What is a Residents Management Company (RMC) ?
The RMC’s are run by directors, who are usually unpaid and appointed from the residents themselves.Company records show that there are over 60,000 registered Residential Management Companies and a high proportion relate to flats. The highest concentrations are in the South East, South Coast, Bristol & Bath areas, Home Counties, South Midlands and the North West.
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.
Should we Self Manage or appoint a Managing Agent?
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.
The choices The RMC has is to self-manage by a formed Committee or by the appointment of a professional managing agent.
ARMA is the leading trade body in England and Wales that focuses exclusively on matters relating to the block management of residential property, whether for landlords or resident management companies. Members agree to adopt and comply with the principal objectives of the Association and undertake to follow the Codes of Practice issued by the Royal Institution of Chartered Surveyors. The Association promotes and encourages consistent standards of practice by its members and provides a platform for developing and contributing to public debate on new legislation concerning management issues.
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.
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.
Should we appoint a Managing Agent?
There are many benefits of professional management, however this service does come at additional cost to leaseholders.
Professional managing agents will:-
Budget for service charges
Send our service charge demands
Collect service charges
Plan for reserve funds
Provide repairs and maintenance as set out in the lease.
It is vital to ensure that the agent has professional indemnity insurance as it is a further protection against negligent acts or incompetence.
What to check when appointing a Managing Agent?
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
There is only one specific qualification for a managing agent, that of the Institute of Residential Property Management, although some managers will be members of the Royal Institution of Chartered Surveyors, or, in the public sector, the Chartered Institute of Housing. However, many agents are members of the Association of Residential Managing Agents, or those who specialise in the management of retirement schemes may be members of the Association of Retirement Housing Managers. The advantages of the appointment of an ARMA or ARHM member is that they will have had to satisfy an independent body of their competence and, as a condition of their membership, will be required to abide by a code of practice and a complaints and disciplinary procedure. Therefore, the management company and individual flat-owners will also have recourse to ARMA or ARHM in the case of complaint about one of their members.
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.
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.
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