Flat Living WEBSITEGUIDE
howto form a residents’ management Company Karenhowell-BowleyisJordans’ foremostexpertontheincorporationof RMCs. Hereshesharesherextensiveknowledgewith Flat Living
Theleaseholders and/ or freeholdersofaResidents Management Company(RMC) will beadiverse groupofpeople with onething in common. They shareabuilding that has been separatedintoindividually ownedand occupiedunits. Each unit dependsuponthe others for supportand protection-quite literally. So thewalls of oneflat will depend upon thewalls of anotherinorder just to stay up! Beingsointerdependentthey wouldbeimpossible tomanage withoutsomeformofintegrated management
structure.Any potentialbuyer ofaunitshould ensure that before he purchases there is a proper structure in place providingrules to enforcethe obligationsbetween eachunit in relation to the others. Most freehold propertyowners
neverhavetoaddress these problemsbecausetheyare the absoluteownersofevery single part of theproperty.However, with flats,under thetermsof thelease theleaseholders will have enteredintocovenants with thelandlord,which areessential forthe efficient running of thebuilding or estate. Thesecovenants are obligationscontractually binding on theleaseholders.Without a management structuretoenable theenforcing of covenants andcollectingmoniesdue, management of theproperty in questioncould break down. Residentmanagement companies will deal with (amongother
things): nManagement andmaintenance of common partslikestaircases, halls, gardens, drive-ways,roads
and other access-ways; nCollecting servicecharges and
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arrangingservices –cleaning, decorating,liftmaintenanceand
windowcleaning; nPayment of insurance,main- tenancecosts, professional fees,
rates, taxes etc.; and nPurchase orownthe freehold i.e. become the landlord, asnecessary.
Buyinga flat Whenbuyingaflat,abuyer should always consider the management structure. Flatsin well-managed blocks areusually easier to sell and because they arewellmanaged arelikelyto be moreharmonious places in which to live. Therecognisedandmost
common structureisthe limitedcompany.Whoowns thecompany will oftengovern howwellorbadlymanagement is
controlled.Structureswill varyaccordingtothe ageofthe block,whereitislocated, andthe number of flats andalsoaccording to themethodbywhich controlof management has been acquired.
Companylimited By shares or guarantee?
By shares The company will normallyissueone sharetoeach flat owner. Each share will have anominal value and upon pay- ment for the share each appli- cant shallbeentitledtoand then become amember of the com- pany andcan vote asamember. It will usuallybeaconditionof ownership of the flat that the newtenant becomes amember of the company and the old ten- anttransfers theshare.Ifthere are two tenants of a single flat (
e.g.husband andwife) theymay
ownthe
sharejointly.Caremust be takentoensurethatthey are not issued one share each as then this will give themtoo many voting rights andupset thebalance of powerbetween flat owners. If the company fails, shareholders’liability is limited by theamounttheyhavepaid for their shares. A company lim- ited by shares can distribute any profits to themembers.However the downside of profit distribu- tion to themembers of the com- pany is that thecompany and itsmembers would then become liable to tax.
By Guarantee
This is the simplest form ofMan- agementCompany if youliveina relativelysmall block of flats. It is much easier to deal with changes of ownership - the outgoing ten- antresigns,the incoming tenant is admitted asamembersothere is no need to physically transfer
shares.Inaddition, it is usually onemember one vote. No share certificates are issued.●
Toreadthis article in full goto:www.flat-living.
co.uk/advice/770-how- to-form-a-residents- management-company
WhaTElSEISThErE onlInEonmanaGEmEnT?
Othertopicscovered by this area
of thewebsite include: nshould we appoint a managing agent?
http://www.flat-living.co.uk/advice/16-manage-your-block
nWhat is a residents association?
http://www.flat-living.co.uk/advice/772-what-is-a-residents- association-
nWhydoweneedaresident’sManagement company?
http://www.flat-living.co.uk/advice/769-why-do-we-need-a- residents-management-company
nWho are rMCmembers?
http://www.flat-living.co.uk/advice/771-who-are-rmc-members
nWhat are Memorandumand articles of association?
http://www.flat-living.co.uk/advice/777-what-are-memorandum- and-articles-of-association
nWhat do rMCs need to do to register their company?
http://www.flat-living.co.uk/advice/776-what-do-rmcs-need-to- do-to-register-their-company
narMalessee advisory Notes 14 and 8
http://www.flat-living.co.uk/advice/779-arma-lessee-advisory- note-14-the-companies-act-2006-and-residents-management- companies
http://www.flat-living.co.uk/advice/778-arma-lessee-advisory- note-8-accounting-for-service-charges
Issue 15 Flat Living
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