Who Is Responsible for Buildings Insurance After RTM Takes Over?

1. The Legal Framework: Commonhold and Leasehold Reform Act 2002

The Right to Manage is governed by Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002.

The legislation allows qualifying leaseholders to take over management functions from their landlord without purchasing the freehold or having to demonstrate mismanagement.

The key provisions concerning insurance are Sections 96 and 97.

Section 96: Transfer of Management Functions

Section 96 provides for the transfer of relevant management functions under leases to the RTM company.

Section 96(5) expressly includes insurance within the definition of management functions.

Consequently, from the RTM acquisition date, the relevant insurance management functions previously exercised by the landlord ordinarily become functions of the RTM company.

This transfer takes place by operation of law. It does not require the freeholder to assign the freehold, amend the leases or voluntarily surrender its management powers.

Importantly, the RTM company does not merely gain the right to obtain alternative insurance quotations. It assumes the relevant responsibility for arranging insurance under the leases.

Section 97: Restrictions on the Freeholder's Management Powers

Section 97 generally prevents the landlord from exercising management functions that have transferred to the RTM company, except in accordance with an agreement with that company.

This means the freeholder cannot ordinarily insist on continuing to control the building's insurance arrangements where those functions have transferred to the RTM company.

There is, however, an important qualification.

Section 97(3) allows the freeholder or another person to insure the premises at their own expense.

Consequently, it would be incorrect to say that a freeholder is legally prohibited from maintaining any insurance whatsoever.

The distinction is between arranging insurance as the responsible manager under the leases and independently obtaining insurance at one's own expense.

The latter does not, by itself, restore the freeholder's transferred management powers. Section 97(3) does not itself authorise recovery of that separate premium from leaseholders through service charges.

2. What Happens to the Insurance Clause in the Lease?

Many residential leases contain provisions stating that the landlord must:

• Insure the building against specified risks.
• Maintain an appropriate reinstatement value.
• Recover the insurance premium through the service charge.
• Arrange reinstatement following insured damage.
• Provide insurance information to leaseholders.

Before RTM, these obligations are normally exercised by the landlord or its appointed managing agent.

After RTM, the relevant insurance management functions transfer to the RTM company under Section 96.

The lease remains in force. RTM does not rewrite its insurance requirements.

Instead, the statutory provisions change which party exercises the transferred management functions.

For example, where a lease requires the building to be insured against fire, flood, storm and escape of water, the RTM company must ensure that the insurance arrangements continue to satisfy those requirements.

An RTM company cannot simply disregard the insurance provisions because it has taken over management. It must comply with the applicable lease obligations.

3. Does the Freeholder Have to Agree to the New Insurance Provider?

Generally, no.

Where the responsibility for arranging buildings insurance has transferred to the RTM company, the freeholder does not ordinarily retain a general right to dictate which insurer or broker must be used.

The RTM company may obtain competitive quotations and select appropriate cover, subject to the leases, applicable law and its duties.

However, it must ensure that the insurance adequately protects the interests of all relevant parties.

These may include:

• The RTM company.
• The freeholder.
• Intermediate landlords.
• Leaseholders.
• Mortgage lenders.
• Other parties with an insurable interest.

The RTM company should ensure that the policy wording appropriately recognises these interests.

Where there are unusual lease provisions or complex ownership arrangements, specialist legal and insurance advice may be necessary.

4. Does the Freeholder Lose Its Interest in the Building?

No.

Right to Manage transfers management functions, not ownership.

The freeholder continues to own the freehold interest and retains the rights and responsibilities that have not transferred under the legislation.

Furthermore, Section 97(1) provides that obligations owed by the RTM company to tenants by virtue of Section 96 are also owed to the landlord.

This is particularly important for buildings insurance.

The freeholder retains a legitimate interest in ensuring that the building is adequately insured, even though the RTM company ordinarily controls the insurance arrangements.

The RTM company should therefore provide appropriate information and maintain constructive communication with the freeholder.

5. What Happens to the Existing Freeholder's Insurance Policy?

The transfer of insurance management responsibilities does not automatically cancel an existing policy or transfer the insurance contract into the RTM company's name.

The existing arrangements must be reviewed before the acquisition date.

There are several possible approaches.

Option A: Continue the Existing Policy

The RTM company may consider retaining the existing policy, subject to the insurer's agreement and appropriate amendments to the policyholder, insured interests, administration and claims arrangements.

This can sometimes avoid disruption where the existing policy offers suitable cover and competitive terms.

However, the RTM company should obtain written confirmation that it has the necessary authority to administer the policy.

Option B: Arrange a New Insurance Policy

The RTM company may arrange a replacement policy through its chosen broker.

Before doing so, it should establish:

• The expiry and cancellation provisions of the existing policy.
• Whether the existing policy covers other properties.
• The appropriate buildings reinstatement value.
• Claims history and outstanding claims.
• Whether terrorism or engineering insurance is required.
• Any lender or lease-specific requirements.
• Whether cancellation would produce a refund.

A replacement policy should be in force from the appropriate handover date, with no gap in cover.

Option C: Agree Transitional Arrangements

Sometimes the RTM company and freeholder may agree temporary arrangements to maintain the existing insurance while a replacement is organised.

Any such arrangement should be clearly documented, including responsibility for premiums, claims, administration and cancellation.

The overriding priority is continuous and adequate insurance protection.

6. What if the Freeholder Has Already Paid the Annual Premium?

This is a common issue.

Suppose the freeholder arranges annual insurance in January, but the RTM company acquires management in October.

Leaseholders may already have contributed towards the full annual premium through their service charges.

The RTM company should not automatically assume that it can recover a second full annual premium without considering the existing insurance and accounting arrangements.

It should establish:

1. Whether the existing insurance can continue.
2. Whether the policy can be amended or transferred with the insurer's consent.
3. Whether cancellation produces a return premium.
4. How any refund should be credited or accounted for.
5. What service-charge funds have been transferred.
6. Whether additional contributions can lawfully be demanded under the leases.

Where a policy is cancelled and a refund is available, the treatment of that refund must be properly accounted for. A refund is not guaranteed and is not necessarily a pro-rata amount: the policy terms, claims history and type of cover matter. LEASE explains that an available partial refund should be returned to the service-charge fund.

Section 94 concerns accrued uncommitted service charges, subject to deductions for costs incurred before acquisition. A premium already incurred is not automatically an uncommitted cash balance. Section 97(5) also preserves the position on service charges needed to meet pre-acquisition costs.

The RTM company should also avoid creating an uninsured period while resolving financial disputes with the outgoing landlord.

7. Can the Freeholder Continue Charging Leaseholders for Insurance?

Once the insurance management function has transferred, the freeholder cannot ordinarily continue exercising that function and charging for new insurance arrangements as though RTM had not taken place.

However, this does not automatically invalidate insurance costs properly incurred before acquisition.

Pre-acquisition liabilities, existing service-charge demands, contractual arrangements and the relevant accounting periods require separate consideration.

An RTM company should distinguish between:

• Insurance expenditure incurred before the acquisition date.
• Insurance expenditure incurred after acquisition.
• Existing service-charge funds.
• Refunds or adjustments arising from cancellation.
• Costs relating to premises outside the RTM company's management responsibilities.

If a freeholder continues demanding insurance contributions after RTM has taken effect, the RTM company should request a clear explanation and supporting documents before determining the appropriate response.

Disputed charges may require specialist advice or determination by the First-tier Tribunal.

8. What About Buildings Containing Commercial Units?

Mixed-use buildings require particular attention.

For example, a building might contain seven residential flats and three commercial premises.

The RTM company may acquire management functions relating to the qualifying residential premises and relevant shared building elements.

However, Section 96(6)(a) excludes functions with respect to a matter concerning only a flat or other unit not held under a lease by a qualifying tenant. The word "only" matters: this is not a blanket exclusion of whole-building insurance just because shops are present. Functions concerning the common parts and fabric must be distinguished from matters concerning only an excluded unit.

As a result, RTM does not necessarily transfer responsibility for managing the commercial units themselves.

This can create complications where one buildings insurance policy covers the entire structure, including shops or offices.

The correct arrangements depend on the leases, the extent of the RTM premises, the building's physical configuration and the insurance policy.

The parties may need to agree how the whole building is insured, how premiums are allocated and how the interests of commercial occupiers and the freeholder are protected.

For mixed-use buildings, it is particularly important not to assume that the RTM company automatically takes over every insurance function relating to every unit.

A coordinated whole-building insurance arrangement may be preferable, supported by a clear agreement between the relevant parties.

Shared estates need a separate scope check. In FirstPort Property Services Ltd v Settlers Court RTM Company Ltd [2022] UKSC 1, the Supreme Court held that statutory RTM does not extend to shared estate facilities. Taking over one block does not automatically transfer insurance responsibilities for neighbouring buildings or shared estate assets. An estate-wide policy must be reviewed against the premises and functions actually acquired.

9. What if the Freeholder Refuses to Cooperate?

Disagreements sometimes arise when a freeholder believes it retains the right to arrange insurance because the lease names the landlord as the insuring party.

The starting point should be Sections 96 and 97 of the 2002 Act.

Where the relevant insurance management function has transferred, the freeholder cannot ordinarily continue exercising it without the RTM company's agreement.

The RTM directors should:

1. Write to the freeholder identifying the statutory provisions.
2. Confirm the RTM acquisition date.
3. Request the existing insurance schedule, policy wording and claims history.
4. Request details of the premium, payment arrangements and any possible refund.
5. Explain the proposed replacement or continuation arrangements.
6. Seek specialist advice if the freeholder continues to dispute the legal position.

The RTM company should avoid cancelling an existing policy without understanding its terms and ensuring suitable replacement cover.

Where necessary, a solicitor specialising in leasehold law can advise on the appropriate steps to resolve the dispute.

10. Insurance Responsibilities: RTM Company vs Freeholder

11. Practical Insurance Handover Checklist

At East Valley Block Management, we recommend that RTM companies begin reviewing insurance arrangements well before their acquisition date.

A proper handover should include:

Directors should also consider appropriate directors' and officers' liability insurance for the RTM company.

12. Frequently Asked Questions

13. How East Valley Block Management Can Help

At East Valley Block Management, we support leaseholders and RTM companies through the transfer of building management responsibilities.

Insurance is one of the most important parts of that process.

Our approach includes reviewing existing insurance arrangements, liaising with outgoing managing agents and freeholders, obtaining competitive quotations through insurance brokers and coordinating cover from the acquisition date.

We also assist with service-charge budgeting, handover documentation, compliance and ongoing block management.

Our objective is to ensure that RTM directors understand their responsibilities and that their buildings are properly protected.

Planning an RTM takeover or experiencing a dispute with your freeholder about buildings insurance?

Contact East Valley Block Management to discuss your building and the insurance handover process.

Email: hello@eastvalleyproperties.co.uk

Website: https://eastvalleyproperties.co.uk

Legal references and further reading

The primary legislation and independent guidance are linked in the sources below. Last reviewed: November 2026.

Related guidance: Buildings insurance: cover and claims and the Right to Manage process.