Mixed-use buildings and RTM: how the 50% rule changed the game

One of the most practically significant changes in recent leasehold reform came into force quietly on 3 March 2025. From that date, the non-residential floor space limit for Right to Manage eligibility was raised from 25% to 50%. For leaseholders living in mixed-use buildings — flats above shops, offices, restaurants, or other commercial premises — this change opened a door that had previously been firmly shut.

If you have previously looked at RTM and been told your building does not qualify because of the commercial units below, it is worth looking again.

The old 25% cap and why it was a problem

When the Right to Manage was introduced by the Commonhold and Leasehold Reform Act 2002 (CLRA 2002), it came with a restriction: a building could not use the RTM procedure if its non-residential floor space exceeded 25% of the total internal floor area of the building.

In theory, this was intended to ensure that RTM applied primarily to residential buildings, where leaseholders' interests would be predominant. In practice, it had the effect of excluding a large number of mixed-use blocks from the right entirely.

Urban buildings with flats above commercial units are common across UK towns and cities. A Victorian terrace converted into a ground-floor café and three or four upper-floor flats; a 1970s development with a row of retail units at ground level and a block of flats above; a modern mixed-use scheme where the lower two floors are offices or restaurants. In all of these, a ground-floor or lower-floor commercial footprint can easily exceed 25% of the total floor area, even if the residential floors above are more numerous.

For the leaseholders in those upper flats, the 25% cap meant there was no route to RTM. They were stuck with whatever management arrangement their freeholder had put in place, with no straightforward mechanism to take control. The only alternative was collective enfranchisement — buying the freehold outright — which is a more complex and costly process.

The 25% cap was widely criticised as an arbitrary and poorly calibrated threshold that undermined the purpose of RTM.

The change: 50% from 3 March 2025

Sections 49 to 52 of the Leasehold and Freehold Reform Act 2024 (LFRA 2024) made changes to the RTM eligibility rules, including raising the non-residential limit. Those provisions came into force on 3 March 2025.

From that date, a building qualifies for RTM (on this particular test) provided its non-residential floor space is no more than 50% of the total internal floor area of the building. The previous 25% cap no longer applies.

This is a substantial increase. A building where commercial premises account for 40% of the total floor area — which would have been ineligible under the old rules — is now potentially eligible. Many thousands of mixed-use blocks across England that were previously excluded may now qualify.

How non-residential floor space is assessed

The test looks at floor space, not number of units or any other measure. You are comparing the internal floor area used for non-residential purposes against the total internal floor area of the building.

Non-residential space typically means commercial units: shops, offices, restaurants, workshops, storage units let on commercial leases, and so on. Common parts — staircases, lifts, corridors shared between residential and commercial occupants — are generally not counted as non-residential.

In practice, establishing exactly what proportion of the floor area is non-residential requires careful measurement. For buildings where the position is clear-cut (say, a building where a small single shop takes up a modest fraction of the ground floor while many residential floors sit above it), the calculation may be straightforward. For buildings where the proportion is closer to the 50% line, it is worth getting a professional measurement — a surveyor can provide this — rather than relying on estimates.

If you are close to the threshold in either direction, obtaining a reliable floor area figure before committing to the RTM process is important. Eligibility challenges based on the non-residential floor space test are a recognised ground of counter-notice, and a disputed measurement can delay or complicate a claim.

A worked illustration

Consider Marlborough Court: a building on a high street with ground-floor and mezzanine commercial units occupied by a retail tenant, and four upper floors containing 20 residential flats. Under the old 25% rule, the commercial footprint (including the mezzanine) accounted for approximately 30% of the total floor area — just over the old threshold. The leaseholders in the upper flats had no RTM route.

Under the new 50% rule, that same 30% non-residential proportion falls comfortably within the permitted limit. Marlborough Court now qualifies on this test, and the leaseholders can explore RTM provided they meet the other eligibility requirements.

That is the kind of transformation the rule change has made possible for many mixed-use blocks across England.

The other qualifying tests still apply

Raising the non-residential cap to 50% does not mean that every mixed-use building automatically qualifies for RTM. The other eligibility tests under the CLRA 2002 remain in force, and all of them must be satisfied:

Self-contained building or part The building (or the part you are claiming over) must be self-contained — capable of being managed independently from the rest. This test can be complex for buildings within larger estates or where services are shared with other structures.

Two or more flats held by qualifying tenants The building must contain at least two flats held by qualifying tenants.

Two-thirds qualifying tenants At least two-thirds of the flats in the building must be held by qualifying tenants — people whose leases were originally granted for a term exceeding 21 years.

50% participation The RTM company's membership must include qualifying tenants of at least half (50%) of the flats in the building. If the building has 20 flats, you need at least 10 qualifying tenants as RTM company members before you can serve the claim notice.

Houses do not qualify RTM applies to buildings containing flats. A mixed-use building that contains only commercial premises and a single dwelling would not meet the "two or more flats" requirement.

The interaction between these tests in a mixed-use context can sometimes be more complex than in a purely residential block. For example, if some flats are owned by the freeholder or by a company associated with the freeholder, those flats may not be held by qualifying tenants for the purposes of the two-thirds test. Eligibility analysis for a mixed-use building is worth doing carefully before proceeding.

What this means for mixed-use leaseholders

If you live in a building with commercial premises below you, and you have previously been told (or assumed) that RTM was not available, the position has changed.

The practical starting points are:

1. Identify the floor area split. Get a reliable measurement of the building's total internal floor area and the non-residential portion. If non-residential is clearly below 50%, you pass that test. If it is borderline, get a professional measurement.

2. Run the other eligibility tests. Check the two-thirds qualifying tenant test, consider whether you can reach 50% participation, and confirm the building is self-contained.

3. Assess the management situation. RTM is a no-fault right — you do not need to prove your current manager is doing anything wrong. But it helps to be clear about why you want to pursue RTM and what you are hoping to achieve.

4. Take advice. Eligibility for mixed-use buildings can be more nuanced than for straightforward residential blocks. A solicitor specialising in leasehold work, or the free helpline at LEASE, can help you assess whether your building qualifies and how to approach the process.

Reeve Start includes an eligibility checker that incorporates the new 50% threshold, so you can get a quick initial read on whether your building is likely to qualify — but for mixed-use buildings near the threshold, that initial check should always be followed up with professional advice.

FAQ

Does the 50% rule apply across England and Wales?

The LFRA 2024 RTM changes apply in England. Wales has its own legislative framework and the rules may differ. If your building is in Wales, check the current Welsh position with a solicitor or LEASE.

What counts as non-residential floor space?

Commercial premises let on non-residential leases — shops, offices, restaurants, storage — generally count as non-residential. Common parts shared between commercial and residential tenants are generally not counted as non-residential. Precise definitions can depend on the specific circumstances; a surveyor can advise on borderline cases.

We were refused RTM before 3 March 2025 because of the old cap. Can we try again?

Yes. The change in the law removes the old bar. If your building now meets all the qualifying tests under the new rules, there is nothing in principle stopping you from forming a new RTM company and starting the process afresh. However, there may be timing restrictions if a previous claim was withdrawn or refused within a certain period — take advice on your specific history.

What if some of the commercial units are vacant?

Vacant units generally still count as non-residential floor space if they are designated for non-residential use — the test is about the nature of the space, not current occupation. A surveyor can advise on how vacant or change-of-use units should be treated.

Does RTM give us any say over the commercial units?

No. RTM gives leaseholders management functions relating to the residential parts and common parts of the building. It does not give the RTM company any rights over commercial units or commercial tenants — those remain the landlord's responsibility.

Is 50% a hard line, or is there any flexibility?

The statutory test is clear: non-residential floor space must be no more than 50% of the total internal floor area of the building. There is no provision for discretion at the margin. If your building is right on the line, precision matters.