Understanding the Changes to RTM Companies: A Simplified Guide

The UK government has introduced new regulations that amend how Right to Manage (RTM) companies operate in England. These changes aim to give leaseholders more power over the management of their buildings, especially in mixed-use properties with significant non-residential space. Here's what you need to know:

What Are RTM Companies?

RTM companies allow long leaseholders—those who hold leases for a lengthy period—to take over the management of their apartment buildings from landlords without needing to prove any fault on the landlord's part. This is particularly useful for leaseholders who want more say in how their buildings are run.

Key Changes in the New Legislation

1. Voting Rights Adjustments:

   • The new rules cap the voting power of landlords to one-third of the votes exercisable by leaseholders. This ensures that leaseholders maintain control, especially in buildings with a high percentage of non-residential areas.
   • Only landlords who are also freeholders (owners of the entire building) can vote if they are members of the RTM company, preventing intermediate landlords from influencing decisions.

2. Increased Non-Residential Limit:

   • Previously, RTM claims were only viable if non-residential spaces made up 25% or less of the building. The new legislation increases this limit to 50%, allowing more mixed-use buildings to qualify for RTM.

3. Clarification on Lease Definitions:

   • The law now clearly states that "leases" refer only to long leases, which helps avoid disputes over voting rights and membership in RTM companies.

Why These Changes Matter

These amendments ensure that leaseholders have a stronger voice and greater control over the management of their buildings, aligning with recommendations from the Law Commission. By capping landlords' voting power, the regulations prevent landlords from having disproportionate influence, especially in buildings where non-residential areas are significant.

Consultation and Support

The changes were shaped by extensive consultation, receiving broad support from leaseholders and resident groups. The government's "How to Lease" guide has been updated to reflect these changes, providing additional resources for those navigating the RTM process.

Impact on Stakeholders

For landlords, this means a potential reduction in voting power within RTM companies, but they still retain management responsibilities for non-qualifying flats and non-residential parts. Leaseholders, on the other hand, gain a stronger position in managing their living spaces.

Monitoring and Evaluation

Although a specific review of these changes isn't planned, the government will continue to monitor the housing sector and evaluate the broader impact of the 2024 Act on leasehold reform.

In summary, these amendments support leaseholders in gaining effective management control of their buildings, ensuring fairer representation and influence in RTM companies. For more detailed guidance, leaseholders and landlords can refer to updated resources provided by the government and the Leasehold Advisory Service.