Right to Manage leasehold reforms announced in February 2025

In what is looking like a very promising start to those waiting for leasehold reforms to improve the rights of flat owners, we have a new announcement following hard on the heals on the removal of two year rule for lease extensions that we recently covered.

On 9 February 2025, Matthew Pennycook, the minister for housing, made an announcement with almost no warning, that the government would be imminently bringing in changes to remove landlords recoverable costs for Right to Manage claims and increasing the non-residential threshold limit from 25% to 50%.

This was included in a wider announcement around digitalising the residential conveyancing process.

The announcement in February 2025

The statutory instrument will take effect on 3rd March 2025, making it easier and cheaper for flat owners to exercise an RTM claim and take over the management and insurance of their block of flats, as well as bringing tens of thousands of new buildings into the criteria of what constitutes a 'qualifying building' and therefore able to benefit from the right. To recap, this right is crucial for those that are unable to buy the freehold through collective enfranchisement.

The detail of the new RTM regulations

Those affected by the changes can read the The Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025 here.

The crux of the changes are that the regulations will bring in the following parts of the Leasehold and Freehold Reform Act 2024:

• change of non-residential limit on right to manage claims from 25% to 50%

• costs of right to manage claims (so that landlords costs are no longer recoverable)

Along with other changes that we will write about in due course, however the two changes above are huge when it comes to improving leaseholder rights.

Right to Manage Claims

In our guidance note on Right to manage, we discuss the importance of getting the claim notice and preparation of the claim correct, due to the common freeholder tactic of seeking to defeat the RTM claim due to:

1. An error in the claim notice

2. The RTM Company being set up incorrectly

3. an issue in inviting all of the qualifying tenants to participate in the claim

This is based on experience of having handle numerous RTM claims for leaseholders in Brighton and London.

Whilst these arguments could still be made, Ricky Coleman, leasehold solicitor and writer at Peppercorn Law argues that it is less likely, stating that "the incentive for freeholders to argue over invalid notices and claims has been heavily curbed. Whilst a freeholder may still seek to frustrate the process in order to hang on to management, they will now have to put their hands into their own pockets and pay their own solicitors costs of the protracted correspondence that is the hallmark of difficult freeholders responding to RTM claims".

Putting it another way, the commercial reality of challenging a claim will be totally different. As freeholders recovered most or all of their costs previously, there was little incentive to keep those legal costs down.

More buildings to qualify for RTM claims

The biggest part of these announcements is to make it available to more leaseholders by increasing the amount of the buildings that can be used for commercial use, without this disqualifying the building from the right to bring an RTM Claim.

For example, in the situation of a building with two flats and one shop at ground floor level, it is common for the ground floor shop to take up enough of the floor space to exceed the (soon to be changed) 25% threshold. This had the double effect of preventing leaseholders from bringing a collective enfranchisement claim or from pursuing a right to manage claim.

The change will now mean that all buildings with up to 50% of commercial use will fall within the Right to Manage process, making a claim a possibility for thousands of leaseholders that have been forced to live in poorly maintained properties.

But wait, there's more

In a significant shifting of the power balance, leaseholders can now bring a claim knowing that they will only have to cover their own legal costs. This is a drastic move away from the old system in which the group's leasehold solicitor had to use a best guess approach as to what the freeholders legal costs might be, only finding out near the end of the process.

It is hard to think of many processes whereby a major stakeholder was kept so in the dark over their potential costs, and thankfully this is due to come to an end in March 2025.

We are cautiously optimistic at Peppercorn Law that the costs change alone will see a move away from gamesmanship design to nullify Right to Manage claims. Combined with more buildings qualifying for the right, the changes look very positive for flat owners.