Right to Manage and Mixed-Use Premises
The right to manage (RTM) regime has undergone legislative changes. These amendments address key aspects such as the eligibility criteria for mixed-use premises, the costs of RTM claims and voting rights within RTM companies. This article highlights the implications of these changes for mixed-use premises.
RTM
The RTM gives residential tenants a mechanism by which they can collectively take over the management functions of a building from the landlord through an RTM company. Introduced by the Commonhold and Leasehold Reform Act 2002 (CLRA), the RTM claim is available to long residential leaseholders in buildings containing two or more flats where at least two-thirds of the flats are held by qualifying tenants.
Mixed-use premises
Under CLRA as originally enacted mixed-use premises where the internal floor area used for non-residential purposes exceeds 25% of the premises’ total internal floor area are excluded from the RTM. A non-residential element is neither occupied or intended to be occupied for residential purposes nor comprised in common parts.
Threshold change and its impact
A recent change in the floor area threshold has increased those buildings that will come within the scope of the RTM regime meaning more mixed-use developments will be eligible for the RTM.
Section 49 of the Leasehold and Freehold Reform Act 2024 (LFRA) which came into force on 3 March 2025 amends the CLRA and increases the limit on the non-residential element to 50%. An RTM cannot be claimed in relation to mixed-use premises where more than 50% of the internal floor area is in non-residential use.
A landlord wanting to structure a development so as to avoid any potential for an RTM will now need to factor in a non-residential element in excess of 50% of the premises’ total internal floor area. Previously a development structured to avoid being subject to RTM claims would factor in a non-residential internal floor area in excess of 25%. Those that are 50% non-residential or below will be caught.
Costs change and its impact
An RTM claim requires no payment to the landlord but under the CLRA as originally enacted following the service of the claim notice the RTM company is liable for the landlord’s reasonable costs. This too has changed.
Section 50 of the LFRA also in force on 3 March 2025 removes the RTM company’s liability to cover the landlord’s costs, except in circumstances where they act unreasonably or withdraw from the claim. The general position is that each party now bears their own costs.
This may encourage more leaseholders to consider making RTM claims and discourage landlords from challenging RTM claims.
RTM model articles amended
The RTM can only be exercised through membership of an RTM company. Landlords seeking to exert control over mixed-use premises through the RTM company are now faced with a cap on their voting rights.
Amendments to the model articles for RTM companies from 3 March 2025 change the voting requirement of a landlord under a lease who is not otherwise entitled to a vote to include that they must be a freeholder of the premises in addition to being a member of the RTM company, and introduce a cap on the voting rights exercisable by landlords under leases of the whole or any part of the premises at one third of the votes exercisable by qualifying tenants.
Regulations
The Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025
The RTM Companies (Model Articles) (England) (Amendment) Regulations 2025
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