The RTM Companies (Model Articles) (England) (Amendment) Regulations 2025
The RTM Companies (Model Articles) (England) (Amendment) Regulations 2025 amend the 2009 Regulations governing right-to-manage (RTM) companies in England.
Key changes include defining 'lease' according to the 2002 Act, restricting landlord voting power to one-third of tenant votes, and requiring landlords to be freeholders to qualify for votes.
These amendments aim to balance voting rights within RTM companies and improve governance clarity.
Arguments For
Clarification of Lease Definition: Provides a clear definition of 'lease' aligning it with established legal definitions in the Commonhold and Leasehold Reform Act 2002, reducing ambiguity and potential disputes.
Enhanced Voting Rights Balance: Enshrines a fairer voting structure within RTM companies by capping the voting power of landlords, preventing potential domination based on lease ownership.
Improved Governance Transparency: These amendments aim to streamline and improve the governance of right-to-manage (RTM) companies. The changes in voting rights enhance the tenant members' influence, ensuring better representation of their collective interests.
Arguments Against
Complexity and Administrative Burden: The changes may introduce increased complexity for RTM companies, requiring adjustments to their internal processes and potentially leading to more administrative burden.
Potential for Legal Challenges: The amendments may present some challenges for interpretation and implementation and could trigger legal disputes between landlords and tenants' associations in edge cases.
Unintended Consequences: The regulations may have unintended consequences on the formation or operation of RTM companies, particularly concerning situations with complex ownership structures.
- These Regulations may be cited as the RTM Companies (Model Articles) (England) (Amendment) Regulations 2025 and come into force on 3rd March 2025.
- These Regulations extend to England and Wales.
Regulation 1 establishes the official title of these regulations and their effective date, 3rd March 2025.
Regulation 2 specifies that these regulations apply to England and Wales.
- The RTM Companies (Model Articles) (England) Regulations 2009 are amended in accordance with paragraph .
- In the Schedule (articles of association of a RTM company)-
- (a) in Part 1, in article 1 (defined terms), after the definition of 'immediate landlord', insert-
- ''lease' means a long lease within the meaning of sections 76 and 77 of the 2002 Act;';
- (b) in Part 4, for article 33(f) (votes) substitute-
- '(f) any person who is not otherwise entitled to any vote shall be entitled to one vote if that person-
- (i) is the freeholder of the Premises,
- (ii) is a landlord under a lease or leases of the whole or any part of the Premises, and
- (iii) is a member of the company;
- (g) the votes exercisable by landlords under leases of the whole or any part of the Premises shall be capped at one third of the votes exercisable by qualifying tenants.'
Regulation 3 states that the 2009 RTM Companies (Model Articles) Regulations are being changed.
Regulation 4, 5, 6, 7, 8, 9, 10, 11, and 12 list the specific amendments.
These details change the definition of 'lease' and modify the voting rights of landlords within RTM companies.
Landlords must now be freeholders to vote and their total voting power is limited to one-third of the tenant votes.
Signed by authority of the Secretary of State for Housing, Communities and Local Government 6th February 2025 Matthew Pennycook Minister of State Ministry of Housing, Communities and Local Government
This section shows the signature and ministerial authority for these regulations.
Matthew Pennycook, Minister of State for the Ministry of Housing, Communities and Local Government signed the document on February 6th, 2025.
EXPLANATORY NOTE (This note is not part of the Regulations) These Regulations amend the RTM Companies (Model Articles) (England) Regulations 2009 (S.I. 2009/2767) ('the 2009 Regulations'), which apply to RTM companies that exercise the right to manage premises in England. They amend the content of the articles of association of RTM companies ('the Model Articles'). The amendments are made partly in consequence of section 49 of the Leasehold and Freehold Reform Act 2024 (c. 22) ('the 2024 Act'), which increases the nonresidential threshold that qualifies premises for the 'Right to Manage' (the statutory right for long leaseholders to take over the management functions in respect of their building from their landlord in certain cases). Regulation 2 amends articles 1 and 33 of the Model Articles. It specifies that 'lease' means a long lease within the meaning of sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002 (c. 15). It amends the entitlement to a vote of a landlord under a lease who is not otherwise entitled to a vote, which previously gave a vote to a landlord who is a member of the RTM company, to require that they must also be the freeholder of the premises. Finally, it provides that the votes of landlords under leases of the whole or any part of the premises are capped at one third of the votes exercisable by qualifying tenants. By virtue of regulation 2 of the 2009 Regulations, the amendments have effect for a RTM company whether or not they are adopted by the company. A full impact assessment has been published in relation to the 2024 Act and copies can be obtained at https://publications.parliament.uk/pa/bills/cbill/58-04/0013/ LeaseholdandFreeholdReformBillImpactAssessment.pdf or from the Ministry of Housing, Communities and Local Government at 2 Marsham Street, London, SW1P 4DF, United Kingdom.
This explanatory note summarizes the regulations' purpose.
It clarifies that the changes amend the 2009 regulations, specifically articles 1 and 33 concerning lease definitions and landlord voting rights.
The note highlights that these amendments were influenced by the 2024 Leasehold and Freehold Reform Act.
It also explains the impact assessment's availability.