The right to manage lets the long leaseholders of a block of flats in England or Wales take over the landlord’s management functions through a company limited by guarantee, without having to prove that the building has been badly run. The building must be self contained, at least two thirds of its flats must be held by qualifying tenants, and when the claim notice is served the company’s members must include qualifying tenants of at least half of all the flats.

What is the right to manage, and where does it apply?

The right to manage is set out in Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002, starting at section 71. It allows a specially formed company, called an RTM company, to acquire and exercise the management rights that the leases give to the landlord. The landlord keeps the freehold and the ground rent; what moves across is responsibility for services, repairs, maintenance, improvements, insurance and management.

The regime applies in England and Wales only, and came into force on 30 September 2003 in England and 30 March 2004 in Wales.

GOV.UK contrasts this with asking a tribunal to appoint a manager, which requires proof of bad management and a prior “section 22 notice” to the landlord.

Which buildings qualify?

Under section 72, premises qualify if they are a self contained building or a self contained part of a building, contain two or more flats held by qualifying tenants, and the flats held by qualifying tenants make up at least two thirds of all the flats in the premises. A building is self contained if it is structurally detached. A part of a building qualifies only if it is a vertical division that could be redeveloped independently and its piped and cabled services are, or could be, provided independently of the rest of the building.

Schedule 6 then excludes some premises even if they pass section 72:

  • Substantial non residential use. Premises are excluded if the internal floor area of the non residential parts exceeds 50% of the whole. The limit was 25% until the Leasehold and Freehold Reform Act 2024, section 49, raised it from 3 March 2025. Garages, parking spaces and stores used with a particular flat count as residential, and common parts are ignored.
  • Resident landlord with four units or fewer. This applies only to converted buildings, not purpose built blocks, where a freeholder or an adult family member has lived in one of the flats as their only or principal home for the last twelve months.
  • Local housing authority landlord. Excluded if a local housing authority is the immediate landlord of any qualifying tenant.
  • Recent RTM. Excluded if an RTM company already has the right, or had it and lost it less than four years earlier.
  • Split freeholds. Excluded where different people own the freehold of different self contained parts.

Who counts as a qualifying tenant?

Section 75 makes the tenant of a flat under a long lease the qualifying tenant. Section 76 defines a long lease mainly as one granted for a term of more than 21 years, together with right to buy leases and shared ownership leases where the tenant has reached a 100% share. A business tenancy within Part 2 of the Landlord and Tenant Act 1954 does not count. Each flat has only one qualifying tenant: joint leaseholders count together as one, and where there is a chain of long leases only the lowest long leaseholder qualifies.

How is the RTM company set up?

Section 73 says an RTM company must be a private company limited by guarantee whose articles state that its object, or one of its objects, is acquiring and exercising the right to manage the specified premises. A commonhold association cannot be an RTM company, and only one RTM company can exist for any given premises. If the company later buys the freehold it stops being an RTM company.

Section 74 limits membership to qualifying tenants of flats in the premises and, from the acquisition date, landlords of the premises. The articles must follow regulations made under section 74, and the normal default model articles in section 20 of the Companies Act 2006 do not apply. It is incorporated as a company limited by guarantee in the ordinary way, so the first directors must verify their identity; see Companies House identity verification.

What is the notice of invitation to participate?

Before claiming, section 78 requires the company to give a notice of invitation to participate to every qualifying tenant who is not already a member and has not agreed to become one. The notice must say the company intends to acquire the right to manage, name the existing members and invite the recipient to join. It must either enclose the articles or say where they can be inspected; the inspection offer must cover at least two hours on each of at least three days, including a Saturday or Sunday, within the seven days after the notice. An inaccuracy in the particulars does not invalidate the notice.

The claim notice cannot be given until at least 14 days after every required invitation has been given (section 79(2)).

How does the claim notice work?

The claim is made by a claim notice, and the date it is given is the “relevant date”. On that date the membership test in section 79 must be met. If there are only two qualifying tenants, both must be members. Otherwise the members must include qualifying tenants of at least half of the total number of flats in the premises, not half of the qualifying tenants.

The notice goes to every landlord under a lease of the premises, every other party to a lease (such as a management company named in the leases) and any tribunal appointed manager. A copy goes to every qualifying tenant. Section 80 requires it to:

  • identify the premises and the grounds for saying they qualify;
  • list each qualifying tenant who is a member, with their flat address and the date, term and start date of their lease;
  • give the company’s name and registered office;
  • set a date for counter notices at least one month after the relevant date;
  • set an acquisition date at least three months after the counter notice date.

What if the landlord serves a counter notice?

A recipient may serve a counter notice by the date in the claim notice, either admitting the claim or alleging, by reference to a specific provision, that the company was not entitled. If any counter notice disputes the claim, section 84 lets the company apply to the tribunal within two months of the last counter notice. The company does not acquire the right unless the tribunal finally decides in its favour or the objectors agree in writing.

Under section 90, if nobody disputes the claim the acquisition date is the one in the claim notice. After a tribunal win it is three months after the decision becomes final; after a written agreement it is three months after the agreement.

Costs changed on 3 March 2025. Section 88, which made the RTM company pay the landlord’s reasonable costs, was repealed by section 50 of the Leasehold and Freehold Reform Act 2024. New section 87A provides that the company and its members are not liable for other people’s costs of a claim, subject to limited exceptions, including a tribunal order under section 87B where a claim notice is withdrawn or ceases to have effect and the company acted unreasonably.

What happens on the acquisition date?

Under section 96 the landlord’s management functions under the leases become the company’s functions, although forfeiture and re entry stay with the landlord. Section 94 requires the landlord or former manager to pay over accrued uncommitted service charges, and section 93 lets the company demand information it reasonably needs, which must be supplied within 28 days.

From that date the company is holding service charge money on the statutory trust in section 42 of the Landlord and Tenant Act 1987, and its directors take on the duties described in our guide to flat management company directors. Tax and filing for the company are covered in tax for residents’ management and RTM companies.

Illustration only.

A converted building has 12 flats. Ten are on 99 year leases and two are let by the freeholder on short tenancies. A shop takes 40% of the internal floor area. Ten out of twelve exceeds the two thirds test (eight flats). The shop is within the 50% limit, although before 3 March 2025 it would have blocked the claim. To serve a claim notice the company needs at least six qualifying tenant members, being half of all 12 flats. If invitations go out on 1 February, the claim notice can go out on 15 February at the earliest, with a counter notice date no earlier than 15 March and an acquisition date no earlier than 15 June.

What are the common mistakes?

  • Measuring the membership threshold against the number of leaseholders rather than the total number of flats.
  • Serving the claim notice less than 14 days after the last invitation, or forgetting leaseholders who bought after the invitations went out.
  • Missing a party to the leases, such as a separate management company, when serving the claim notice.
  • Treating the money collected after acquisition as company income instead of trust money that must be kept identifiable and accounted for to leaseholders.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.