Advice for RMC directors

 

What is a Resident Management Company?

This  is a  formal Company, as  defined and  governed by The Companies  Act  2006,  that consists entirely  of the residents of the  building or  development that you've  bought - that  means  you  have  to run the  Company too. 

You'll   need  to  check  your  Lease to  see  how the  RMC  exists - it  has  become  common for the  RMC  to  be a  named  'party' to the  Lease i.e.  as  well as the  developer  (who  would  also  normally  be the  Freeholder)  yourself  and the RMC  are  named:  this  is known as  a 'tripart' Lease  because there  are  three  parties.

When  you  sign your  Completion  papers you're   at the  same  time  becoming  a  Member  of the  RMC.  Amongst  all the  papers  then  sent  to  you by  your  solicitor  will be the Memorandum of  Association  and  Articles of Association - these  lay  down  how  your  Company  is  run and  are the  rules  of  management.

The  classification  of Company  is  'private and  limited  by  guarantee'  i.e.  it  has  no  share  capital so  there  are  no  shareholders,  indeed the  Company does  not  trade which  means  it  never  has any   turnover  and  is  classed  as  'dormant'.

Mixed  tenure  developments  commonly  use  this  type  of Company   as  its  model - the  initial  builder/developer  'incorporates'  (forms)  the  Company  at  an  early stage and  provides the necessary Company  Officers (as  defined  by the  Companies  Act  and  it's  own  Articles)  to  run the Company until  these  responsibilities  are  handed-over  to the  residents;  this  is  likely  to  be  at the  time  when all  Leases  have  been signed  so  will  be  some time  after the  building  work  has  finished.

So  the  intention  is  for the  Company  to be controlled  by the  residents  who  live  there and  so  they  become  the  Directors  of the  Company.  The  practicalities of  how  and  exactly when this happens, though,   can  be  a  controversial  issue which might  lead  to  frustrations and  sometimes  disputes  between the  residents and  developer -  the first Managing  Agent is likely  to be   appointed  without any  consultation  with the  residents.

What is the role of an RMC Director?

As  this  is  a formal  Company  there  must  be  'officers'  or  directors.  The  role  and  duties of the  Company Secretary  are  typicaly  performed for  an  RMC  by the  Managaing  Agent  or  sometimes  the  accountant.  The  directors   will  be  Members  of the  Company, which  means  they  are  residents i.e.  a  Leaseholder who  has  signed the  lease  and  other  paperwork  at  Completion.

Becoming  an RMC director can  be a  daunting  prospect, but  it's a  role that plays a  critical  part in the  sucess of  your  local  community,  which  will also  include  at  least  35%  of   social  housing  on your  development.  It  is  rewarding  and influential,  and  with a  small amount of  knowledge   doesn't  need  to  occupy  a  large  amount  of  time.  The  actual  role  can  vary  significantly depending  on  your  development and  is shaped  by what the group  of  directors can and  are  willing  to  manage  themselves. Generally  it  is  recognised that the  directors  are  doing  this  voluntarily so  it  shouldn't  be  too  onerous.

Therefore it's  quite  likely  that a Managing  agent will  be  employed to  manage  the  whole estate,  engaging contractors (cleaners, gardeners,  window  cleaners, etc) to attend  to all things  defined  by the  Lease as the  RMC's  responsibility. 

The  number  of  directors  you  have is  to  be  considered - there  may  be a  stipluation  about  this  in the  Articles.  Typically  at  least  two  are  recommended  but best  practice  is  to  have  a  manageable  number  which  reflects  the  size  of  your  development.  It  is  quite normal  to  have  6  or  more  directors if there  are  more  than  200  residents.  Also  depending  on the  time available  of  your  director's this  may  dictate the extent  to which  management  functions  are  out-sourced but  make  sure you  never  compromise knowledge  and  experience at the  expense  of  unqualified  volunteers!

One  important  point  we  often  make is  not  to  be  overly  concerned  with the  liaibilty of  being an  RMC  director - it  is  recognised  standard  practice for the  Company to  arrange Director's and  Officer's  insurance  cover which  indemnifies the  holder  against  potential  claims.  Note,  however, that  in the  case  of Health and  Safety breaches it  is  possible  for   criminal action  to  be  brought  directly  against the director's  in civil law  so  we  would  strongly  recommend  your  H &  S procedures reflect  this - MixTen Services Ltd can  assist  you. 

Typical issues faced by RMC Directors and  how MixTen Services Ltd  can  help

We  have a wealth  of  knowledge  and  experience  here  at  MixTen Services Ltd   that  can  help and  support  you  as and  when  issues  arise.  We  find  that  at the  outset of  your  directorship there  may be a  need  for assistance.  Whether  this is  to  work with  you  and  a  Managaing  Agent that  has  been  'inherited'  from the  builder/developer  or  perhaps there  are  practical  issues  on  your  development  like  parking  or  constant  Lease  breaches that  have  become  common  place.

There  is also likely  to  be  requirement  for alot  of  liaison  with  other  stakeholders,  such  as  Housing  Associations.   For  some  time  it  has  been Government  policy to  have  at  least  35%  social  housing   so  Housing  Associations  are a  key  stakeholder  who need  to  be  embraced.   

In  our  experience it  is  better to  form  alliances and  work  closely  together so  that  you  truly  represent  the  whole  of the  development -  the whole  community must  work  together.  

We  recognise  also that there  may  be  an  element of  retail  or  business use  on the  development  and again  it  is  better  that  there  is  full  communication between  all  parties.

Remember  always  that if  you  are  employing  a  Managing Agent  then they  are working  for  you  and  all  of the  residents,  who  all  expect to  get  value for   money.  MixTen Services Ltd  will  work  with  you  to ensure  your  Managing  Agent  is employed  on  fair  terms  to  all  parties and  at  an  acceptable  Fee  level.  As  directors  it  is  your  duty  to support  them but  you  should  also  be fully  confident  with their  ability  and  happy  with their  performance.

 

Next steps

We provide a training and  preparation  for directors  or  prospective  directors  of Resident Management Companies.  It is  is packed with valuable information for anyone taking an appointment or has been a director but would like to extend their knowledge. We  have  developed  this  through  association  with  the  Leasehold  Advisory  Service  (LEASE)  and  the  Federation of  Private Residents'  Association (FPRA). 

Our  service  also  includes adapting  our  Training  Programme  to  meet the  specific  needs  of  your development,  typically  at the point  of assuming  RMC control  from the developer.

Please  talk  to  us  about  your  needs - we  can  help!