Manzurul Islam
Commercial Property
Is It The Right Time To Manage?
The Commonhold and Leasehold Reform Act 2002 provided tenants the right to take over management of their building from the freeholder – the “Right To Manage (RTM)”.
The Leasehold and Freehold Reform Act 2024 (Commencement No.3) Regulations 2025, brought into force on 3rd March 2025, Sections 49, 50, 51, 52 and 64 of the Act which will likely impact on the recovery of costs in a right to manage claim.
Under the previous legislation, a Right To Manage claim meant that the collective leaseholders who had come together to exercise their right to manage a building, would be liable for the current management company’s/landlord’s reasonable costs. These would likely include solicitor’s fees and/or management fees.
The changes brought into force from 3rd March 2025 changed this stance. The default approach now is that unless an exception applies, the RTM company is not responsible for the costs incurred by any recipient of a claim notice if they choose to exercise the Right To Manage.
The Act goes further and illustrates that the only exception to this, is where the Tribunal may order the RTM company to pay costs are if a set of strict conditions are met.
The other changes introduced from 3rd March include the non-residential floor space threshold. Previously, buildings with over 25% non-residential floor space were excluded from RTM claims.
This has now been extended such that only buildings with over 50% non-residential floor space/mixed use are excluded from RTM claims. This could have a huge impact on commercial landlords and tenants.
The radical changes in the Law are part of a series of proposals put forward under The Leasehold and Freehold Reform Act 2024, many of which will have a huge impact on lease extensions and enfranchisement but are yet to be implemented and we do not know when they will be.
This shift in power on Right to Manage claims is likely to entice leaseholders to exercise this right, giving them control over the way a building for which they own a qualifying lease is managed and maintained.
Related insights
Emma Boys-Smith
Vernon Sellahewa
Shelley Fitzpatrick, a Senior Associate Solicitor in the Commercial Property team, said:
“This change offers leaseholders an easier route to taking control of the management of the building that they own a lease in. It seeks to simplify the process and avoid cost deterrents for leaseholders. It enhances leaseholder rights and could act as a deterrent for current mismanagement of buildings.
However, managing a building and its complexities are often overlooked. Leaseholders should consider appointing their own preferred management company to carry out the duties of managing the building even when they exercise the Right To Manage.
If you are thinking about a Right To Manage claim or, if you have received notice from the collective leaseholders where you deal with management, then please do not hesitate to contact me and I will be happy to advise on the next steps.”