every eligible leaseholder the opportunity to join the RTM company before the claim notice is served. There is no minimum number of members required beyond the membership of the RTM company itself, but broader participation strengthens the claim and ensures the process has widespread support.
Step 3
Serve the Claim Notice
The claim notice is the formal document that initiates the right to manage process. It must be served on the landlord (and any intermediate landlords or existing managing agents) and must contain prescribed information including the name and registered office of the RTM company, the names of the members, the date on which management functions are proposed to be acquired (the determination date), and details of the building. The claim notice must be served at least one month before the counter-notice date.
Step 4
Counter-Notice Period
The landlord has one month from receipt of the claim notice to serve a counter-notice. The counter-notice must either admit that the RTM company is entitled to acquire the right to manage, or state the grounds on which the landlord alleges the claim is not valid. Common grounds for dispute include allegations that the building does not meet the qualifying criteria or that the claim notice was defective. If no counter-notice is served, the RTM company is deemed to have acquired the right to manage.
Step 5
Tribunal Application (If Disputed)
If the landlord serves a counter-notice disputing the claim, the RTM company can apply to the First-tier Tribunal (Property Chamber) for a determination. The tribunal will assess whether the statutory requirements have been met and either approve or reject the claim. Applications to the tribunal should be made within two months of the counter-notice. Most RTM claims are not disputed at tribunal, but it is important to be prepared for the possibility.
Step 6
Acquisition of Management Functions
On the determination date specified in the claim notice, the RTM company formally acquires the management functions. From this date, the RTM company is responsible for service charge collection, building insurance, maintenance, compliance, and all other management obligations. The outgoing managing agent must hand over all relevant records, accounts, and keys. Most RTM companies appoint a professional managing agent at this stage to handle day-to-day operations.
For professional guidance through every stage of the right to manage process, visit our right to manage service page or call 0161 371 7190.
Pros and Cons of Right to Manage
Understanding the right to manage pros and cons is essential before committing to the process. While the benefits of exercising the right to manage are significant, there are also responsibilities and challenges that leaseholders should consider carefully.
Advantages
- Full control over the choice of managing agent and contractors, allowing you to appoint professionals who deliver value for money
- Greater transparency over service charge expenditure and the ability to scrutinise every cost line in the budget
- No requirement to prove fault or mismanagement by the current landlord, making the process more straightforward than other legal remedies
- Ability to set maintenance priorities based on what leaseholders actually want, rather than what the landlord dictates
- Improved building standards and a greater sense of community ownership and engagement among residents
Disadvantages
- Directors take on legal and financial responsibilities that were previously borne by the landlord, including Companies Act compliance
- The initial right to manage costs for legal fees and company formation can be significant, though the landlord must contribute to reasonable claim costs
- Volunteer directors may face burnout, particularly in larger buildings with complex maintenance needs and demanding residents
- Disagreements between leaseholders over budgets, maintenance priorities, and contractor selection can create internal conflict
- If the RTM company fails to manage the building properly, leaseholders may find themselves in a worse position than before
The key to a successful RTM company is professional support. Most of the disadvantages above can be avoided by appointing an experienced block management company to handle operations while the directors retain strategic oversight. If you are considering whether to change your managing agent as part of the RTM process, we can help.
RTM Company Directors Responsibilities
Once the right to manage company has acquired the management functions, the directors become responsible for the governance and oversight of the building. The right to manage company directors responsibilities are significant and cover both company law obligations and leasehold management duties.
Directors must act in the best interests of the RTM company and its members, exercise reasonable care and skill, and ensure compliance with the Companies Act 2006, the Landlord and Tenant Act 1985, and the Commonhold and Leasehold Reform Act 2002. For a comprehensive overview of director duties, see our block management directors guide.
Service Charge Administration
Setting annual budgets, issuing service charge demands, collecting payments, pursuing arrears, and producing certified annual accounts in accordance with the lease terms and the Landlord and Tenant Act 1985.
Building Maintenance and Repairs
Ensuring the building is properly maintained through planned preventative maintenance programmes, reactive repair management, and Section 20 consultation for qualifying major works exceeding the statutory threshold.
Insurance Arrangement
Arranging and maintaining adequate buildings insurance for the property, ensuring the policy meets the requirements of the lease and provides appropriate cover for all insured risks.
Health and Safety Compliance
Meeting all statutory obligations including fire risk assessments, electrical testing, legionella monitoring, asbestos management, and compliance with the Building Safety Act where applicable.
Companies House Filings
Submitting annual confirmation statements, notifying changes of directors and registered office, and maintaining the company statutory registers as required by the Companies Act 2006.
Appointing a Managing Agent
Selecting, instructing, and monitoring a professional managing agent to handle day-to-day operations. Directors retain oversight and can switch managing agent if the service is not satisfactory.
If you are a director of an RTM company and feel that your current managing agent is not delivering the level of service you expect, our guide to switching your managing agent explains the process and what to look for in a replacement.
Frequently Asked Questions About Right to Manage
What are the disadvantages of RTM?
The main disadvantages of exercising the right to manage are the administrative burden that falls on volunteer directors, the legal costs of setting up an RTM company and serving the claim notice, and the ongoing responsibility for compliance, insurance, maintenance, and service charge administration. Directors of an RTM company must fulfil their obligations under both the Companies Act 2006 and leasehold legislation, and if the board lacks experience or professional support, management standards can decline. Disputes between leaseholders over budgets and priorities are also more common when there is no external landlord making decisions. Most of these disadvantages can be mitigated by appointing a professional managing agent to handle day-to-day operations.
How much does it cost to set up a right to manage company?
The right to manage costs typically range from two thousand to five thousand pounds for the initial setup, depending on the complexity of the building and whether solicitors are instructed. This covers RTM company formation at Companies House, preparation and service of the claim notice, and any legal advice required during the process. The landlord is required to pay the reasonable costs of the RTM company in connection with the claim under the Commonhold and Leasehold Reform Act 2002, but this is limited to the costs of the claim itself, not the ongoing management costs. If the landlord disputes the claim and the matter goes to the First-tier Tribunal, additional legal costs may be incurred.
Is right to manage a good idea?
Right to manage is generally a good idea for leaseholders who are dissatisfied with the current management of their building and want greater control over service charges, maintenance decisions, and the appointment of contractors and managing agents. The right to manage process does not require you to prove fault on the part of the landlord, which makes it more straightforward than other remedies. However, it does transfer significant responsibility to the RTM company directors, so it is important to ensure that enough leaseholders are willing to serve on the board and that professional support is in place. For most buildings, the benefits of improved transparency, accountability, and cost control outweigh the additional administrative responsibility.
How long does the RTM process take?
The right to manage process typically takes between three and six months from the decision to proceed through to the acquisition of management functions. The key stages are: incorporating the RTM company at Companies House, which takes a few days; inviting qualifying tenants to participate as members; serving the claim notice on the landlord, which triggers a one-month counter-notice period; and then a further two-month period before the RTM company acquires the management functions on the determination date. If the landlord serves a counter-notice disputing the claim, the matter may be referred to the First-tier Tribunal, which can extend the timeline significantly.
Who can be a director of a right to manage company?
Directors of a right to manage company must be members of the RTM company, which means they must be qualifying leaseholders in the building. You must be at least 16 years old under UK company law, and you cannot act as a director if you are an undischarged bankrupt or have been disqualified by the court. There is no requirement for directors to hold professional qualifications or have property management experience, although a willingness to learn and a commitment to acting in the best interests of all leaseholders are essential. In practice, having at least three directors is advisable to ensure a quorum can be maintained and the workload is shared fairly.
Can a right to manage company buy the freehold?
An RTM company itself cannot exercise the right of collective enfranchisement to purchase the freehold, as this is a separate statutory process under the Leasehold Reform, Housing and Urban Development Act 1993. However, the qualifying leaseholders who are members of the RTM company can collectively purchase the freehold by forming a nominee purchaser company or using the RTM company as a vehicle, provided the statutory criteria for collective enfranchisement are met. Acquiring the freehold gives leaseholders full control over the building, including the ability to extend leases at minimal cost. Many RTM companies treat the right to manage as a first step before pursuing freehold purchase.
Expert Support for Your Right to Manage Journey
Whether you are exploring the right to manage process for the first time, need help with RTM company formation, or are an established right to manage company looking to switch managing agent, Block is here to help. We have guided RTM transitions across the UK, providing professional block management services that give directors confidence and leaseholders peace of mind. Contact us for a free, no-obligation consultation about your right to manage options.