What Is a Freehold Residents Management Company?

A freehold residents management company is a company owned by the leaseholders in a block of flats that holds the freehold of the building. It gives leaseholders collective control over how their block is managed — including maintenance, insurance, service charges, and major works — without relying on an external landlord or professional managing agent.

If you've recently become a director of one, or you're considering forming one, this guide covers how they work in practice.

How freehold RMCs work

In a typical leasehold structure, a freeholder (landlord) owns the building and grants long leases to individual flat owners. The freeholder manages the building and charges service charges to cover costs.

In a freehold RMC structure:

The leaseholders collectively own the freehold through a limited company (the RMC)
Each leaseholder is typically a member (shareholder) of the company
The company is run by volunteer directors elected from among the leaseholders
The directors manage the building, set service charge budgets, arrange maintenance, and handle compliance

The key distinction: you are both the landlord (through the company) and the tenant (through your lease). The company has the same legal obligations as any other freeholder — including Section 20 consultation for major works, health and safety compliance, and Companies House filing.

Freehold RMC vs RTM company

Both structures give leaseholders management control, but they differ in how that control is acquired:

	Freehold RMC	RTM Company
How formed	Leaseholders collectively purchase the freehold	Leaseholders exercise the statutory Right to Manage under the Commonhold and Leasehold Reform Act 2002
Freehold ownership	The company owns the freehold	The freeholder retains ownership; the RTM company takes over management functions
Cost to set up	Purchase price of the freehold (varies — can be significant)	Statutory process with fixed costs (no purchase required)
Scope of control	Full control — the company is the landlord	Management functions only — some landlord rights remain with the freeholder
Ground rent	Eliminated (company owns the freehold)	Ground rent continues to the freeholder

In practice: Both types of company face the same day-to-day management challenges — service charge budgeting, arrears collection, Section 20 compliance, year-end accounts, and Companies House obligations. The differences are primarily legal and structural, not operational.

For a full breakdown of what directors handle, see our guide to RMC director responsibilities.

How freehold RMCs are typically formed

There are several routes:

1. Developer sets up the RMC at build time

Many new-build developments include an RMC in the legal structure from the start. The developer creates the company, makes leaseholders members as they buy, and transfers the freehold to the company after the last flat is sold (or after a specified period). This is increasingly common in modern developments.

2. Leaseholders collectively purchase the freehold

Existing leaseholders can exercise the right of collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993. This requires that at least two-thirds of the flats in the building are held by qualifying tenants (the building qualification test), and that at least half of those qualifying tenants participate in the claim. A nominee purchaser (usually a new company set up by the leaseholders) acquires the freehold at a price determined by statutory valuation.

3. Freeholder voluntarily sells

Less common, but some freeholders will sell the freehold to leaseholders outside the statutory process, particularly for smaller blocks where the freehold value is modest.

What freehold RMC directors are responsible for

The responsibilities are the same as for any block management company. Key duties include:

Service charges: Setting budgets, issuing demands, collecting payments, chasing arrears
Building maintenance: Arranging repairs, managing contractors, maintaining common parts
Compliance: Section 20 consultations for major works, fire safety, health and safety
Insurance: Arranging and maintaining adequate buildings insurance
Companies House: Filing annual confirmation statements and accounts
Accounts: Producing year-end service charge accounts following RICS/ICAEW guidance

The additional responsibility of freehold ownership: Unlike RTM directors, freehold RMC directors are also responsible for ground rent collection (if applicable to any remaining leases), lease extensions, and potentially granting new leases. These are landlord functions that don't apply to RTM companies.

Common challenges for freehold RMCs

Getting enough directors

Most blocks need 3-5 directors for good governance. In a block of 8-12 flats, finding volunteers is often difficult. The same 2-3 people end up doing everything, leading to burnout and governance risk.

Succession planning

When a leaseholder sells their flat, they cease to be a member of the company. If they were a director, that directorship needs filling. Ensure your Articles of Association make it straightforward to appoint and remove directors.

Decision-making disputes

When leaseholders disagree about spending priorities (new windows vs. lower service charges), the democratic structure can create friction. Clear Articles, regular AGMs, and transparent budgeting reduce conflict.

The 18-month rule

Volunteer directors managing finances part-time are most at risk of missing the Section 20B deadline. Costs incurred more than 18 months ago without a demand or written notification are irrecoverable.

Sources

This guide applies to England and Wales. Scottish and Northern Irish property law differs significantly. This is general information, not legal advice.