Usually within the lease the management structure for a block of flats is defined. Usually it will be either a) The Landlord / Freeholder b) Residents Management Company (RMC) c) a named manager. One of these will then be responsible for the overall management of a block of flats. This could be an individual person, a company or a local authority.
Alternatively, it can be the leaseholders themselves if a residents’ management company (RMC) is set up within the lease to manage the development or the residents own the Freehold of the block of flats
Discerning the responsibilities of a leasehold management company can be complicated, so our clear and concise guide should help to ascertain exactly what they are responsible for.
When a RMC manages the communal areas of a building and estate areas will require maintenance:-
- Structure, walls and roofs
- Communal hallways
- Car parking spaces
- Cleaning, Gardening and window cleaning.
- Facilities onsite such as vehicle gates, lifts, smoke and fire alarms.
- Health and Safety / Fire Risk Assessments and related issues.
However this is not necessarily the limit of the responsibility:-
- Preparation of Year End Accounts
- Service Charge Collection
- Block Building and Public Liability Insurance
- Acting as Company Secretary
- Dealing with flat sales
- Service Charge invoicing and arrears collection.
- Dealing with Breachs of Lease
How are the leasehold management company responsibilities funded?
The company’s responsibilities are funded by a mandatory contribution from the owners within the building, known as a service charge. The services to be provided are dictated by the obligations set out in the lease or transfer documents.
The service charge will usually cover the day to day expenditure for the property, whilst a reserve fund may be saved towards items of known future expenditure, such as roof replacement or repairs.
How are the members of a leasehold management company selected?
Typically, an RMC is made up of shareholders or members who are also the owners of the flats or houses within the block or estate. Usually the directors of the RMC are selected from the owners within the building – positions which are normally voluntary and unpaid.
The duties of a director include using independent judgment and avoiding conflicting interests. They must not accept benefits from third parties.
How is a leasehold management company set up?
Both a memorandum of association and articles of association are required for a RMC to be formed in the UK. The memorandum of association is the document that sets up the company and the articles of association set out how the company is run, governed and owned.
What are the board’s responsibilities?
- To approve the yearly company accounts
- To make decisions about the running of the RMC and the property
- To attend board meetings
- To consider the financial position of the RMC
Analysing the financial position may include setting up the service charge and planning financial goals and future requirements. The RMC’s funds are separate to the service charge funds, and a separate set of annual accounts will need to be produced each year.
What is ‘The Right to Manage’?
The Right to Manage gives leaseholders the opportunity to take over the management of their property.
The Right to Manage (RTM) was introduced through the Commonhold and Leasehold Reform Act 2002. It gives leaseholders the statutory right to take over the management of their property from the landlord by setting up a ‘right to manage company’.
They do not have to get the landlord’s permission, prove any mismanagement or obtain any court order to utilise the right.
What does a managing agent do for a leasehold management company?
Whether you are the director of a residents’ management company or you have exercised ‘The Right to Manage’, a managing agent can help you with your property management responsibilities.
This is especially useful if you do not have the time to carry out all the responsibilities or need expert advice. A managing agent makes sure that clients are apprised of their legal obligations and that everything is maintained to the highest possible standards.
- Collection of service charge and ground rent
- Management of contractors
- Compliance with relevant company and property law
- Management of on-site staff
- Preparation of budgets, financial forecasts and year-end accounts
- Handling solicitors’ enquiries on the sale of individual properties
- Engaging and management of maintenance contracts and repairs
- Administration of insurance and communal claims
- Compliance with health and safety legislation
- Attendance of meetings
- Regular property visits and inspections