Right to Manage Companies (Model Articles) (Wales) (Amendment) Regulations 2025: integrated impact assessment

Section 1. What action is the welsh government considering and why? 

In narrative form, please describe the issue and the action proposed by the Welsh Government. How have you applied / will you apply the five ways of working in the Well-being of Future Generations (Wales) Act 2015 to the proposed action, throughout the policy and delivery cycle?

The RTM Companies (Model Articles) (Wales) (Amendment) Regulations 2025 amend the method by which voting rights are allocated in Right to Manage (‘RTM’) companies, following a change to the Right to Manage qualification criteria made in the Leasehold and Freehold Reform Act 2024. 

The Amendment Regulations 2025 will preserve the ability of tenant members of a RTM company to exercise a majority over landlord members, which could otherwise be undermined as a result of the change in primary legislation.

The Law Commission undertook a project on the Right to Manage, which included considering the problems with the operation of the law currently, consulting on potential changes and making recommendations to Government. The project considered a wide range of matters, including qualification criteria for the RTM, which the Commonhold and Leasehold Reform 2002 Act limited to buildings with less than 25% non-residential space.

The UK Government, in collaboration with the Welsh Government, undertook further consultation which considered qualification criteria, as well as the need to amend voting rights if the non-residential limit were to be amended. Reforming the leasehold and commonhold systems in England and Wales - GOV.UK ran from 11 January to 22 February 2022. A Government response was published on 27 November 2023, alongside the introduction of the Leasehold and Freehold Reform Bill to UK Parliament. 

The response confirmed that the proposal to increase the non-residential limit to 50% would be pursued. In relation to voting rights, the majority of individuals (89%) agreed that voting rights should be amended, and the majority (80%) supported the option under consideration (restricting total votes allocated to landlords to one third of the total votes of qualifying tenants). Others, particularly landlords, did not agree with the option, but the consultation response set out reasoning to support the adoption of that option, even given the lack of unanimous support from all those potentially affected. These Amendment Regulations 2025 give effect to the confirmed policy.

Costs and Savings

The Explanatory Memorandum contains a Regulatory Impact Assessment.

Section 8. Conclusion  

8.1 How have people most likely to be affected by the proposal been involved in developing it?

As referred to in Section 1, a consultation has been carried out on the proposed approach to amending model articles to accommodate the change to the non-residential limit which was made in LFRA 2024. The consultation response, issued in November 2023, confirmed the changes that would be made. No other changes are being made to the regulations.

8.2 What are the most significant impacts, positive and negative?

These regulations will make a change to the allocation of voting rights to preserve ability of tenant members to exercise a majority in the decisions of the RTM company, which could otherwise be skewed in favour of the votes of landlords in a property with a higher proportion of non-residential space.  The amendment to limit the total votes exercisable by landlords under leases to one-third of the total votes exercisable by qualifying tenants, will retain the aim of the right to manage by preserving the current status quo and the ability of tenant members of a RTM company to exercise a majority over landlord members.

After undertaking the mandatory impact assessments required, no significant negative impacts have been identified. The positive impacts identified generally relate to preserving the policy intent of the RTM (following the extension of qualifying criteria to include properties with a higher proportion of non-residential space by the Leasehold and Freehold Reform Act 2024), which would otherwise be undermined by the unamended model articles.

8.3 In light of the impacts identified, how will the proposal: 

• maximise contribution to our well-being objectives and the seven well-being goals;  and/or,
• avoid, reduce or mitigate any negative impacts?

The Amendment Regulations 2025 preserve current policy. They address the potential negative impact on the operation of newly created RTM companies under the existing voting rights outlined in the current model articles. Given the limited remit and technical nature of the regulations, it is not considered that there are opportunities to promote wider policy objectives.  

8.4 How will the impact of the proposal be monitored and evaluated as it progresses and when it concludes?

The UK Government has committed to post-implementation review following the implementation of the LFRA 2024, which prompted the change to model articles achieved via these regulations. No further specific review is planned.