How to Set Up a Right to Manage Company (Step by Step)

How to set up a Right to Manage company

Part of our Right to Manage guide: RTM hub · Plain-English RTM guide · What it costs

If you've decided to take over the management of your building, the first practical job is setting up the Right to Manage company — the legal entity that will eventually hold the right to manage and run the block.

It's not difficult. It is fiddly. The reason RTM claims fail is almost never the legal principle — it's almost always a paperwork mistake at one of the early steps. This guide walks through exactly what to do, in order, in plain English.

If you're not yet sure whether RTM is right for you, start with our plain-English guide to Right to Manage and come back here when you're ready to actually do it.

2026 update: Three things changed for RTM from March 2025: the non-residential limit rose from 25% to 50%; the prescribed model articles for RTM companies were amended (landlord votes now capped at one-third of tenant votes); and leaseholders are no longer required to cover the freeholder's legal costs during the RTM process. All three are covered below.

Before you start: confirm you qualify

You can incorporate the company at any point — but there's no point doing the work unless your building qualifies for RTM. Quickly check:

• At least two flats in the building
• Two-thirds or more of the flats are held on long leases (originally over 21 years)
• No more than 50% non-residential floor area (increased from 25% in March 2025)
• Self-contained building or part of one

And confirm you can realistically get 50% of qualifying leaseholders to become members. If you can't see how to get those numbers, sort the people problem before the paperwork.

Step 1 — Choose a company name

The name must end with the words "RTM Company Limited" (or the Welsh equivalent). It must also be unique enough to be accepted by Companies House.

The convention is to use the building name or address:

• "12 Acacia Avenue RTM Company Limited"
• "Coppergate House RTM Company Limited"

Check availability on the Companies House name checker before doing anything else. If your preferred name is taken, add the road or postcode to disambiguate.

Step 2 — Use the prescribed Articles of Association

This is the single most common point of failure. An RTM company must use the prescribed articles set out in the RTM Companies (Model Articles) (England) Regulations 2009 — as amended in March 2025.

You cannot:

• Use the standard Companies House model articles
• Adapt your own articles
• Use articles drafted for an RMC (Residents' Management Company)

If you do, the company is technically not an RTM company, and any claim notice it serves can be defeated on that basis alone. The freeholder's solicitor will spot it.

Important — use the current version: The prescribed articles were amended in March 2025. The changes cap landlord votes at one-third of qualifying tenant votes — even where the landlord holds multiple flats. If you find an old download of the 2009 articles online, it may be out of date. Source the current version from legislation.gov.uk, or use a specialist solicitor who will have the right version.

Shortcut: Most specialist RTM solicitors will incorporate the company for a fixed fee using the prescribed Articles. If you're at all unsure, this is one job that's worth paying someone £200–£400 to get right.

Step 3 — Decide on directors

An RTM company needs at least one director. In practice, two or three is the sweet spot for a small block:

• One person makes the company brittle (illness, holidays, falling out)
• Five or more makes every decision a meeting

Directors must be at least 16 and not disqualified. They don't have to be leaseholders in your building, but in practice they almost always are.

Be honest with the people you ask. Director duties are real — under the Companies Act 2006 directors owe duties of care, must act in the company's interests, and can be held personally liable for serious breaches. For a well-run small block these duties are not onerous, but they're not nothing.

Step 4 — Incorporate at Companies House

You can incorporate online via the Companies House web service. The fee is £50 and approval is usually within 24 hours.

You'll need:

• The company name (ending "RTM Company Limited")
• The registered office address (often a director's address or your accountant's)
• The directors' details
• The prescribed Articles, uploaded as a PDF
• A SIC code — 98000 (Residents property management) is the standard choice

Once incorporated, the company has a registered number and can hold a bank account, sign contracts, and own the right to manage. It does not yet have any members beyond the subscribers — that's the next job.

Step 5 — Open a bank account

You don't strictly need this before serving notices, but you'll need it before acquisition day, and bank account opening for new companies is famously slow. Start it now.

Most high street banks offer free business banking for the first 12–24 months for community-interest-style companies. Look for one that:

• Lets all directors view the account
• Has reasonable bounced direct debit charges
• Allows tagged transactions or categories (or play nicely with your accounts software)

You will eventually be holding service charge money, which under section 42 of the Landlord and Tenant Act 1987 must be held on trust. A separate, dedicated bank account is not legally required but is strongly recommended — and on the day of acquisition you'll need somewhere for the previous manager to transfer funds to.

Step 6 — Recruit your members

Every qualifying leaseholder is entitled to become a member. You need at least 50% to be members before you serve the claim notice.

Practical advice:

• Knock on doors. Email is ignored, WhatsApp gets buried, paper-under-the-door works.
• Hold one short meeting (in person or video) to explain it. Most objections evaporate when people understand it doesn't change their lease and doesn't cost much.
• Have a one-page summary they can show their partner — most "I'll need to ask" answers are really "I want a paper to point at".

Once someone agrees, they sign a membership application — a one-page form. The directors then formally admit them as members and add them to the register of members.

Step 7 — Serve the Notice Inviting Participation

Before serving the claim notice, the RTM company must invite every qualifying leaseholder who is not already a member to participate. This is a statutory notice with prescribed contents — including a summary of how RTM works and the company's name and registered office.

Key practical points:

• Serve it on every non-member qualifying leaseholder. Missing one is fatal.
• Use the address in their lease unless you have a more recent one.
• You must wait at least 14 days after the last invitation is served before serving the claim notice.

It's worth keeping a tracker — name, flat, date served, method of service — for every notice. If the freeholder challenges, this is the document that wins.

Step 8 — Serve the Claim Notice on the freeholder

The Claim Notice (sometimes called a "section 79 notice") is the formal notice that the RTM company is claiming the right to manage. Its contents are prescribed and include:

• The premises
• The qualifying tenants and their flats
• The members of the RTM company
• The proposed acquisition date — at least three months in the future

Serve it on the landlord and on any manager (managing agent or third-party manager) named in the lease. You typically also serve a copy on every qualifying leaseholder.

The freeholder has one month to serve a counter-notice. If they don't, the right transfers automatically on the acquisition date.

Step 9 — Prepare for acquisition day

While the counter-notice clock is running, get ready to actually run the building:

• Ask the existing manager for a full handover pack — current contractors, contracts, insurance, certificates, leaseholder ledger, year-to-date accounts.
• Decide whether you'll self-manage or appoint a new agent.
• Set up systems for budget tracking, document storage, and communications. (This is exactly what Proppa is built for — book a demo if you'd like a single place to run the block from day one.)
• Brief leaseholders on what changes and what doesn't.

Step 10 — Acquisition day

On the acquisition date specified in your claim notice, the right transfers. From this moment:

• The RTM company is responsible for delivering the services the lease requires
• Service charges are payable to the RTM company
• Existing management contracts terminate or transfer
• The previous manager must transfer the service charge balances and trust funds to the RTM company
• The RTM company is the leaseholders' point of contact for everything

This is the day you've been working towards. It's also the day the real work starts.

A realistic timeline

Step	Typical time
Confirm qualification, agree directors	1–2 weeks
Incorporate company at Companies House	1–2 days
Recruit 50% of qualifying leaseholders	2–6 weeks
Serve Notice Inviting Participation, wait 14 days	2–3 weeks
Serve Claim Notice, wait for counter-notice (1 month)	4 weeks
Acquisition date (minimum 3 months from claim notice)	12+ weeks
Total	4–6 months

If you're considering paying for a "fast-track" RTM service, remember: most of the timeline is statutory waiting periods that nobody can shortcut.

Frequently asked questions

What articles of association does an RTM company need?

An RTM company must use the prescribed articles set out in the RTM Companies (Model Articles) (England) Regulations 2009, as amended in March 2025. You cannot use standard Companies House model articles or articles drafted for an RMC. The March 2025 amendments cap landlord votes at one-third of qualifying tenant votes — so make sure you're using the current version, available at legislation.gov.uk.

Does the freeholder have to pay their own costs in an RTM claim?

Yes — since March 2025, leaseholders are no longer required to cover the freeholder's legal costs during an RTM claim. Each party generally bears its own costs. The exception is where the RTM company withdraws the claim or acts unreasonably, in which case a tribunal may order costs. This is a significant change from the pre-2025 position, where the RTM company was liable for all costs flowing from the claim notice.

How much does it cost to set up a Right to Manage company?

Companies House incorporation costs £50. A specialist solicitor or RTM service to handle the notices typically costs £1,500–£3,500 for a small block. Since March 2025, you no longer have to cover the freeholder's legal costs — unless you withdraw the claim — which makes the process meaningfully cheaper than it used to be.

How many directors does an RTM company need?

At least one, but two or three is the practical sweet spot for a small block. One director makes the company brittle; five or more makes decisions unwieldy. Directors must be at least 16 and not disqualified from acting as a company director.

What is the non-residential limit for Right to Manage?

Since March 2025, the non-residential floor area limit increased from 25% to 50%. Many more mixed-use buildings — blocks above shops, offices, or commercial units — now qualify for Right to Manage as a result.

Can the freeholder block our RTM claim?

No — not simply because they want to. A freeholder can only serve a counter-notice on narrow grounds: that the building doesn't qualify, or that the procedure was wrong. If they do challenge it, the RTM company can apply to the First-tier Tribunal (Property Chamber). Most tribunal cases are won by leaseholders.

Can we form the RTM company before we have all the members?

Yes. You only need members at the point you serve the claim notice. The company can exist for weeks or months while you recruit. The only requirement is to use the prescribed Articles from incorporation.

Do directors need to be leaseholders?

No, but in practice they almost always are. There's no statutory requirement that directors live in the building or own a flat — but a director who isn't a leaseholder won't have a long-term stake in getting it right.

What happens if we make a mistake on the Claim Notice?

The freeholder can serve a counter-notice citing the defect, and the notice can be withdrawn. You can re-serve a corrected notice. The cost is time — typically a few months — not the loss of the right itself.

Can we appoint a managing agent after we get RTM?

Absolutely. RTM gives you control of management — it doesn't mean you have to do it yourself. Many RTM companies appoint a new agent on better terms than the freeholder previously did. Others self-manage with software like Proppa.

Do we need a solicitor?

It is possible to do RTM yourself, especially for a clean small-block claim. Most groups choose to use a specialist for at least the notices because the cost of getting them wrong (delay) is greater than the cost of the solicitor. Expect £1,500–£3,500 for a small block.

Does the RTM company need to file accounts?

Yes — it's a Companies House company like any other. It must file a confirmation statement annually and accounts. Because it's limited by guarantee with no trading activity beyond managing the building, micro-entity accounts are usually appropriate.