The UK Government has published the third set of provisions under the Leasehold and Freehold Reform Act 2024 (LAFRA 2024). These provisions, known as the Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025, will come into force on 3 March 2025. This latest update introduces significant changes to the qualifying criteria for the Right to Manage. It follows the government’s ongoing efforts to reform leasehold and freehold rules to improve the property management landscape.

On 9 February 2025, the government announced a faster, cheaper home buying and selling process, highlighting digitalisation in the Land Registry to speed up conveyancing and changes in the Right to Manage under Leasehold and Freehold Reform Act 2024. The new regulations introduce several changes, particularly impacting the non-residential limits on managing claims. The changes affect Sections 49 to 52 and 64 of the Leasehold and Freehold Reform Act 2024.

What is new for Right to Manage in 2024?

Starting 3 March 2025, the non-residential limit on right-to-manage claims will rise from 25 per cent to 50 per cent. Buildings with non-residential areas over 50 per cent of total floor space won’t qualify for this right. Therefore, in short, more buildings will now be eligible for the Right to Manage. Previously, buildings with more than 25 per cent non-residential space did not qualify. The new rule allows buildings to qualify as long as the residential portion does not exceed 50% of the total area.

Who pays the Freeholder's costs under Right to Manage?

Since the Commonhold and Leasehold Reform Act 2002, Right to Manage (RTM) Companies must cover costs for serving a claim notice but are not liable for landlords' expenses related to it, except as permitted by new Sections 87A and 87B.  Under the amendments, permitted costs include expenses incurred before a Court or Tribunal, provided the Court or Tribunal orders the RTM Company to pay those costs. 

Also, landlords will be unable to recover non-litigation costs associated with handling a right-to-manage claim from non-participating tenants through service charges. 

Are there any Freeholder costs that a Right to Manage Company will be liable for?

An RTM Company is liable for landlord or management costs if the claim notice is withdrawn, ineffective, or if it unreasonably delays withdrawal. However, it is not responsible for costs incurred before a planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal or Court.

Any costs the RTM Company is liable for must be reasonable. Lease clauses allowing landlords or management companies to recover costs related to acquiring management rights will be void. Landlords often face a shortfall in legal costs when assessing claims. Under the new regulations, they cannot recover legal fees unless the claim is withdrawn or invalid.

Which legal route enforces Right to Manage issues?

Well, this is a big change. It used to be the First-tier planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal (FTT) . However, the new provisions change the jurisdiction for enforcing obligations under RTM legislation. Instead of the county court, the First-tier planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal (FTT) will have authority. If the FTT enforces obligations, the applicant can request the County Court to enforce the order against a third party, as long as it is not for payment.

How is a Right to Manage Company governed?

Alongside the 2025 changes to Right to Manage, the Government introduced the RTM Companies (Model Articles) (England) (Amendment) Regulations 2025, which will also come into force on 3 March 2025.

The amendment changes the Model Articles of RTM Companies, limiting landlords' votes on leases to one-third of those by qualifying tenants. This change reduces landlords' influence in decisions concerning acquiring the Right to Manage. Even in buildings with several flats, landlords cannot dominate voting outcomes.

So far, the provisions implemented under Leasehold and Freehold Reform Act 2024 include the removal of the two-year qualifying criteria for lease extensions or acquiring the freehold, building safety provisions, and the right-to-manage changes. Other provisions under LAFRA 2024 are yet to be enacted. The Government will decide on the implementation dates for these provisions.

Opponents of Leasehold and Freehold Reform Act 2024 launched a judicial review challenging its provisions. In January 2025, they secured permission to proceed with the judicial review. The outcome of this legal challenge could impact the implementation of LAFRA 2024, particularly the more controversial aspects related to lease extension valuations and enfranchisement. We have separately blogged on this. See blog title High Court Grants Judicial Review on Leasehold Reform Challenge

The residential property sector stakeholders are advised to monitor developments closely as the legal proceedings continue.

FAQs

What is changing under the new right-to-manage rules?

The non-residential limit for right-to-manage claims will increase from 25 per cent to 50 per cent. This means buildings with up to 50 per cent non-residential space qualify for the Right to Manage.

Will RTM Companies still be liable for costs related to claim notices?

RTM Companies aren't liable for landlords' costs unless allowed by Sections 87A and 87B. They are responsible for reasonable costs if the claim notice is withdrawn or ineffective.

How do the new voting rules impact landlords?

Landlords' voting rights will be capped at one-third of the votes exercised by qualifying tenants. This will reduce their influence over decisions related to the Right to Manage.