Strategic Considerations following RTM Reform 

The legislative landscape surrounding the Right to Manage (RTM) has undergone material change. With effect from 3 March 2025, the Leasehold and Freehold Reform Act 2024 (LFRA) introduced a series of amendments to the Commonhold and Leasehold Reform Act 2002 (CLRA) which resets how rights and responsibilities are divided between leaseholders and landlords. These changes, particularly as they apply to mixed-use premises, demand the immediate attention of commercial landlords, investors, and developers.

Here, we analyse the legislative adjustments and their implications for commercial landlords, particularly those responsible for mixed-use premises.

Right to Manage

The purpose of the RTM scheme is to allow qualifying residential leaseholders to take on management responsibility for their building through a dedicated RTM company. Importantly, the RTM does not require any allegation of landlord mismanagement or fault – tenants need only satisfy the statutory criteria. In mixed-use premises, this dynamic has long been constrained by a cap on the level of commercial use permissible before RTM eligibility is lost.

Previously, the CLRA excluded buildings where over 25% of the internal floor area was in non-residential use. However, this threshold has been significantly relaxed, and landlords can no longer rely on such a narrow commercial use ratio as a structuring tool to preclude RTM claims.

A new threshold for mixed-use eligibility

Section 49 of the LFRA now increases the permitted non-residential floor area threshold from 25% to 50%. Mixed-use buildings where up to half the internal area is devoted to commercial purposes are now squarely within the scope of the RTM regime.

This change is of material concern to landlords of urban and suburban mixed-use assets. It brings a vast range of previously exempt properties into the RTM framework and may prompt a spike in tenant activity in this area—particularly where there is dissatisfaction with service charges or a desire for direct control over managing agents.

Landlords who previously relied on the 25% threshold when designing or acquiring developments will now need to reassess this strategy. Planning for future schemes must now accommodate a higher threshold if RTM avoidance is a priority. The line has moved. Developments must now exceed 50% non-residential floor area to fall outside the RTM regime—a design consideration that may affect layout, lettable area calculations, and long-term asset flexibility.

Cost allocation reforms

Traditionally, landlords faced no direct financial detriment from an RTM claim, as the RTM company was liable for the landlord’s reasonable costs arising from the claim process. This provision provided a degree of protection and discouraged speculative or poorly prepared RTM attempts.

Section 50 of the LFRA removes this safeguard. Going forward, landlords will generally be required to bear their own costs in responding to RTM claims, save for limited circumstances where the RTM company acts unreasonably or withdraws its claim. This fundamental shift alters the economics of landlord engagement with RTM applications.

The practical consequence is twofold. First, leaseholders may now be more inclined to proceed with RTM claims, buoyed by the reduced financial downside. Second, landlords will need to weigh their responses carefully: contesting a claim could result in unrecoverable expenditure, particularly where the challenge is unsuccessful.

Landlords should take a more strategic approach to RTM claims moving forward, reserving opposition for cases with clear procedural or legal vulnerabilities, and ensuring robust internal protocols for managing such claims efficiently.

Corporate governance constraints

A further consequential reform lies in the corporate structure of RTM companies themselves. Historically, landlords with leasehold interests in a building could exert considerable influence within the RTM company. While they could not control management directly, voting rights were often used to shape operational decisions.

The LFRA introduces a cap on landlord voting rights, limiting their influence to one-third of the votes exercisable by qualifying leaseholders. Moreover, to vote, landlords under leasehold interests must also be the freeholder of the building and a member of the RTM company. This reduces the scope for landlords to indirectly control or obstruct leaseholder-led management initiatives.

For landlords invested in maintaining standards across their mixed-use portfolios, this change may pose operational challenges. The ability to monitor or intervene in management decisions via the RTM company will now be considerably diluted. Where brand integrity, service cohesion, or tenant mix is essential, landlords will need to explore alternative mechanisms—such as estate management schemes or robust lease covenants—to preserve influence over building operations.

Portfolio and risk management

Landlords must now respond to this legislative evolution with a comprehensive strategic review. This includes:

• Audit of existing holdings: Identify mixed-use buildings now brought within RTM scope under the revised 50% threshold.
• RTM risk mapping: Evaluate tenant profiles and leaseholder sentiment in qualifying buildings. Where there is a risk of RTM mobilisation, proactive engagement may assist in de-risking potential claims.
• Review of lease provisions: Ensure leases contain robust clauses covering service standards, access rights, and landlord protections in the event of RTM takeover.
• Planning for future schemes: Consider internal area allocations carefully to achieve the desired balance between commercial viability and legal control.
• Management contract structuring: Consider longer-term managing agent contracts and estate-wide frameworks that preserve service consistency even after RTM is exercised.

A proactive legal strategy

The reforms to the RTM regime represent a policy-driven rebalancing of landlord and leaseholder rights. While politically positioned to enhance leaseholder empowerment, they simultaneously introduce new pressures on commercial landlords managing or investing in mixed-use property.

At Newmanor Law, our team is committed assisting landlords across the UK in understanding and managing these changes, from claim response strategies to future-proofing portfolios against RTM exposure.

If you own or manage mixed-use premises, now is the time to revisit your risk position and operational frameworks. For clear, commercially focused legal guidance, we are here to support you.