Securing the right to manage is a significant milestone for leaseholders. It transfers control of the building's management functions — often including maintenance, service charges, and, crucially, insurance — from the freeholder or their appointed managing agent to a company owned by the leaseholders themselves. With that control comes responsibility: from the acquisition date, the RTM company typically becomes responsible for ensuring the building is properly insured, without any gap in cover. This guide sets out the covers a block of flats may need and the practical steps to procuring them.

What Changes When RTM Is Acquired

Under the Commonhold and Leasehold Reform Act 2002, an RTM company takes over the management functions set out in the leases — often including the obligation to insure the building, where the lease places that duty on the party responsible for management. The freeholder's existing policy will typically lapse or be cancelled at the acquisition date, so the RTM company will usually need its own buildings insurance in force from day one.

This is a genuine change of role. Leaseholders who previously simply paid an insurance charge through the service charge now, through their RTM company and its directors, carry the responsibility for making sure the cover is adequate, correctly structured, and properly evidenced.

Can an RTM Company Insure in Its Own Name?

Typically, yes. The RTM company will usually have an insurable interest in the building by virtue of its statutory management functions, and insurers routinely issue block policies with the RTM company as the policyholder. The policy is arranged in the name of the RTM company (for example, "12 Example Road RTM Company Ltd"), and the premium is typically recovered from leaseholders through the service charge in the usual way.

The freeholder often retains an ownership interest in the building, which is why they are commonly noted on the policy as an interested party — covered in Step 2 below. For a wider view of who is responsible for insuring residential blocks, see who is responsible for block of flats insurance.

The Cover a Block of Flats Needs

Core Covers

Additional Covers

See also our guides to loss of rent insurance and freehold vs leasehold buildings insurance.

Do RTM Directors Carry Personal Liability?

Potentially, yes. The directors of an RTM company are directors in the full legal sense, typically with the duties the Companies Act 2006 places on any director — even though most are volunteer leaseholders acting unpaid. In managing the block they may take decisions on insurance, contractor appointments, fire safety compliance, service charge expenditure, and major works, and a leaseholder, contractor, employee, or regulator who alleges a wrongful act in that management may bring a claim against the directors personally. Arranging inadequate buildings cover that leaves the block underinsured could itself be a decision for which directors are held to account.

Because the RTM company often holds few assets of its own, a claim that succeeds against a director may become a claim against their personal assets. D&O cover can meet defence costs and awards on the directors' behalf, and its typically modest premium is usually recoverable through the service charge. The exposures often mirror those faced by residents' management companies — our guide to Directors' and Officers' Insurance for Residents' Management Companies sets out the risks and cover in detail.

Step 1: Appoint a Specialist Broker

The first decision is who will arrange the cover. The RTM company is typically free to appoint a broker directly — there is usually no need to route the placement through a property manager, even where one has been appointed to handle day-to-day management.

It often pays to choose one specialist block of flats broker and let them work the market on your behalf. Approaching multiple brokers — or worse, going directly to several insurers at once — can be counterproductive. Insurers may see the same risk arriving from different directions ("scattergunning"), which can weaken negotiating positions and may lead to insurers declining to quote at all. A single broker with genuine experience of residential blocks can access the right insurers once, present the risk properly, and secure competitive terms. Our guide to choosing a commercial insurance broker covers what to look for.

Step 2: Agree Values, Limits, and Insured Parties

Before any quotation is sought, the broker will typically work with the RTM directors to make sure the cover requested actually fits the building. Key areas to align on often include:

• Reinstatement value

  The sum insured should reflect the full cost of demolishing, clearing and rebuilding the block, typically including professional fees and VAT where applicable — not its market value. If no recent Reinstatement Cost Assessment (RCA) exists, commissioning one is usually recommended; underinsurance is among the most common and costly failings in block policies.

• Policy limits

  Alternative accommodation percentages, property owners' liability limits, and any inner limits on covers such as loss of rent should be reviewed against the block's actual profile.

• Deductibles

  The excesses applying to each section, particularly escape of water and subsidence, which are often higher than standard perils. Directors should understand what leaseholders may bear in a claim.

• Clauses and conditions

  Any endorsements affecting cover, such as unoccupancy conditions, minimum security requirements, or cladding and fire-safety related terms that may follow from EWS1 or fire risk assessment findings.

• Insured parties

  The policy is typically issued in the RTM company's name, and the freeholder is often added as an interested (noted) party. Agree with the freeholder in advance exactly how their interest should be noted — the precise wording and capacity — to avoid disputes later. Leaseholders' and lenders' interests are generally covered by a general interests clause.

Once the RTM company and the broker share the same understanding of the cover required, the broker approaches the market.

Step 3: Review the Quotation

The broker will then obtain terms from insurers and present a quotation, typically setting out the premium, the covers and limits offered, the applicable excesses, and any conditions attached. The directors representing the block should assess the quotation carefully — checking it against the requirements agreed at Step 2 rather than judging it on price alone — and decide whether to proceed to cover.

A good broker will usually walk the board through the quotation, explain any differences from what was requested, and answer questions before a decision is made.

Step 4: Incept the Policy and Arrange Payment

Once the directors confirm they wish to proceed, the broker incepts the policy — putting cover in force from the agreed date, which should generally be no later than the RTM acquisition date to avoid any gap. The broker will also set out the payment options available, typically a single annual premium or monthly instalments through premium finance, often allowing the RTM company to align payment with its service charge collection.

Policy documentation usually follows shortly after inception and should be retained with the company's records.

Step 5: Evidence Cover to the Freeholder

Freeholders will often request evidence that the building is properly insured, given their continuing interest in it — and where they are noted on the policy, confirmation of that noting. The broker can provide the policy schedule or a confirmation of cover for this purpose. Providing this promptly, and at each renewal, helps keep the relationship on a professional footing and can head off disputes.

Frequently Asked Questions