Leasehold and Freehold Reform Act 2024: Provisions changing qualifying criteria for right to manage will come into force on 3 March 2025

Hot on the heels of the second commencement order, the third set of commencing provisions in the form of the Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025 ("the Regulations") have been published which will bring into force further provisions of the Leasehold and Freehold Reform Act 2024 ("LAFRA 2024") from 3 March 2025.  The Government has also published a press release on 9 February 2025 entitled: Home buying and selling to become quicker and cheaper which mainly focuses on digitalisation of Land Registry processes with the aim of speeding up conveyancing transactions. However, it also references the Government’s plans to implement various provisions of LAFRA 2024 relating to the right to manage. 

The Regulations bring into force more provisions of LAFRA 2024, including Sections 49 to 52 and 64 which will: 

• Increase the non-residential limit on right to manage claims from 25% to 50%.

This means that only buildings or estates where the non-residential parts are above 50% of the total internal floor area will not meet the right to manage qualification criteria.  Undoubtedly, this is a huge change which will bring a large number of extra buildings within scope of right to manage and buildings which previously would not have qualified, because the commercial or non-residential parts exceeded 25%, will now qualify provided those residential parts do not exceed 50%.

•  Make changes to the costs position in relation to right to manage claims.

Since 2002, the RTM Company and its members have been liable for all costs incurred as a consequence of the service of a claim notice. The amendments mean that the starting point will be that an RTM Company and a member of an RTM Company will not be liable for any costs incurred by a landlord or other person as a result of service of a claim notice unless permitted by new Sections 87A and 87B of the Commonhold and Leasehold Reform Act 2002.  Permitted costs include costs incurred before a Court or Tribunal if the Court or Tribunal has power to order that they pay those costs, and the Court or Tribunal makes such an order.  

In addition, an RTM Company will be liable for the costs of the landlord, management company under a lease or FTT appointed manager if the claim notice to acquire the right to manage is withdrawn, deemed withdrawn or otherwise ceases to have effect, or the RTM Company acts unreasonably in giving a claim notice or not withdrawing it sooner, save that it will not be liable for costs incurred before the Tribunal or Court under this Section. To the extent that the RTM Company is liable for any costs incurred by the landlord, these will only be costs that are reasonably incurred and any provisions in any lease which enable a landlord or management company to recover its costs of dealing with the acquisition of the right to manage will be null and void. 

In addition, a landlord will be prevented from recovering non-litigation costs in dealing with a claim to acquire the right to manage by way of service charges under the lease from non-participating tenants. 

This means that in most cases, landlords will now suffer a shortfall in legal costs when considering the validity of a claim to acquire the right to manage.  They will be unable to recover any legal costs for doing so unless the claim is withdrawn or otherwise invalid.

• Make jurisdictional changes so that it is the FTT rather than the County Court which is given jurisdiction to enforce the obligations of any party under the RTM legislation.  

If the FTT makes an order for the enforcement of obligations, the applicant may apply to the County Court to enforce the FTT's order against a third party, provided it is not for the payment of money.

The RTM Companies (Model Articles) (England) (Amendment) Regulations 2025

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

These make amendments to the Model Articles of Association for RTM Companies and caps the votes which can be exercised by landlords under leases of the whole or any part of the premises at one third of the votes exercised by qualifying tenants. This means that any votes which the landlord has will be diluted. From the landlord’s perspective, this means that even in buildings where they hold a number of flats, they will not be able to influence any votes concerning the acquisition of the right to manage.

The only provisions of LAFRA 2024 which have been brought into force are the removal of the two-year qualifying criteria to obtain a lease extension of a flat or a house or to acquire the freehold of a house, various building safety provisions and the above provisions concerning right to manage.  All other provisions of LAFRA 2024 remain to be brought into force on a date or dates determined by the Government. Opponents of the Government who have launched a judicial review in respect of LAFRA 2024 were successful in obtaining permission to proceed with the judicial review at a hearing at the end of January 2025. Those stakeholders in the residential sector will want to continue to monitor developments as this could impact implementation of LAFRA 2024 and in particular the more controversial provisions around valuation of lease extensions and enfranchisement.

We are tracking developments on our Essential Residential Hub and timeline: Changing landscapes in residential leasehold. Please contact Lauren Fraser, Laura Bushaway or your usual Charles Russell Speechlys contact if you have any queries.