Introduction

Taking on the Right to Manage (RTM) can feel empowering – finally, leaseholders get control over how their block is run. But with that control comes responsibility, and sometimes confusion. One common mistake is assuming that RTM company costs, like filing accounts, paying for a company secretary, or buying Directors and Officers (D&O) insurance, can be paid from the service charge. The truth? They can’t. In this blog, we’ll explain why, what the law says, and what RTM directors need to know to stay on the right side of the rules.

What are RTM company costs?

RTM company costs are the expenses of running the RTM company itself as a legal entity. That includes filing annual accounts at Companies House, paying any company secretarial fees, and arranging D&O insurance to protect directors. These are separate from the costs of managing the building.

Why are RTM costs different from service charge costs?

The service charge is strictly limited to what the lease allows. Leases usually cover building costs – things like cleaning, repairs, insurance for the block, and maintenance. They almost never include RTM company running costs because when the lease was drafted, the RTM company didn’t exist.

Can RTM directors charge their company costs to the service charge?

No. RTM directors cannot simply add company costs to the service charge. RTM doesn’t change the terms of the lease, it just transfers management responsibilities from the freeholder to the RTM company. The lease remains the rulebook, and if it doesn’t allow for those costs, they can’t be passed on.

What happens if RTM company costs are wrongly added to the service charge?

If RTM company costs are wrongly included, leaseholders can challenge them. Most definitely yes. Leaseholders may take the issue to the First-tier Tribunal, and the RTM company (acting as competent landlord demanding the service charges) could be ordered to refund the money to the service charge payer. This not only causes financial stress but also damages trust between neighbours. Ultimately then other leaseholders could ask for the same justice and the RTM company is left short of cash and calling on its directors or shareholders to fund the shortfall.

Who pays RTM company costs—and how to share them fairly

The members of the RTM company – usually the leaseholders themselves – are responsible for paying company costs. This is separate from the service charge and often managed through small contributions from each member. In practice, this means running two budgets: one for the service charge, and another for RTM members’ contributions, covering essentials like company accounts, secretarial support, and D&O insurance.

The fairest way to handle these contributions is through transparency. Let members know what the RTM costs are, why they exist, and how they’ll be divided. Costs can be shared equally between members or apportioned according to the same proportions set down in the lease. Ultimately, it’s a decision for the RTM directors, as there’s no legal requirement to use one method over the other. Keeping costs modest, budgeting carefully, and explaining clearly helps avoid disputes and ensures the RTM company runs smoothly.

When handled with openness and respect on both sides, service charge issues don’t have to become battles. Many leaseholders find that once accounts are explained clearly, or once they’ve had their concerns heard, tensions ease and trust is rebuilt. Likewise, landlords and managing agents who embrace transparency often find smoother relationships and fewer formal disputes. And when the Tribunal does need to step in, its role is to bring clarity and fairness so everyone knows where they stand. In the end, the goal is simple: well-managed buildings, fair costs, and communities where leaseholders feel confident that their money is being used wisely. That’s an outcome everyone can be happy with.

Feeling stuck as an RTM director? You’re not alone.

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