Types of leasehold management structures explained

Leasehold management structures define who controls service charges, repairs, and insurance in leasehold properties across England and Wales. The structure in place at your building determines how much influence you have over day-to-day decisions, how transparent your costs are, and whether you can replace a poor managing agent. Understanding the types of leasehold management structures is the first step towards exercising your statutory rights under the Commonhold and Leasehold Reform Act 2002 and the Leasehold and Freehold Reform Act 2024. The Right to Manage (RTM) is the most powerful tool available to leaseholders who want control without buying the freehold.

1. What are the main types of leasehold management structures?

Leasehold management structures fall into four broad categories: landlord-managed, Right to Manage company, Residents' Management Company, and Commonhold. Each sits at a different point on the control spectrum. Landlord-managed sits at one end, where the freeholder holds all power. Commonhold sits at the other, where leaseholders collectively own the freehold outright. RTM and RMC models occupy the middle ground, giving leaseholders operational control without full ownership.

Choosing the right structure matters because it directly affects your service charge bill, your ability to appoint a managing agent you trust, and your access to statutory remedies. Leaseholders who understand their options are far better placed to reduce costs and hold management to account.

2. Landlord-managed leasehold: the default model

The landlord-managed model is the most common leasehold management arrangement in England and Wales. The freeholder retains full control and appoints the managing agent without requiring leaseholder approval. Leaseholders pay service charges set by the freeholder and have limited say over which contractors are used or what work is carried out.

This model creates a structural conflict of interest. The freeholder's financial incentives do not always align with leaseholders' desire for value and transparency. Inflated insurance commissions, unnecessary works, and opaque accounts are common complaints under this arrangement.

Leaseholders in a landlord-managed building are not entirely without recourse. They can challenge unreasonable service charges at the First-tier Tribunal and, where there is significant management failure, apply for a tribunal-appointed manager. The tribunal route requires proof of default or excessive charges, which makes it slower and more adversarial than the RTM route.

• Freeholder appoints and instructs the managing agent directly
• Leaseholders receive service charge demands but have no vote on agent selection
• Insurance is arranged by the freeholder, often with undisclosed commissions
• Maintenance decisions rest with the freeholder or their agent
• Statutory consultation under Section 20 of the Landlord and Tenant Act 1985 applies for major works above £250 per leaseholder

Pro Tip: If your freeholder refuses to provide a breakdown of service charge costs, write a formal request under Section 21 of the Landlord and Tenant Act 1985. They are legally obliged to provide a summary of relevant costs within one month.

3. Right to Manage companies: leaseholder-controlled management

Right to Manage is the most direct statutory route for leaseholders who want to replace their managing agent without proving fault. RTM transfers management functions to a company formed and controlled by leaseholders, with no requirement to demonstrate landlord wrongdoing and no premium payable to the freeholder. The legal basis sits in the Commonhold and Leasehold Reform Act 2002, with significant reforms introduced by the Leasehold and Freehold Reform Act 2024 that raised the non-residential floor space threshold and changed cost recovery rules.

RTM is designed to give leaseholders greater control over service charges without the cost and complexity of buying the freehold. That makes it the most practical leasehold management option for the majority of flat owners in England and Wales. You can read a full breakdown of the process in this guide to RTM for leaseholders.

How the RTM process works

1. Check eligibility: at least two thirds of flats must be held by qualifying leaseholders, and the building must be self-contained with at least two flats.
2. Form the RTM company using prescribed articles of association. Incorrect company formation can invalidate the entire claim, so legal compliance at this stage is non-negotiable.
3. Serve a Section 78 notice inviting all leaseholders to participate.
4. Serve a Section 79 claim notice on the freeholder.
5. The freeholder has one month to serve a counter-notice. If no valid counter-notice arrives, the RTM company acquires management on the acquisition date.
6. Manage the operational handover, including contract transfers and financial administration, to maintain service continuity.

What RTM does and does not give you

RTM transfers day-to-day management, including the right to appoint your own managing agent, arrange insurance, and set service charge budgets. It does not transfer freehold ownership. Ground rent obligations and other freeholder rights remain intact after RTM. Leaseholders sometimes assume RTM gives full control over all cost drivers. That assumption leads to disappointment when ground rent demands continue to arrive.

Pro Tip: Before serving any RTM notices, check your building's eligibility carefully. The 2024 reforms changed the non-residential threshold, so buildings previously excluded may now qualify. Righttomanage offers a free eligibility check at righttomanage.co.uk.

4. Residents' Management Companies: a developer-created alternative

A Residents' Management Company (RMC) is a limited company established, usually at the development stage, to manage a building on behalf of leaseholders. Unlike an RTM company, which leaseholders form themselves using a statutory process, an RMC arises from the original lease structure and its articles of association vary considerably between developments.

RMCs and RTM companies are distinct legal vehicles with different origins and different implications for leaseholder control. Understanding which one applies to your building is critical before deciding on next steps.

Key features of the RMC model:

• The RMC is typically set up by the developer and written into the lease at the point of sale
• Leaseholders may automatically become members of the RMC, or membership may require a separate share purchase
• The articles of association govern voting rights, director appointments, and management decisions
• In some developments, the freeholder or developer retains a controlling interest in the RMC, limiting leaseholder influence
• Where leaseholders hold majority control, the RMC functions similarly to an RTM company in practice
• RMC directors owe legal duties to the company and must comply with Companies Act 2006 requirements

The practical difference between an RMC and an RTM company often comes down to who controls the board. A leaseholder-controlled RMC can appoint and dismiss managing agents freely. A developer-controlled RMC can leave leaseholders in a position almost identical to the landlord-managed model, despite the appearance of collective governance.

5. Commonhold: the freehold alternative to leasehold

Commonhold is a freehold ownership model where each flat owner holds their property outright, with no lease term and no expiry date. The building's common parts are owned and managed collectively by a Commonhold Association, a democratic body in which every unit holder has a vote. There is no ground rent, and governance is standardised through a Commonhold Community Statement.

The Government has positioned Commonhold as the preferred future model for flat ownership in England and Wales. The Leasehold and Freehold Reform Act 2024 included measures to support Commonhold uptake, and further legislation is expected. For leaseholders considering conversion, the table below sets out the key differences.

Commonhold removes the structural tension between freeholder and leaseholder entirely. The catch is that converting an existing leasehold building to Commonhold currently requires the consent of the freeholder and all leaseholders, which makes it difficult to achieve in practice. New-build developments are the most likely route to Commonhold adoption in the near term.

6. Layered governance and estate-wide management complexity

Even leaseholders who successfully establish an RTM company or RMC can find that their control is incomplete. Estate-wide services such as roads, landscaping, and shared amenities are often controlled by a separate estate management company, not the building's RTM or RMC. This creates split control, where leaseholders manage their block but have no influence over a significant portion of their total service charge.

A common misconception is that taking over building management gives full control of all service charges. In reality, many costs derive from these estate-wide governance layers, which sit outside the RTM framework entirely.

Practical steps for leaseholders navigating layered governance:

• Map every service charge line item and identify which entity controls it
• Distinguish between building-level costs (within RTM/RMC scope) and estate-level costs (outside it)
• Review the management control layers in your title register and lease before pursuing RTM
• Check whether the estate management company has a residents' association or consultation obligations
• Consider whether collective action with other blocks on the estate could create leverage

Pro Tip: Ask your conveyancer or solicitor to identify every management entity that has the right to charge you before you complete a purchase. Estate management charges are often buried in the title register rather than the lease itself.

Key takeaways

The most effective leasehold management option for leaseholders in England and Wales is the Right to Manage company, which transfers operational control without requiring fault proof, a premium, or freehold purchase.

Why the legal vehicle matters more than most leaseholders realise

People often focus on finding a better managing agent and assume the governance structure will sort itself out. That is the wrong order of operations. The legal vehicle you use to manage your building determines what you can and cannot do, who bears liability, and whether your decisions will hold up if challenged.

I have seen RTM claims fail because the company was formed with incorrect articles of association. The statutory requirements are precise, and a single procedural error can invalidate months of work. The RTM company formation rules exist for good reason, but they catch out leaseholders who try to cut corners.

The other mistake I see repeatedly is leaseholders pursuing RTM and then discovering that a third of their service charge relates to estate-wide amenities they still cannot control. RTM is powerful, but it is not a complete solution on every estate. You need to map your governance layers before you commit to a structure.

Commonhold is the right long-term answer for flat ownership in England and Wales. The political direction is clear. But conversion from leasehold to Commonhold remains practically difficult today, and leaseholders should not wait for it. RTM, properly executed, delivers real control now. The LFRA 2024 reforms have made RTM more accessible than at any point since 2002, and that window should not be wasted.

— Paul

How Righttomanage helps leaseholders take control

Righttomanage manages the entire RTM process for leaseholders who are frustrated with poor managing agents, excessive service charges, or a lack of transparency from their freeholder.

From eligibility checks and RTM company setup through to Section 78 notices, Section 79 claim notices, and counter-notice review, Righttomanage handles every legal step. The RTM process timeline on the website sets out exactly what happens at each stage and how long it takes. If your building has a poor managing agent, the dedicated RTM for poor managing agents page explains how RTM applies to your situation. Righttomanage's service is built for leaseholders who want results, not paperwork.

FAQ

What is leasehold management?

Leasehold management refers to the administration of a leasehold building's services, repairs, insurance, and service charges. The entity responsible for management depends on the governance structure in place, whether that is the freeholder, an RTM company, or an RMC.

What is the difference between an RTM company and an RMC?

An RTM company is formed by leaseholders using a statutory process under the Commonhold and Leasehold Reform Act 2002. An RMC is typically created by the developer at the point of sale, with governance terms set out in the original lease and articles of association.

Can leaseholders replace a managing agent without RTM?

Leaseholders in a landlord-managed building cannot replace the managing agent directly. They can apply to the First-tier Tribunal for a court-appointed manager if there is significant management failure, but this requires proof of default and is more adversarial than RTM.

Does RTM give leaseholders full control over all service charges?

No. RTM transfers operational management but freehold ownership remains with the landlord. Ground rent and estate-wide service charges often fall outside the RTM company's control, so leaseholders should map all charge sources before pursuing RTM.

What is Commonhold and how does it differ from leasehold?

Commonhold is a freehold ownership model where flat owners hold their property permanently with no lease expiry and no ground rent. Governance sits with a Commonhold Association rather than a freeholder, giving residents full collective control over the building.

Recommended

• Types of leasehold title issues: a leaseholder's guide
• Residential leasehold explained: what you need to know
• Long leasehold explained: what homeowners need to know
• Leasehold management pack review: your 2026 guide