The latest news in relation to the implementation of the Leasehold and Freehold Reform Act 2024 impacts the qualification criteria for right to manage (RTM), and will take effect as of the 3rd March 2025. Whilst the changes being introduced have on the whole been welcomed for enabling leaseholders to take over the management of their block easier and at a lower cost, they also bring with them further considerations for both managing agents and leaseholders.
Our Head of Litigation and Leasehold Transactions, Liz Rowen, has written this blog detailing what the changes are, their potential impact, and how to ensure you are prepared for the 3rd March when the changes come in.
Key Right to Manage Changes and Their Impact
- Increased Commercial Space Threshold
Previously buildings with more than 25% commercial space were excluded from RTM eligibility. The revised threshold has been raised to 50%, meaning more mixed-use developments will now qualify for RTM. Whilst this amendment will make RTM a viable option for more leaseholders, as it was intended to do, it may have other impacts that weren’t so desired. One of which is that upon the successful completion of the RTM process for example on a block which is 49% commercial, and the commercial units are occupied by a multibillion-pound supermarket, are the leaseholders who live within the apartments in the block going to be capable of calculating the service charge apportionment for the block and then collecting the relevant contribution from the supermarket, who may or may not be forthcoming with their payment? - Removal of the Requirement for Leaseholders to Cover Freeholders’ Legal Costs
Under previous legislation, leaseholders had to cover the freeholder’s legal costs when pursuing an RTM application. This occasionally led to freeholder solicitors delaying the processes by raising unnecessary and unfounded enquiries, which not only slowed the process, but also increased the freeholder’s solicitors’ costs which leaseholders were required to cover. Removing this requirement will not only reduce the cost of the RTM process for leaseholders by up to £3,000, but it also reduces the likelihood of delays being encountered.
What Managing Agents can do to Prepare
With RTM becoming more accessible to leaseholders it is of increased importance for managing agents to foster positive relationships with leaseholders within their blocks. This can be done through clear communication, responsive service and transparency in management decisions. Additionally, conducting regular performance reviews and addressing any concerns flagged proactively can heavily impact upon management decisions within a block.
Whilst taking steps to protect the current blocks being managed is logical, managing agents may also investigate the possibility of providing a tailored approach to RTM companies, whether that be in the form of a consultancy or management services directly to RTM companies.
Finally, as we see further introductions coming into effect from the Leasehold and Freehold Reform Act 2024, it is becoming increasingly important for managing agents to remain fully legally informed to ensure they are compliant with the ever-changing legal landscape.
Conclusion
It is clear to see that the RTM qualification amendments make it easier and cheaper for leaseholders to proceed and complete the RTM process, as they were intended to do. However, qualification of a building for RTM does not stop at the percentage of commercial space. Recent Upper Tribunal decisions in the case of The Courtyard RTM Co Limited and others v Rockwell Limited and others v 14 Park Crescent RTM Co Ltd [2025] have sought to add clarity on what constitutes ‘a self-contained part of a building’ and has provided some assistance, but RTM is a heavily litigated area and no doubt this will continue for some time.
Additionally, these amendments may initially appear to only add to the challenges being face by managing agents, but they could actually be seen as offering opportunities for managing agents to take on new blocks being poorly managed in the eyes of leaseholders and benefit managing agents who have established strong leaseholder relationships within their blocks.
