What Does Right to Manage Cost, and Who Pays?

For a claim notice given today in England, the RTM company generally does not pay the landlord's costs of the claim: since 3 March 2025 the old rule that made the company liable for them has been repealed. The company pays its own costs (formation, advice, the claim itself), the reasonable cost of anyone answering its information notices, and the landlord's costs only in narrow cases, chiefly where a tribunal finds the company acted unreasonably and the claim then fails. Once the company takes over, its running costs are paid either through the service charge, where the lease allows it, or by the company and its members.

This article covers England only. Wales is not covered here. For the claim steps themselves, see how the RTM claim process works. This is general information, not legal advice.

Who pays the landlord's costs of an RTM claim?

Until March 2025, section 88 of the Commonhold and Leasehold Reform Act 2002 made the RTM company liable for the reasonable costs that the landlord, any other party to the leases and any tribunal-appointed manager incurred "in consequence of" a claim notice. Section 89 then limited that liability, if the claim was withdrawn or ceased, to costs incurred up to that point, and made every current and former member jointly and severally liable for them. Disputes over the amount went to the tribunal.

Section 50 of the Leasehold and Freehold Reform Act 2024 repealed sections 88 and 89 and inserted two new sections, 87A and 87B. Section 50 came into force on 3 March 2025 under the Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025 (SI 2025/131), regulation 2(b). It is fully in force; this is not a change waiting for a future date.

The general rule: no liability for other people's costs

Section 87A(1) says that an RTM company and its members are not liable for costs that any other person incurs as a result of a claim notice, except as the section sets out. Section 87A(2) adds that any lease, transfer, contract or other arrangement saying otherwise has no effect, so a lease clause cannot bring the old liability back. For this purpose "member" includes former members (s.87A(7)).

The exceptions

• Agreed costs between the company and its members (s.87A(3) and (4)). The company is liable to a member, a member to the company, or one member to another, only to the extent they agree. This is how the company funds its own claim costs: members agree to contribute.
• Court or tribunal costs orders (s.87A(5)). The company or a member pays another person's costs of proceedings only where another enactment gives the court or tribunal power to order it and the court or tribunal does so.
• Unreasonable claims that end (s.87A(6) and s.87B). See below.

When the tribunal can order costs: section 87B

On an application, the tribunal (in England, the First-tier Tribunal, Property Chamber) may order the RTM company to pay a landlord's, another lease party's or an appointed manager's costs, but only if all of these are met (s.87B(2)):

• the claim notice is withdrawn, deemed withdrawn or otherwise ceases to have effect;
• the company acted unreasonably in giving it, or in not withdrawing it, causing it to be deemed withdrawn or causing it to cease to have effect sooner;
• the costs were incurred before the notice was withdrawn or ceased;
• they are not costs of court or tribunal proceedings; and
• they were reasonably incurred.

A claim that succeeds cannot lead to a section 87B order, and nor can one that fails without unreasonable conduct. The section sets no cap on the amount.

Costs of the information notice

One cost did move the other way. Before serving a claim notice, the RTM company can require anyone holding information it reasonably needs for the notice to provide it within 28 days (s.82). Since March 2025, the company must pay the reasonable costs of complying with that notice (s.82(4)), and the tribunal decides the amount if the parties cannot agree (s.82(5)).

Can the landlord put its costs on the service charge?

Not its non-litigation costs, against leaseholders who were not part of the claim. Section 20J of the Landlord and Tenant Act 1985, in force for the right to manage from 3 March 2025, stops a landlord's non-litigation costs of an RTM claim being counted in a variable service charge payable by a "non-participating tenant", meaning anyone who is not and has never been a member of the RTM company. Members are covered by the general rule in section 87A instead (s.20J(4)).

Section 20J covers non-litigation costs only. A separate bar on litigation costs, a new section 20CA of the 1985 Act inserted by section 62 of the 2024 Act, comes into force in England on 1 April 2027 and does not apply to proceedings issued before that date (SI 2026/1128, regulations 3 and 6). Until then, whether a landlord can pass tribunal costs of an RTM dispute to leaseholders depends on the lease and on section 20C of the 1985 Act.

What applies to a claim notice given today

A claim notice given today is governed by sections 87A and 87B, not the old sections 88 and 89. Neither section 50 nor SI 2025/131 contains a transitional provision about claims already running on 3 March 2025, so if your claim notice was given before that date, take advice on which regime applies to it.

Can members or directors be personally liable?

An RTM company must be a private company limited by guarantee (s.73(2)). Its articles must take the form set out in the RTM Companies (Model Articles) (England) Regulations 2009, which apply whether or not the company adopts them (regulation 2). Article 7 limits each member's liability to £1, payable if the company is wound up while they are a member or within one year after they leave.

That £1 is the guarantee, but it is not the whole picture:

• A section 87B order makes every current and former member jointly and severally liable with the company (s.87B(3)). A former member escapes only if their lease was assigned to someone who then became a member (s.87B(4)).
• Members are liable for anything they have agreed to pay the company (s.87A(4)).
• Directors are not personally liable for the company's debts simply by being directors, but they owe the general duties of any company director to the company (Companies Act 2006, ss.171 to 177). The model articles let the company indemnify directors from company assets, within the limits of company law (article 43), and let the directors buy insurance for themselves at the company's expense (article 44).

What does an RTM company cost to run?

These are the categories to budget for. Where we give a figure, it comes from the Companies House fees page at November 2026; we give no figures for the rest, because they depend on the building and the market.

• Incorporation. £100 to register a private company digitally (online or through software),£124 on paper, at November 2026.
• Confirmation statement. £50 online or through software, £110 on paper, for the first statement in each 12-month period, at November 2026.
• Annual accounts. Companies House lists no fee for a private company to file its accounts, but every company files them, and the cost of preparing them (in house or by an accountant) is real.
• Directors' and officers' insurance, which the articles allow the company to buy.
• Buildings insurance. Insurance is one of the management functions that passes to the RTM company (s.96(5)). The landlord can still insure at its own cost (s.97(3)).
• Managing agent fees, if the company appoints one rather than self-managing.
• Professional advice: legal, accounting, surveying and, for major works, the fees that come with them.
• Banking, covered in our guide to RTM company bank accounts.

Which costs can go through the service charge?

The RTM company does not get a new power to charge leaseholders. It takes over the landlord's management functions under the leases (s.96), meaning functions about services, repairs, maintenance, improvements, insurance and management (s.96(5)), and the leaseholders' covenants about those functions become enforceable by the company (s.97(4)). So what the company can recover through the service charge is, broadly, what the lease already lets the landlord recover, and every charge still has to be reasonably incurred (s.19 of the Landlord and Tenant Act 1985).

In practice that means:

• Costs of the services the lease covers, such as buildings insurance, repairs and, where the lease provides for them, managing agent or management fees, are usually the core of the service charge.
• The company's own corporate costs (Companies House fees, accounts, directors' insurance) are recoverable only if the lease's service charge clause is wide enough to include them. Leases differ, and whether a particular clause covers a particular cost is a question about that lease.
• The costs of the claim are best treated as falling on the company and its members by agreement. Section 97(5) also stops the company collecting service charges for costs incurred before it acquired the right to manage.

Anything the lease does not cover has to be funded by the company, which in practice means its members.

How to keep the costs down

• Agree costs up front. Get fixed or capped quotes for formation, notices and the claim, and record in writing what each member has agreed to contribute (the section 87A(4) agreement).
• Get the facts right first. Use the section 82 information notice only for what you need, and check eligibility before spending anything; our RTM eligibility checker is a starting point.
• Read the counter-notice carefully before litigating. If it raises a point that is right, a corrected claim may cost less than a tribunal application. Persisting with a flawed claim is the conduct section 87B is aimed at.
• Keep records from day one. Notices, dates, quotes, invoices and decisions in one place make the accounts cheaper to prepare and any dispute easier to answer.
• Read the lease before budgeting. Knowing which costs the service charge covers tells you early what the members will have to fund.

If you are taking over as a director, our guide to RMC and RTM director handovers covers what to ask for, and the complete guide to Right to Manage covers the basics.

References

• Commonhold and Leasehold Reform Act 2002, section 87A - costs of RTM claims: the general rule and exceptions
• Commonhold and Leasehold Reform Act 2002, section 87B - tribunal power to order costs where a claim ceases
• Commonhold and Leasehold Reform Act 2002, section 88 - the former costs rule, omitted from 3 March 2025
• Commonhold and Leasehold Reform Act 2002, section 82 - right to obtain information, and its costs
• Commonhold and Leasehold Reform Act 2002, section 73 - RTM companies
• Commonhold and Leasehold Reform Act 2002, section 96 and section 97 - management functions
• Leasehold and Freehold Reform Act 2024, section 50 - costs of right to manage claims
• The Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025 - commencement of section 50 on 3 March 2025
• The Leasehold and Freehold Reform Act 2024 (Commencement No. 4 and Saving Provision) (England) Regulations 2026 - section 62 (litigation costs) in force in England from 1 April 2027
• Landlord and Tenant Act 1985, section 20C - limitation of service charges: costs of proceedings
• Landlord and Tenant Act 1985, section 20J and section 19 - claim costs and the service charge; reasonableness
• The RTM Companies (Model Articles) (England) Regulations 2009 - articles 7, 43 and 44
• Companies House fees - incorporation and confirmation statement fees
• Companies House - life of a company: accounts - annual accounts filing
• First-tier Tribunal (Property Chamber) - the tribunal for RTM disputes in England

Marklet is Right to Manage software for RTM companies: issues, service charges, Section 20 and managing-agent emails in one record.