Block Of Flats Management

The RMC’s are run by directors, who are usually unpaid and appointed by the residents themselves. The Directors will usually appoint a managing agent.

The RMC will have a Memorandum and Articles of Association specially drawn up to allow the company to own, manage and administer a leasehold or freehold property, which is normally divided into several dwelling units or flats, with each leaseholder owning a share in the company. The leaseholder will be obliged to transfer the ownership of the share to the new leaseholder when disposing of the property.

A Residents Management Company (RMC) protects the interests of the leaseholders. RMC’s typically manage common parts of the building although they may have other responsibilities. Your property probably has parts common to all the flat owners living in it: boundaries, roofs, halls, drives and gardens being typical examples. These all require maintenance, insurance, lighting, etc.

Monies for day to day requirements will be collected within your service charge requests, however additional monies may be required for larger projects, i.e. replacement roof, the individual flat owners usually fund these costs, by making periodic contributions into a reserve fund.

Self Management

Flat owners may gain management responsibility in various ways, for example, by purchasing the freehold, through Right to Manage (RTM) or simply by delegation of the management responsibilities from the landlord. Whatever the route, the management is normally exercised through some form of resident management company (RMC).

The RMC will assume responsibility for the management and repair of the building, and for compliance with the requirements of the lease, plus many statutory requirements.

This can often place a large burden of responsibility upon a few Directors and which may lead to future issues if those volunteers are unable to commit to the role in the longer term. There is also a risk that without professional guidance Health and Safety and legal matters may be overlooked or mis-managed.

The choices the RMC has is to self-manage by a formed Committee or by the appointment of a professional managing agent.

Residents Management Companies

Many leaseholders do manage their buildings themselves, with this they acquire the same responsibilities that the landlord has. Leaseholders should be aware of the work required and their obligations to all shareholders, flat owners and the freeholder.

Leaseholders considering self-management should appreciate that this will not provide them with additional freedom as they still are governed by the restrictions and requirements both of the lease and the relevant legislation and codes of practice whilst making management decisions.

The task of management for an RMC is an onerous task, which requires a committee with sufficient members to provide an effective management structure. Director and Company Secretary positions are usually unpaid and rely on a number of reliable members.

Committee members will be required to fulfil their duties, which can be challenging at times.

Duties and obligations

Management of a residential block of flats is a largely practical exercise and demands considerable effort, with meticulous approach and care. The building must be regularly inspected, maintained and redecorated to the required standard and at the required times.

Budgets must be prepared and monies collected for the works. The RMC will need to appreciate exactly how the Lease operates to ensure how the building should be maintained and how the lease permits the charges to be raised, in advance or arrears.

There are requirements to provide final accounts and the annual statutory summaries to all leaseholders.

Although the company is the landlord, the accounts must clearly distinguish between the financial affairs of the company and those of the landlord. In cases where a resident is in default of his or her lease, in non-payment or arrears of rent or service charges or in breach of a clause of the lease controlling the use of the flat (subletting, for example), the RMC will be required to take action; this can include threat, or ultimate use, of forfeiture and possession proceedings. RMC’s may feel uncomfortable in direct action against a fellow leaseholder/flatowner and consider such actions better carried out by an independent professional.

Leaseholders should choose self-management only where they have a complete understanding of the scope of their role and responsibilities and they must have or acquire the facilities and resources to undertake the task properly. The building is, after all, an investment of many shareholders.

There are many benefits of professional management, however this service does come at additional cost to leaseholders.

Professional managing agents will:-

• Budget for and collect service charges
• Work hard for future large expenditures to reduce the risk of unexpected levies to shareholders
• Comply with Companies House requirements
• Insure and maintain the building
• Provide a co-ordinated approach in respect of inter-flat issues 
• Provide a company Secretary 
• Ensure that the correct formalities are properly completed upon the sale/purchase of a flat
• Understand your individual requirements so that a unique team approach can be provided 
• Offer you clarity on some of the more complex lease terms as necessary 

Professional managing agents would have full professional indemnity insurance

Specification

When you interview Managing Agents you need to be clear about what you want them to do. Produce a specification of the jobs you need them to carry out and provide it to all agents you interview and gain confirmation that they are able to complete all of the tasks required

Agents' qualifications

One of the most important qualifications is the ability to provide a responsive and experienced service.

Agents' insurances

It is most important to confirm the prospective agent's professional indemnity insurance. If the agent is a member of a professional or trade association, professional indemnity insurance will be an automatic condition of membership. However, the existence of the cover, and its extent, must be checked. Where a resident management company delegates tasks to a managing agent, the residents' company will remain legally answerable for any neglect, omission or mistake by the agent and must be sure that the agent has the means for compensation or damages.

References

It is sensible to gain references from your chosen managing agent. It is sensible to ask for references from a director of a block they currently manage that is similar to your own.