Right to Manage - legal update
Who Pays the Freeholder’s Costs in a Right to Manage Claim?
Since 3 March 2025, an RTM company and its members are not normally responsible for the freeholder’s legal and professional costs simply because an RTM claim is made. However, important exceptions remain.
Short answer
Since 3 March 2025, an RTM company is not normally required to pay the freeholder’s legal and professional costs merely because it makes a Right to Manage claim. Each party generally bears its own costs. The RTM company remains responsible for its own advisers, and costs may still be awarded in certain exceptional circumstances.
Why this question comes up
The Right to Manage lets qualifying leaseholders take over the management of their building without buying the freehold and without having to prove mismanagement. It is a statutory right under the Commonhold and Leasehold Reform Act 2002: follow the procedure correctly and the freeholder cannot simply refuse.
Before March 2025, there was a catch that put many leaseholders off. The RTM company could be liable for the freeholder’s reasonable costs incurred as a consequence of the claim notice. That potential liability was open-ended and hard to budget for, which made the true cost of an RTM claim uncertain from the outset.
The position changed on 3 March 2025. This article explains the new rules, the exceptions that remain, and what an RTM company should still budget for.
What changed on 3 March 2025?
Section 50 of the Leasehold and Freehold Reform Act 2024 changed the costs provisions in the Commonhold and Leasehold Reform Act 2002. The reform was brought into force on 3 March 2025 by the Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025. The old costs provisions in sections 88 and 89 were replaced by the new regime, principally in sections 87A and 87B.
The starting point is now that an RTM company and its members are not liable for another person’s costs incurred because of the RTM claim notice, unless a statutory exception applies. A lease or other private arrangement cannot simply reverse that statutory starting point.
| Before 3 March 2025 | From 3 March 2025 |
|---|---|
| The RTM company could generally be required to meet the freeholder’s reasonable costs arising from the claim. | The RTM company and its members are not normally liable for the freeholder’s costs. Each side generally bears its own costs, subject to limited exceptions. |
The reform is not retrospective. If the timing of a particular claim straddles the change, or you are unsure which regime applies, take specialist legal advice before acting.
Does the RTM company still have costs to pay?
Yes. Removing routine liability for the freeholder’s costs does not make an RTM claim cost-free, and it does not remove the need to follow the statutory procedure precisely. The company should still budget for:
- Its own solicitor or RTM specialist
- Incorporating and administering the RTM company
- Obtaining Land Registry documents and checking ownership
- Serving the statutory notices correctly
- Professional advice on eligibility or the extent of the premises
- Additional representation if the freeholder disputes the claim
- Preparatory management work before the acquisition date
Our Right to Manage cost calculator explains the typical cost headings, and the step-by-step RTM process guide sets out the procedure itself.
When could the RTM company still have to pay costs?
The general rule is that each side bears its own costs. Four limited situations can still produce a costs liability, and it is worth understanding each one.
A. Costs ordered in court or tribunal proceedings
An RTM company or member can be liable for another party’s costs where the court or tribunal has a separate legal power to make a costs order and exercises that power. The First-tier Tribunal does not routinely award full legal costs, so this is an exception rather than the norm.
B. An unreasonable claim that is withdrawn or comes to an end
Under section 87B, the appropriate tribunal may make a costs order where all the statutory requirements are satisfied. This includes circumstances in which the claim notice is withdrawn, deemed withdrawn or otherwise ceases to have effect, the RTM company acted unreasonably in making or continuing the claim, the costs were reasonably incurred, and the other statutory conditions are met. This is not an automatic cost liability simply because a claim fails or is withdrawn: the tribunal must consider the statutory test and make an order. If an order is made, current and former RTM company members may be jointly and severally liable, subject to the statutory exception concerning an assignment to a new member.
C. Pre-claim information costs
If an RTM company serves a formal notice under section 82 requiring information before making its claim, it remains liable for the reasonable costs of the recipient complying with that notice. Any disagreement over the amount can be determined by the appropriate tribunal. This is a specific information-compliance cost, not a general liability for the freeholder’s RTM legal bill.
D. Costs agreed internally
The RTM company and its participating members may agree how the company’s own costs will be funded or shared between them. That is an internal funding arrangement and is different from statutory liability for the freeholder’s costs.
Can the freeholder recover the costs through the service charge?
The March 2025 reforms also restrict the recovery of non-litigation costs connected with an RTM claim through a variable service charge. This is a distinct point from the wider litigation-cost reforms affecting other types of leasehold dispute.
In practice
In a standard RTM claim, a freeholder should not be able to avoid the new costs regime simply by passing its non-litigation claim costs through the service charge.
If you receive a service charge demand that appears to include the freeholder’s RTM claim costs, obtain specific advice before withholding payment or taking action. Withholding service charges without advice can put you in breach of your lease.
What if the freeholder disputes the RTM claim?
A freeholder may serve a counter-notice disputing the RTM company’s entitlement. The dispute may then need to be determined by the First-tier Tribunal (Property Chamber) in England. The underlying principle remains that each party generally bears its own costs of that dispute.
Opposition from a freeholder does not automatically make the RTM company liable for the freeholder’s fees. The company must nevertheless budget for its own representation, and the tribunal’s separate costs powers and the unreasonable-conduct provisions described above can apply in appropriate cases.
Why accurate RTM notices still matter
The reform reduces the ordinary financial exposure of a claim, but it does not relax any of the statutory requirements. A valid claim still depends on:
- Correctly identifying the qualifying premises
- Checking which leaseholders are qualifying tenants
- Meeting the membership threshold
- Inviting all qualifying leaseholders to participate where required
- Serving notices on the correct parties
- Using the required form and timetable
- Keeping evidence of service
A defective or prematurely abandoned claim can cause delay, require the process to start again and, where the statutory test for unreasonable conduct is met, potentially expose the RTM company and its members to a costs application.
Practical budgeting for leaseholders
- Obtain a fixed or clearly explained quotation for the RTM company's own professional costs
- Agree how participating leaseholders will contribute
- Confirm what happens if a participant withdraws
- Check the building's eligibility before serving notices
- Retain a contingency for a disputed claim
- Plan the costs of management from the acquisition date
- Keep RTM claim expenditure separate from later building-management expenditure
Once the right is acquired, ongoing management costs are a separate matter. Our block management fees are published in full, and our RTM company management service explains how we support directors after the acquisition date.
Does the change make Right to Manage easier?
It removes an important area of financial uncertainty: the open-ended exposure to the freeholder’s costs that used to hang over every claim. RTM remains a formal statutory process, however, and the procedure has to be followed exactly.
Separate reforms in force from the same date increased the permitted non-residential proportion in a qualifying building from 25% to 50%. That is a separate eligibility reform and not the subject of this article, but it may bring some mixed-use buildings into scope for the first time.
How East Valley can help
East Valley Block Management can discuss the practical management arrangements needed if your RTM company is preparing to take control of a building. This may include reviewing management requirements, preparing an initial budget and planning the handover from the existing managing agent.
We recommend using a solicitor or qualified RTM specialist for advice on eligibility, notices, disputed claims and legal costs.
Frequently Asked Questions
Short answers to the questions leaseholders ask most about RTM costs since the March 2025 reform.
Primary sources and guidance
The legislation and official guidance behind this article. We summarise them in plain English rather than reproducing them.
- Leasehold and Freehold Reform Act 2024, section 50 (legislation.gov.uk)
The provision that reformed the RTM costs regime.
- Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025 (legislation.gov.uk)
Brought the costs reform into force on 3 March 2025.
- Commonhold and Leasehold Reform Act 2002, section 87A (legislation.gov.uk)
The general rule that the RTM company is not liable for other parties' costs.
- Commonhold and Leasehold Reform Act 2002, section 87B (legislation.gov.uk)
Costs orders where an unreasonable claim is withdrawn or ceases to have effect.
- LEASE - About the Right to Manage
Plain-English background on eligibility and the RTM process.
- GOV.UK Leasehold Toolkit
Official guidance for leaseholders in England.
Please note: this article provides general information about the law in England and is not legal advice. Right to Manage claims are technical and the outcome can depend on the building, leases, notices and conduct of the parties. Obtain advice from a suitably qualified professional before acting.
Written by Romain Maillard - Director, East Valley Properties
Romain manages residential blocks and estates for RTM companies, residents' management companies, share of freehold developments and freeholders across East London and Essex.
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