Residential leaseholders in mixed-use buildings are set to benefit from expanded rights to take control of their building’s management, thanks to key provisions of the Leasehold and Freehold Reform Act 2024 coming into force today (March 3).
Among the most significant changes is the amendment to Section 49, which raises the non-residential limit for Right to Manage (RTM) claims from 25% to 50%, enabling more leaseholders in mixed-use developments to qualify.
In a move welcomed by campaigners, leaseholders will no longer be required to cover their freeholder’s legal costs when making an RTM claim – a change expected to make the process more accessible and affordable.
Announcing the reforms on 9 February, Housing and Planning Minister Matthew Pennycook said the legislation would “improve the lives of leasehold homeowners across the country, allowing them to more easily and cheaply take control of the buildings they live in and clamp down on unreasonable or extortionate charges.”
OPPORTUNITIES AND COMPLEXITIES
The Association of Leasehold Enfranchisement Practitioners (ALEP) has been quick to highlight both the opportunities and complexities these changes will bring.
Shabnam Ali-Khan, Partner at Russell-Cooke and ALEP member, emphasised that while the expansion of RTM will give leaseholders more control over building management, it also brings financial responsibilities, including building safety compliance, insurance procurement, and long-term maintenance.
She also cautioned that “removal of professional management costs does not necessarily translate to savings,” urging leaseholders to fully understand the financial and legal implications before pursuing RTM.
LOSS OF CONTROL
From the freeholders’ perspective, Katherine Simpson, Partner at Edwin Coe LLP, noted the shift will mean a loss of control over qualifying buildings’ management.
While some freeholders may welcome the reduced direct management responsibilities, there are concerns about fragmented ownership leading to poorly managed buildings and a potential drop in future investment. She warned that developers may respond by reducing the residential element of new schemes – a move that could impact the delivery of much-needed housing.
FINANCIAL VIABILITY
Mark Chick (main picture), Director of ALEP and Partner at Bishop & Sewell LLP, stressed the crucial role of professional advisors – property lawyers, valuers, and managing agents – in guiding leaseholders through the RTM process.
He says: Property lawyers, valuers, managing agents and surveyors each have an important role in guiding leaseholders through the RTM process and avoiding the unintended consequences.
“As RTM becomes more widely accessible, the knowledge of our members and other professionals will be invaluable in navigating new regulatory requirements, ensuring compliance with safety legislation and advising on best practices for effective management.”
READY TO STEP UP
And he adds: “As a starting point, leaseholders should engage property lawyers to assess the financial viability of RTM and ensure compliance with leasehold and building safety regulations.
“They will need to work with insurance brokers to secure appropriate coverage, consider appointing a professional managing agent post-RTM to provide oversight and reduce administrative burdens and, importantly, engage with freeholders throughout the process. For freeholders receiving the correct advice will be key to understanding their rights and obligations and in managing the process.
“The shift away from the landlord’s ability to recover costs may deter some from seeking advice. This may have some negative impact on the ease with which handovers occur.”
“ALEP members are abreast of these changes and ready to advise leaseholders and freeholders of their obligations in relation to these reforms to the residential leasehold system and other reforms yet to come.”
