The Right to Manage (RTM) is a statutory procedure enabling leaseholders to take over the management functions of their building, executed through a dedicated RTM Company. While distinct from a developer-established Residents' Management Company (RMC), both structures provide leaseholders with direct authority over spending, maintenance, and contractor appointments.
Key takeaways
- The Right to Manage is a statutory right under the Commonhold and Leasehold Reform Act 2002, allowing qualifying leaseholders to take over block management without proving fault or obtaining landlord consent.
- To exercise RTM, leaseholders must incorporate a dedicated RTM Company limited by guarantee, governed by prescribed statutory Articles of Association.
- RTM allows leaseholders to eliminate managing agent markups, reclaim hidden insurance commissions, and procure maintenance services directly at open-market rates.
- RTM directors are bound by statutory Section 20 consultation limits under the Landlord and Tenant Act 1985, as well as structural safety obligations under the Building Safety Act 2022.
- Qualification requires that at least two-thirds of the flats are held by qualifying leaseholders, non-residential space does not exceed statutory thresholds, and participating members represent at least 50% of the total flats in the building. There is no upper limit on the number of units.
What is RTM? A Leaseholder’s Path to Control
The Right to Manage (RTM) is a statutory mechanism introduced under the Commonhold and Leasehold Reform Act 2002 for qualifying leaseholders in England and Wales. It empowers leaseholders to collectively take over the day-to-day management functions from the freeholder or landlord, without having to buy the freehold or prove fault before a tribunal.
The process requires incorporating an RTM company and securing support from qualifying tenants representing at least 50% of the total flats in the building. Once acquired, the RTM company assumes full responsibility for setting service charge budgets, placing insurance, appointing managing agents, and commissioning communal repairs.
What is an RMC? Legal Entity Structures Explained
While both put management in the hands of residents, an RMC and an RTM company originate differently:
An RMC (Residents' Management Company) is typically structured into the original leases by the developer at construction, making the resident-led company a named party to the lease with pre-existing management covenants.
An RTM Company is formed specifically to acquire management powers by statutory right when the original leases left control with an external freeholder or landlord. Registered at Companies House as a company limited by guarantee, the RTM company must adopt statutory Model Articles. Its directors owe fiduciary duties under the Companies Act 2006 to act in the best interests of the company and its members.
RTM vs RMC: Clarifying the Structure
The core distinction lies in origin and scope:
- An RMC holds lease covenants from day one, often including enforcement powers over lease terms and structural ownership.
- An RTM Company acquires the landlord's management functions under statute, while non-management covenants (such as freehold ownership, forfeiture actions, and certain core structural alterations) remain with the freeholder.
Both entities carry the same ultimate responsibilities: maintaining financial transparency, budgeting reserve funds, complying with Section 20 consultations for major works, and appointing competent building managers.
When to Pursue RTM vs Retaining Existing Management
RTM is effective for buildings experiencing chronic service charge inflation, opaque administration, or delayed communal maintenance. It allows leaseholders to directly retender contracts, audit historical expenditure, and ensure supplier agreements are procured competitively.
However, RTM requires competent governance. Once management transfers, the RTM company directors carry legal responsibility for statutory compliance, fire safety, and budget enforcement. If a building lacks an engaged core of leaseholders willing to take on directorship duties, working with an existing agent under enhanced transparency agreements may be preferable.
Governance and Building Safety Duties
Holding management through an RTM company entails statutory compliance:
- Section 20 Consultations: Under the Landlord and Tenant Act 1985, directors must follow strict statutory consultation procedures before committing to qualifying works exceeding £250 per leaseholder or long-term contracts exceeding £100 per leaseholder annually.
- Building Safety Act 2022: For higher-risk residential buildings (at least 18 metres or 7 storeys), statutory management entities face direct duties regarding building registration, Golden Thread documentation, and building safety case preparation.
- Accounting Transparency: Modern governance platforms and open-banking tools allow RTM directors to present real-time accounting, automate ledger reconciliations, and ensure statutory compliance without relying on opaque agency spreadsheets.
Next Steps: Assessing Building Qualification
Before serving statutory notices, leaseholders must verify that the property meets statutory criteria:
- The property must be a self-contained building or structurally independent part.
- At least 66.7% (two-thirds) of the total flats in the building must be owned by qualifying leaseholders (leases originally granted for more than 21 years).
- The non-residential/commercial floor space must not exceed statutory thresholds (traditionally 25%, expanded to 50% under the Leasehold and Freehold Reform Act 2024).
- Qualifying leaseholders representing at least 50% of the total flats in the building must join the RTM company prior to serving the formal Notice of Claim.
