You’ve won the Right to Manage. Now comes the part nobody tells you about.

Apr 28, 2026 | General

Taking control of your building through Right to Manage is a significant achievement. But the moment your RTM company acquires management, one of your most pressing legal obligations lands squarely on your directors’ shoulders: arranging adequate buildings insurance. Here’s what you need to know — and what can go wrong if you don’t get it right.

The Right to Manage process is well-documented. The legal steps, the qualifying criteria, the claim notice — there’s plenty of guidance available. What receives far less attention is what happens on day one of management, when the insurance policy previously arranged by the freeholder or their managing agent is no longer your policy, and you — as a director of a newly formed RTM company — are now responsible for one of the most complex insurance arrangements in the residential property sector.

This isn’t a small administrative task. Getting it wrong can leave your entire building uninsured, expose you to personal liability as a director, and leave your fellow leaseholders without recourse in the event of a fire, flood or other serious loss.

 

The Legal Position : Insurance is now your Responsibility 

Under the Commonhold and Leasehold Reform Act 2002, when an RTM company acquires management, the management functions of the landlord transfer automatically. Those functions are explicitly defined as covering “services, repairs, maintenance, improvements, insurance and management.” There is no ambiguity: from the acquisition date, arranging buildings insurance is the RTM company’s legal duty.

Your lease will also typically set out specific requirements — the minimum level of cover, the perils that must be insured against, and often which parties must be noted on the policy. Failing to meet these lease obligations is a breach of the terms that govern every flat in the building. Mortgage lenders for leaseholders in your block will also have their own requirements, and if your policy falls short, you could inadvertently cause problems for residents trying to sell or remortgage.

 

What many RTM Directors Don’t Realise:

The freeholder retains the legal right to arrange additional insurance at their own expense after RTM is acquired. This can cause confusion — but it does not remove your obligation. The freeholder’s policy cannot substitute for yours, and you cannot rely on theirs in the event of a claim.

 

Why Standard Home Insurance Won’t Do

This is one of the most common and costly mistakes made by self-managing RTM companies, particularly smaller blocks. A standard residential buildings policy — even a comprehensive one — is not designed for a building containing multiple leasehold flats under common management. Most household insurers will not cover this arrangement at all, and those that do often provide wholly inadequate protection.

Block of flats insurance is a form of commercial property insurance, and it works very differently from personal lines cover. A specialist block policy will typically include:

  • Buildings insurance for the entire structure, communal areas, gardens and outbuildings
  • Property owners’ liability, covering legal liability to the public for injury or damage occurring on the premises
  • Employers’ liability if you employ a caretaker, cleaner or any other staff
  • Loss of rent and alternative accommodation cover if the building becomes uninhabitable following an insured event
  • Trace and access cover for finding the source of a leak
  • Automatic index-linking of the sum insured to protect against inflation in reinstatement costs
  • Cover for mixed occupancy — owner-occupiers, tenants and empty flats within the same building

None of these features are standard on a domestic buildings policy. And the absence of any one of them could prove catastrophic in the event of a serious claim.

 

Director’s Liability: A Risk That’s Easy To Overlook

RTM company directors are not simply members of a residents’ committee. You are officers of a private limited company registered at Companies House, with legal duties under the Companies Act 2006. That distinction matters enormously when it comes to personal exposure.

If you arrange inadequate insurance — or allow the building to be uninsured during a transition — and a loss occurs, fellow leaseholders may have grounds to pursue the directors personally for the consequences. This is not a theoretical risk. Disputes between leaseholders and RTM directors are increasingly common, and they often arise precisely from decisions made in the early months of management when processes are still being established.

Directors’ and Officers’ (D&O) liability insurance exists to protect you in this scenario. It covers the cost of defending a claim made against you personally as a director — legal fees, settlements, and regulatory costs — and is something every RTM company director should seriously consider. It is not expensive relative to the risk it addresses, and it can be arranged alongside your block buildings policy as a single package.

 

The Building Safety Act : New Obligations for RTM Companies 

The Building Safety Act 2022 introduced significant new responsibilities for those managing residential buildings, and RTM companies are squarely within scope. If your building is a higher-risk building — broadly, one above 18 metres or seven storeys — your RTM company will be the Accountable Person, with statutory duties relating to building safety that go well beyond ordinary property management.

Even for buildings below the higher-risk threshold, the Act has changed the landscape. RTM companies and their directors now operate in a more scrutinised environment, with greater expectations around fire safety compliance, record-keeping and resident engagement. Insurance underwriters are increasingly aware of this, and the quality of your safety documentation and compliance records can directly affect the terms available to you at renewal.

One important consequence for many RTM companies: if your building has historical fire safety defects — cladding or otherwise — your RTM company may be required to pursue remediation funding and coordinate works, even where the financial liability ultimately falls elsewhere. This is a complex area where specialist advice is essential, and your insurance broker should be aware of any ongoing remediation activity when placing your cover.

 

The Reinstatement Valuation 

Underinsurance is endemic in the block of flats market, and it is a particular risk for RTM companies who inherit a policy from a previous manager without independently reviewing the sum insured.

The sum insured on a block policy should reflect the full cost of rebuilding the property from scratch — not its market value, and not last year’s figure automatically rolled forward. Rebuild costs have risen substantially in recent years due to construction inflation, and a building insured on an outdated valuation may be significantly underinsured by the time a major claim occurs.

When underinsurance is established at the time of a claim, most insurers apply what is known as “average” — meaning your claim payout is reduced in proportion to the degree of underinsurance. In a serious loss scenario, this can mean the difference between a full reinstatement and a financial crisis for the service charge fund.

As a new RTM company, one of your first priorities should be commissioning an independent reinstatement cost assessment from a qualified surveyor. Through our experience and reputation in this market, we have negotiated discounted rates with leading surveyors in this sector – RebuildCostAssessment.com and Barrett Corp Harrington – and can arrange these on your behalf.

 

RTM Insurance Checklist : What To Get Right From Day One

  • Establish the exact date management transfers — your insurance must be in place from that date, with no gap
  • Review the lease requirements for insurance — note specified perils, minimum cover levels and any named interests
  • Obtain a specialist block of flats policy — not a domestic buildings policy
  • Ensure Property Owners’ Liability and Employers’ Liability are included
  • Commission an independent reinstatement cost assessment from a qualified surveyor
  • Consider Directors’ and Officers’ (D&O) liability insurance for RTM company directors
  • Check whether the building requires Engineering Inspection cover (lifts, pressure vessels etc.)
  • Consider Legal Expenses insurance for disputes with contractors, leaseholders or third parties
  • Notify your insurer of any ongoing remediation works or fire safety concerns
  • Set a robust renewal review process — don’t let the policy auto-renew without checking terms and reinstatement values

 

Choosing an Insurance Broker for your RTM Company 

Block of flats insurance is a specialist class. The differences between policies — in exclusions, conditions, claims handling and the quality of the insurers used — are significant, and they are not always apparent from a premium comparison alone.

An experienced specialist broker will not simply find you the cheapest quote. They will review your lease obligations, identify covers you may not have considered, challenge reinstatement values, and be available to support you when a claim occurs — which, in a residential block, is a question of when rather than if.

As an RTM company, you also have an obligation to your fellow leaseholders to demonstrate that you are managing the building responsibly. Working with a recognised specialist broker, and being able to evidence that your insurance has been properly placed, is part of fulfilling that duty.

At Alastair James Insurance Brokers, we have extensive experience arranging buildings insurance for RTM companies, residents’ management companies and self-managing freeholder groups across England and Wales. We understand the lease obligations, the regulatory environment, and the specific risks that come with self-managed blocks — and we take the time to make sure your cover is right, not just cheaper.

If your RTM company is approaching an acquisition date, coming up to renewal, or simply wants a second opinion on the cover currently in place, we’d be very happy to help.