If leaseholders want greater influence over how their building is managed, two routes are commonly considered: Right to Manage (RTM) and Collective Enfranchisement (buying the freehold).
Both can increase leaseholder control and reduce reliance on a third party, but they achieve this in different ways and suit different circumstances.
The question is not necessarily which option is better, but rather which option best fits your objectives?
What is Right to Manage (RTM)?
RTM gives qualifying leaseholders a legal right to take over the management responsibilities of a building without needing to purchase the freehold.
Leaseholders typically form an RTM company which assumes responsibility for the day-to-day running of the building. This can include:
Arranging buildings insurance
Instructing maintenance and repairs
Managing service charge budgets
Ensuring statutory compliance requirements are met
Appointing a managing agent if desired
Importantly, leaseholders do not need to prove poor management by the current freeholder. If the building qualifies and the correct legal process is followed, leaseholders may exercise the right regardless.
Advantages of RTM
Lower upfront cost than buying the freehold
Gives leaseholders direct control over management decisions
Usually quicker and simpler than collective enfranchisement
Greater transparency over costs and decision-making
Leaseholders can appoint their own managing agent
Considerations
The freeholder retains ownership of the freehold
Ground rent arrangements generally remain unchanged
Lease extensions remain a separate process
The legal process must still be completed correctly
For many buildings, RTM provides a practical way to improve oversight and increase leaseholder involvement without the additional cost of purchasing the freehold.
What is Collective Enfranchisement?
Collective enfranchisement allows qualifying leaseholders to purchase the freehold collectively.
Rather than simply taking over management responsibilities, leaseholders become the freeholder through a shared ownership structure.
This provides ownership as well as control.
Advantages of Collective Enfranchisement
Full ownership and management control
Greater flexibility around future lease extensions
Potential to simplify certain long-term decisions
Ability to address ground rent considerations
Long-term control of the building structure
Considerations
Usually involves significantly greater upfront cost
Requires valuation and legal work
Leaseholders need to fund the freehold purchase
Can involve a longer and more complex process
Collective enfranchisement can be attractive where leaseholders are seeking wider ownership benefits alongside management control.
Which route may suit your circumstances?
RTM may be more suitable where:
The primary objective is management control
Leaseholders are seeking a lower-cost option
Speed and simplicity are priorities
Leaseholders wish to appoint their own managing arrangements
Immediate ownership of the freehold is not essential
Collective enfranchisement may be more suitable where:
Leaseholders are considering longer-term ownership objectives
Lease lengths are becoming a consideration
Ground rent arrangements are a concern
There is appetite amongst leaseholders to jointly fund a purchase
Greater flexibility is desired over future building decisions
Can RTM and freehold purchase be considered separately?
Yes.
Importantly, pursuing RTM does not prevent leaseholders from exploring a freehold purchase at a later date.
Many leaseholders choose to establish management control first and then decide whether collective enfranchisement is something they wish to pursue longer term.
This allows immediate priorities to be addressed while keeping future options open.
To Summarise…
Both RTM and collective enfranchisement can provide leaseholders with greater influence over how their building is run.
RTM is often attractive where the objective is to gain management control in a relatively straightforward and cost-effective way.
Collective enfranchisement may provide wider ownership benefits but typically involves greater cost and complexity.
The right route will depend on the leaseholders' objectives, the building itself and the priorities of those involved.
If you are considering either option and would like guidance on the practical implications, our team would be happy to discuss your circumstances.