ight to Manage insurance is designed for leaseholders who have taken responsibility for managing a residential block through a Right to Manage arrangement. Often referred to as RTM insurance, this type of cover helps protect the structure, communal areas and shared responsibilities associated with a leasehold building.
When leaseholders acquire the Right to Manage, they do not become the owners of the freehold. Instead, they take over many of the practical management duties that were previously handled by the freeholder or a managing agent. These duties can include arranging repairs, maintaining communal spaces, collecting service charges and organising buildings insurance.
This means RTM insurance is generally relevant to an RTM company rather than to an individual flat owner acting alone. However, every leaseholder in the block has an interest in ensuring that suitable cover is arranged, maintained and reviewed regularly.
What is Right to Manage?
Right to Manage is a legal process that allows qualifying leaseholders in certain blocks of flats to take over the management of their building. The freeholder continues to own the building, but the RTM company assumes responsibility for day-to-day management.
Leaseholders do not normally need to prove that the existing management is poor before using the Right to Manage. They may decide to take control because they want greater involvement in decisions, improved oversight of maintenance or more influence over how service charges are spent.
An RTM company is usually formed specifically to manage the building. Once the Right to Manage has been acquired, the company becomes responsible for key functions relating to the premises. These can include services, repairs, maintenance, improvements, insurance and general management.
RTM insurance therefore becomes an important part of the company’s responsibilities. Although the freeholder retains ownership, the RTM company must ensure that the building is properly insured in line with the leases and the needs of the property.
Who can arrange RTM insurance?
The RTM company is normally responsible for arranging the buildings policy after the Right to Manage has transferred. This means the company should identify the building’s insurance requirements, obtain suitable quotations, check the policy terms and ensure the cover remains active.
The company may manage this process itself or appoint a professional managing agent to assist with the administration. Even where an agent is involved, the RTM company should remain aware of its responsibilities. It should not assume that appointing an agent removes the need to monitor the policy.
RTM insurance is therefore suitable for:
RTM companies managing blocks of leasehold flats.
Leaseholders who have collectively acquired the Right to Manage.
Directors or members of an RTM company responsible for arranging building cover.
Managing agents acting on behalf of an RTM company.
Residential blocks where the management company needs one policy covering the whole structure.
An individual leaseholder would not usually arrange RTM insurance for the entire building. Their own responsibilities are more likely to involve arranging contents insurance, liability protection for personal activities and any additional cover required by their lease.
What does RTM insurance cover?
The exact protection provided by RTM insurance depends on the policy and the building being insured. In general, the policy is intended to cover the structure of the block and its shared areas rather than the personal possessions inside individual flats.
The insured property may include external walls, roofs, floors, ceilings, foundations, internal structural elements and permanent fixtures. Communal hallways, staircases, entrances, lifts, corridors, shared utility areas, bin stores and other common spaces may also need to be included.
Typical insured risks may include fire, escape of water, storm damage, flooding, malicious damage and impact. Some policies may also provide cover for alternative accommodation or loss of rent following insured damage, subject to the policy wording and the type of occupancy involved.
RTM insurance may also include liability protection connected with the management of shared areas. For example, if someone is injured in a communal hallway and the RTM company is alleged to have failed in its responsibilities, suitable liability cover may help with legal costs and compensation, subject to the terms and exclusions.
The RTM company should avoid assuming that every policy offers the same protection. The building’s construction, location, age, occupancy, claims history and previous alterations can all affect the cover required.
Why is RTM insurance important?
A block of flats represents a significant shared financial interest. If the building suffers serious damage and the insurance is inadequate, leaseholders may face substantial costs for repairs. A suitable RTM insurance policy helps reduce this risk by providing financial support after an insured event.
The policy also helps the RTM company meet its management responsibilities. Lease agreements often require the building to be insured, and the company may need to demonstrate that the policy provides an appropriate level of protection. Failure to maintain cover could create practical, financial and legal complications.
Insurance also supports the wider operation of the building. Mortgage lenders may expect the structure to be insured, while leaseholders need reassurance that their homes and shared spaces can be repaired after major damage. Without an appropriate policy, even a relatively small incident could lead to disagreements over who should pay.
RTM insurance is not simply an administrative purchase. It forms part of the wider system used to protect the building, preserve its value and manage the shared obligations of the leaseholders.
Which buildings may qualify?
Right to Manage generally applies to qualifying blocks of flats rather than ordinary houses. The property normally needs to be a self-contained building or a self-contained part of a larger building. It must also contain at least two flats held by qualifying tenants.
A qualifying tenant is usually a leaseholder whose lease was originally granted for more than 21 years. At least two-thirds of the flats generally need to be held by qualifying tenants, while at least half of the flats must usually be represented in the RTM company before it can take over management.
The building must also be mainly residential. Current rules allow a greater proportion of non-residential space than previous rules, but a property with extensive shops, offices or other commercial areas may not qualify. Other exclusions can apply, including certain buildings with a resident freeholder, some smaller converted properties and buildings connected with local housing authorities.
These eligibility rules matter when considering RTM insurance because the structure and ownership of a building can affect both the Right to Manage process and the type of cover needed. A mixed-use building, for example, may require insurers to consider commercial activities, public access and different liability risks.
What should the RTM company insure?
The RTM company should begin by reviewing the leases and establishing precisely what it is responsible for. The policy should normally cover the whole building rather than just the individual flats participating in the RTM arrangement.
The reinstatement value is particularly important. This is the estimated cost of rebuilding the property after a total loss, including relevant professional fees, demolition, debris removal and compliance with current building regulations where applicable. It is not the same as the building’s market value.
If the reinstatement value is too low, the policy may not provide enough money to complete the necessary works. Underinsurance can also affect the amount paid for a partial claim if the insurer applies an average condition. A professional valuation may therefore be useful, particularly for older buildings, unusual structures or properties with expensive architectural features.
The RTM company should also consider communal contents, machinery, unoccupied flats, subsidence, terrorism, legal expenses and employers’ liability where relevant. Not every building requires every extension, but each risk should be assessed rather than ignored.
How does RTM insurance affect leaseholders?
The cost of RTM insurance is usually treated as a shared building expense. The RTM company may arrange the policy and recover the cost from leaseholders through the service charge, in accordance with the terms of the leases.
Leaseholders should understand what the block policy covers and what they must insure themselves. RTM insurance will generally protect the building and permanent fixtures, but it will not normally cover furniture, clothing, personal electronics or other belongings inside a flat.
Leaseholders may also need their own contents insurance and personal liability protection. If a flat is rented out, the owner may require additional landlord cover. Tenants should arrange their own contents insurance because the building policy does not normally protect their belongings.
Clear communication can help prevent disputes. The RTM company should explain the policy’s main features, the premium, the claims process and any important exclusions. Leaseholders should also report damage promptly and follow any reasonable requirements set out in the policy.
What happens when a claim is made?
The RTM company will usually act as the policyholder and coordinate claims affecting the shared building. It may need to notify the insurer, provide information about the incident, arrange access for surveyors and authorise repairs.
A clear process is valuable, particularly where water leaks, fire or storm damage affects several flats. The company should keep records of correspondence, photographs, invoices and repair decisions. It should also communicate with affected leaseholders while avoiding promises about cover before the insurer has assessed the claim.
The leases may set out additional responsibilities for individual leaseholders. For example, a leaseholder may need to report damage inside their flat or pay an excess allocated under the policy. The RTM company should check the policy and lease terms before deciding how costs are divided.
Professional advice may be useful where a claim is substantial, disputed or likely to involve several parties. Prompt action can reduce further damage and help establish a reliable record of what happened.
Is RTM insurance suitable for every leaseholder?
RTM insurance is not a separate replacement for all other forms of property insurance. It is primarily intended to protect the shared building under an RTM arrangement. It will not usually replace contents insurance, landlord insurance or specialist cover for individual circumstances.
It is also not automatically suitable simply because a property is leasehold. The Right to Manage must normally have been acquired, and the RTM company must have responsibility for arranging the building’s insurance. Before purchasing cover, the company should confirm who currently has responsibility under the leases and whether the transfer has formally taken place.
If the freeholder or another party still arranges the buildings policy, the RTM company should avoid creating overlapping cover without checking the existing arrangements. Duplicate insurance can create confusion over claims and may lead to unnecessary costs.
Choosing appropriate RTM insurance
The most suitable RTM insurance should reflect the building’s actual structure, use and responsibilities. The company should provide accurate information about the number of flats, construction materials, occupancy, commercial areas, security measures, previous claims and any significant risks.
The policy should be reviewed whenever the building changes. Extensions, conversions, roof works, cladding alterations, new communal equipment or changes in occupancy may affect the level of cover required. The reinstatement valuation should also be reviewed periodically so that inflation and construction cost changes do not leave the property underinsured.
RTM insurance is ultimately for the shared protection of a leasehold block and the people responsible for managing it. By arranging suitable buildings cover, maintaining accurate records and reviewing the policy regularly, an RTM company can help protect leaseholders from the financial consequences of serious damage while meeting its wider management obligations.