When leaseholders take over their block through the right to manage, the RTM company takes on the insurance functions in the leases, liability for the common parts, fire safety duties, and often a lift, a caretaker and other people's money. None of it comes with a ready-made insurance programme, and the freeholder's policy may stop on the day you take over, run on, or carry on alongside your own.

This guide is for leaseholders setting up an RTM company, and for directors of RTM companies that have already taken over. It covers what transfers on the acquisition date, who insures the building afterwards, the handover, the cover an RTM company typically needs, and mixed-use and taller blocks.

It doesn't repeat our other block guides. Directors' personal protection is covered in our guide to D&O insurance for RMC and RTM directors. How a block buildings policy works (reinstatement values, common parts and claims) is in our block of flats insurance guide. If you own one flat and let it out, see landlord insurance for a leasehold flat.

The right to manage rules below are in Part 2 of the Commonhold and Leasehold Reform Act 2002 (CLRA 2002) and apply to England and Wales. Policy wordings vary between insurers.

Setting up an RTM company, or about to take over? Send us your leases, the freeholder's current policy schedule and your target acquisition date. We'll map what the company needs to insure and review it against the insurers on our panel. Speak to us.

The short answer

From the acquisition date, an RTM company should expect to deal with:

1. Buildings insurance, if the leases make insuring the building the landlord's job.

2. Property owners' or common parts liability.

3. Directors' and officers' (D&O) cover for the volunteer board.

4. Employers' liability, if the company employs anyone.

5. Engineering inspection and insurance for lifts and plant.

6. Terrorism cover, if the leases or lenders require it.

7. Fidelity or crime cover for service charge and reserve funds.

What legally passes to an RTM company

An RTM company is a private company limited by guarantee whose articles state that its object is to acquire and exercise the right to manage the premises (CLRA 2002 s73). Its members are qualifying tenants, meaning long leaseholders, and from the acquisition date the landlord can join too (s74). It isn't the freeholder and doesn't own the building. If it acquires the freehold, it stops being an RTM company (s73(5)).

Section 96 is what makes insurance an RTM issue. From the acquisition date, the management functions that a landlord has under the leases become functions of the RTM company and stop being the landlord's (s96(2)). The Act defines management functions as functions with respect to services, repairs, maintenance, improvements, insurance and management (s96(5)).

Two kinds of function stay with the landlord (s96(6)):

• functions about a matter that concerns only a flat or unit not held by a qualifying tenant, such as a shop let on a business lease or a flat the freeholder keeps, and

• re-entry and forfeiture.

Schedule 7 then applies other legislation to the RTM company:

• Landlord's duty of care for defects. Section 4 of the Defective Premises Act 1972 applies to the RTM company as if it were the landlord (Sch 7 para 2). Where the company now has the repairing obligation, it can owe a duty of care to people affected by defects.

• Service charges. The Landlord and Tenant Act 1985 service charge provisions in ss18 to 30, including reasonableness and section 20 consultation, apply with the RTM company treated as the landlord (Sch 7 para 4).

• Insurance information. Leaseholders' rights to information about the buildings insurance under s30A of and the Schedule to the 1985 Act apply to the RTM company (Sch 7 para 5).

• Service charge trust. Section 42 of the Landlord and Tenant Act 1987, which says service charge money is held on trust, applies to the RTM company (Sch 7 para 11).

The company also gives lease approvals, with prior notice to the landlord (ss98 and 99), and must report tenant covenant breaches to the landlord within three months (s101).

Who insures the building after the right to manage?

RTM boards get this wrong in both directions: some assume the freeholder carries on insuring because it owns the building, others that the company must insure whatever the leases say. The leases decide.

Three points follow.

The freeholder's own insurance is a separate question. Section 97(2) stops the landlord from doing anything the RTM company is now responsible for, except by agreement. Section 97(3) says that doesn't stop anyone from insuring the whole or any part of the premises at their own expense. A freeholder can keep a policy to protect its own interest, but it can't charge that cost to leaseholders through the service charge, because the service charge is now the RTM company's. Two buildings policies on one building can make claims harder, because each insurer may argue about its share of a loss. Talk to the freeholder early.

The freeholder still owns the building. Most leases that require the landlord to insure also require the policy to protect the landlord's interest, and sometimes the leaseholders' and their lenders' interests too. When the RTM company places the cover, it should check the lease wording and make sure the policy notes the freeholder's interest where the lease requires it. That's part of performing the transferred obligation properly. Section 97(1) says the obligations the company takes on are owed to the landlord as well as the tenants.

Lenders will ask you. LEASE notes buildings insurance is usually a lease condition and mortgage lenders usually require it. Evidence of cover for a sale or remortgage now comes from the RTM company.

The handover: an insurance timeline

The statutory dates are your insurance plan. The worst outcome is a building with no cover on the acquisition date.

The money problem at handover

LEASE's guidance flags a practical problem: there may be no service charge money for the first premium, leaseholders may already have paid the freeholder for this year, and managing agents may not want the debt. Options:

• Time the acquisition date for the start of a service charge or insurance year. The statutory periods are minimums, so the claim notice can set a later date.

• Ask to take over the existing policy. LEASE notes the insurer may agree, avoiding a second premium in the same year. Not every insurer will.

• Chase the refund. If the freeholder cancels, LEASE says any partial refund should go back to the service charge fund. Policies with claims, or specialist covers such as terrorism, may not refund.

• Don't rely on the s94 transfer. Accrued uncommitted service charges should be paid over on the acquisition date, but don't count on that money to pay a premium due the same day.

RTM company insurance: the map

Some of these may sit in one combined block policy; others are bought separately.

Buildings

If the insuring function has transferred, the RTM company has to perform it properly, and that means getting the sum insured right. The block's reinstatement value should be the full cost of rebuilding, not its market value. Ask the freeholder for the most recent reinstatement valuation and check its date. Our block of flats insurance guide explains reinstatement, common parts, average and claims in detail.

Three points are specific to RTM companies:

• Price. LEASE warns that a freeholder with many buildings may have portfolio terms that a single-building RTM company can't match. A small block's first standalone policy can cost more than leaseholders expect. Disclose the building's features, claims history and safety information fully, because those drive the terms.

• Disclosure. Under the Insurance Act 2015 s3 the company owes a duty of fair presentation, covering what it knows or ought to know. If you haven't yet seen the freeholder's files, say so.

• Escape of water. LEASE notes that water leaks are by far the most common claim on block buildings policies. The claims history follows the building, not the freeholder, so agree with leaseholders how excesses will be handled under the lease before the first leak.

Property owners' and common parts liability

The RTM company will usually control the common parts: the entrance, stairs, corridors, bin store, car park and gardens. A person who controls premises is likely to be an occupier for the Occupiers' Liability Act 1957, which requires the common duty of care to visitors (s2). Add the Defective Premises Act 1972 s4 duty applied by Sch 7 para 2, and the company is exposed if someone is hurt by a defect it should have repaired.

Section 4 of the Health and Safety at Work etc. Act 1974 adds duties for people in control of non-domestic premises, including through a repair obligation, "for profit or not".

Liability cover is usually part of a block policy, but check the limit, who the insured is, and whether it covers the company's directors and volunteers. Our public liability insurance guide covers the basics.

Directors' and officers'

LEASE's guidance says the company should arrange D&O insurance for its usually unpaid directors. We cover it in detail in our RMC and RTM directors' D&O guide, including building safety offences and the carve-out for unpaid directors of resident-run companies. For the general product, see our directors' and officers' insurance guide.

The RTM-specific point: the freeholder didn't choose to hand over management, so disputes with it are more likely. Check the policy responds to claims by the freeholder and by members, and how any "major shareholder" exclusion reads for a company limited by guarantee.

Employers' liability

If the RTM company employs anyone, the Employers' Liability (Compulsory Insurance) Act 1969 applies. The minimum cover is £5 million (Employers' Liability (Compulsory Insurance) Regulations 1998, reg 3).

This catches companies out at handover: LEASE's guidance explains that site staff such as a caretaker become the RTM company's employees under TUPE, so EL is needed from the acquisition date. If staff come through an agency or managing agent instead, check who the employer actually is. See our employers' liability insurance guide.

Lifts, boilers and plant

The Lifting Operations and Lifting Equipment Regulations 1998 (LOLER) require thorough examination of lifting equipment used at work, at least every six months for lifts carrying people (reg 9). HSE's guidance says LOLER may not apply where a passenger lift is not used by people at work. But an organisation in control of a lift still has general health and safety duties, and a similar regime of maintenance and examination may be reasonably practicable. HSE also notes that insurers may impose similarly strict risk management requirements before covering public liability.

Cleaners, contractors and caretakers use block lifts, so plan for regular thorough examination. An engineering inspection policy provides the examiner; engineering insurance covers breakdown. Common boilers, pressure systems, pumps and gates may need the same. Get the last reports from the freeholder so inspections don't lapse at handover.

Terrorism

Standard buildings policies often exclude terrorism or limit it. Check whether the leases list it as an insured risk and what lenders require. LEASE lists terrorism among the policies an RTM company may need.

Protecting the money

Service charge and reserve funds aren't the company's money in the ordinary sense. Section 42 of the Landlord and Tenant Act 1987 applies to the RTM company (Sch 7 para 11), so contributions are held on trust. If funds go missing through a dishonest agent, employee or director, or through payment fraud, the directors will face hard questions.

Use a separate trust account, dual authorisation and regular reconciliation. Fidelity or crime insurance can cover dishonesty losses; check whether it extends to your managing agent's staff or you rely on the agent's own cover.

Building safety and fire: the duties that drive cover

Fire safety. The Regulatory Reform (Fire Safety) Order 2005 applies to the common parts of a block of flats. The Fire Safety Act 2021 confirmed that for buildings with two or more domestic premises, the Order also covers the structure, external walls and flat entrance doors. LEASE's guidance says a right to manage company is a "responsible person" under the Order. It must take reasonable steps to reduce the risk of fire and make sure people can escape safely. In practice that means a fire risk assessment for the common parts, flat entrance doors and external walls, reviewed regularly, with the findings acted on.

Taller buildings in England. LEASE summarises extra duties in England for buildings over 11 metres, such as regular fire door checks. For buildings 18 metres or higher, or with at least seven storeys, the Building Safety Act 2022 regime applies.

Accountable person. Under the Building Safety Act 2022 s72, an accountable person for a higher-risk building includes a person who is under a relevant repairing obligation for the common parts. An RTM company that has taken over the landlord's repairing obligations can be an accountable person. The duties (registration, risk assessments, the safety case and the residents' engagement strategy) and how they affect directors are covered in our RMC and RTM directors' D&O guide.

For insurance, a current fire risk assessment, external wall information and evidence that findings were acted on are among the first things insurers ask for. Unresolved cladding or fire defects can restrict cover. D&O policies typically exclude deliberate wrongdoing and fines that can't legally be insured.

Leaseholders' insurance rights now run against the RTM company

Leaseholders who pay for insurance through their service charge have rights to information about the buildings insurance. Once the RTM company is responsible, those rights run against the company (Sch 7 para 5).

Under the Schedule to the Landlord and Tenant Act 1985:

• Summary of cover. A leaseholder can ask, in writing, for a written summary of the insurance. The company has 21 days from receiving the notice to supply it. The summary must include the sums insured, the insurer, and the risks covered (para 2).

• Inspecting the policy. A leaseholder can require facilities to inspect the policy and associated documents, or copies of them. The time limit is again 21 days, and inspection must be free of charge (para 3).

• Notifying a claim. A leaseholder who pays for insurance through the service charge can notify the insurer of possible damage to their flat or the building directly, within time limits set by the policy (para 7).

The FCA's rules on multi-occupancy building insurance, in force since 31 December 2023, add another layer. Firms must treat residential leaseholders as customers when designing, pricing and arranging the policy, and act in their best interests. After a multi-occupancy building policy is concluded or renewed, the firm must give the policyholder information covering the cover, the price and how the firm is paid. It must tell the policyholder to pass a copy on promptly and in full to leaseholders (ICOBS 6A.7). If the RTM company is the policyholder, passing that information on is now the company's job.

Keep a folder with the schedule, wording, summary and disclosure document ready. Meshed charges a flat 10% broker fee, disclosed up front.

What's changed and what's coming

The Leasehold and Freehold Reform Act 2024 s59 (limits on recoverable insurance costs) and s60 (insurance information duties) were shown as prospective, not in force, on legislation.gov.uk when we checked on 27 October 2026. Because the 1985 Act rules reach RTM companies through Schedule 7, expect them to matter for RTM companies once commenced.

Two right to manage changes have been in force since 3 March 2025 (Commencement No. 3 Regulations 2025):

• The non-residential limit is now 50%. A building with commercial parts qualifies as long as the non-residential parts don't exceed 50% of the internal floor area, ignoring common parts. The old limit was 25%.

• Costs. The old rule that an RTM company pays the landlord's reasonable costs of a claim has been replaced. In general, the RTM company and its members aren't liable for other parties' costs of the claim. The tribunal can order costs if the claim ends and the company has acted unreasonably.

Mixed-use blocks: shops and offices

The 50% limit means more buildings with shops or offices on the ground floor now qualify. That makes insurance harder.

• Whose function is it? Section 96 transfers the landlord's management functions under any lease of the whole or part of the premises, except for matters concerning only a unit not held by a qualifying tenant (s96(6)). If the shop's lease makes the landlord insure the whole building, that building-wide function is likely to sit with the RTM company. Matters concerning only the shop stay with the landlord. Get legal advice on how the leases fit together.

• Disclose the commercial use. A takeaway, bar or workshop changes the risk for the whole building. Tell the insurer, and tell it again if the use changes.

• Contributions. Where some units aren't held by qualifying tenants and the flat leases don't add up to the full cost, the landlord (or the appropriate person for each excluded unit) pays the RTM company the difference. Where there's more than one excluded unit, it's split by internal floor area (s103).

• Fire safety coordination. LEASE's guidance reminds directors to work with anyone else who has fire safety responsibilities for the building, such as the occupier of a shop or office.

Freeholders of mixed-use buildings may find our commercial property landlord insurance guide useful for the cover they keep on their own interest.

When the right to manage ends

The right to manage stops on winding up, administration, receivership, a voluntary arrangement, striking off, a tribunal-appointed manager, or agreement with the landlord (s105). If the company acquires the freehold, it stops being an RTM company (s73(5)).

For insurance:

• If management returns to the freeholder, agree when the RTM company's buildings policy ends and the freeholder's starts. Don't let a policy lapse while the parties argue.

• If the company is struck off, often because there were no directors or filings lapsed, the policyholder no longer exists. Keep the board filled and filings current.

• If the leaseholders buy the freehold, the company becomes a freeholder or a share-of-freehold company. The policy will need updating to reflect the new interest.

• Ask about D&O run-off before the company closes, as claims can come years later.

Two scenarios

A 12-flat block takes over mid-year. The claim notice sets an acquisition date in June. The freeholder's policy renews in January, and leaseholders paid their share in January. The RTM company asks the insurer to take over the existing policy for the rest of the year, and the insurer agrees on condition that the company provides an up-to-date fire risk assessment. Liability, D&O and EL (for the cleaner who transfers under TUPE) start on the acquisition date. At the January renewal, the board reviews the whole programme.

A mixed-use block with a restaurant. The restaurant takes up a third of the internal floor area, so the building qualifies under the 50% rule. The flat leases and the restaurant lease both make the landlord insure the building. The broker discloses the commercial kitchen, and the insurer asks for duct cleaning evidence and a lift inspection. The freeholder keeps its own policy for its interest under s97(3). The two sides agree in writing which policy responds to which loss, so a claim isn't delayed by two insurers arguing.

RTM company insurance checklist

Before the acquisition date:

1. Read every lease's insurance clause and note differences.

2. Request the policy, claims history, reinstatement valuation, fire risk assessment, lift reports and staff details.

3. Decide whether to take over the existing policy, start a new one, or time the takeover for renewal.

4. Agree in writing with the freeholder what happens to its policy, and whether the freeholder's interest needs to be noted on yours.

5. Arrange buildings (if required by the leases), liability, D&O, EL (if anyone is employed), engineering and terrorism cover as needed, all starting on the acquisition date.

6. Make sure the service charge budget includes the premium and any excess the company may need to pay.

After the acquisition date:

1. Tell leaseholders about the policy, claims process and excesses.

2. Keep the insurance information file ready.

3. Diarise renewals, valuation and fire risk assessment reviews, and lift inspections.

4. Check contractors' own insurance.

5. Review the programme yearly and when use or leases change.

FAQs

Does an RTM company have to insure the building?

Only if the leases make insuring the building a landlord function, or a function of a management company that's party to the lease. Insurance is one of the management functions that transfers to the RTM company under s96 of the 2002 Act. If the leases make each leaseholder insure their own flat, there's nothing to transfer.

Can the freeholder keep insuring the building after the right to manage?

The freeholder can insure the building at its own expense, because s97(3) says nothing stops anyone from doing that. What it can't do is carry on performing the insuring function under the leases and recover the cost through the service charge, unless the RTM company agrees. If both sides insure, agree how the policies interact.

Is insurance a section 20 consultation matter for an RTM company?

The service charge rules in the 1985 Act apply to RTM companies. Section 20 consultation applies to qualifying works and qualifying long-term agreements, which are agreements for more than 12 months. A normal annual insurance policy isn't a qualifying long-term agreement. If you're offered a multi-year insurance arrangement, check the position before you sign.

Does an RTM company need employers' liability insurance?

Yes, if it employs anyone, unless an exemption applies. That includes site staff who transfer under TUPE at handover. The minimum is £5 million. If the company has no employees, for example because cleaning is done by a contractor, it doesn't need EL. Check that the contractor has its own EL.

Do leaseholders still need their own insurance?

Usually, for contents and their own improvements. Leaseholders who let their flats usually need landlord cover too. See our guide to landlord insurance for a leasehold flat.

Get your RTM insurance reviewed

Send us your leases, the freeholder's policy schedule and claims history, your acquisition date, and details of any lifts, staff or commercial units. We'll map what the RTM company needs to insure and when, flag any gaps or overlap with the freeholder's cover, and review the programme against the insurers on our panel. Speak to us.

Meshed is a trading name of Mesh'd Limited, authorised and regulated by the Financial Conduct Authority (FRN 1033248). We charge a flat 10% broker fee. This guide is general information, not legal advice.