As anyone who’s attended our recent enfranchisement or leaseholders’ webinars will know, many residential apartment buildings create a residents’ management company (RMC), which are owned by leaseholders, to deal with the management and maintenance of the building, writes Laurent Vaughan a Senior Solicitor in our experienced Landlord & Tenant team.
RMCs are required to have directors, who are responsible for their day-to-day management. The directors are usually the owners of flats who accept the appointment to gain further input and visibility on the decisions of the RMC, and because they see it as a positive way of supporting the community they live in.
But none of the recent legislation around leasehold has recognised that acting as a director is usually an unpaid role and carries many of the onerous risks being a director of a limited company brings.
To work properly the role of the RMC requires a significant time commitment by directors, who should attend board meetings, keep up to date with information from the property managers and liaise with other leaseholders and third parties on a regular basis.
Sometimes quite personal decisions need to be made, and directors may find themselves in direct conflict with members of the RMC, who might probably be their neighbours. For instance, the decision to recover several months’ of unpaid service charges might require the appointment of a solicitor or recovery agency to force a neighbour to pay their fees.
Directors of RMCs are also subject to various directors’ duties, which if breached can lead to personal liability for the director concerned. These range from specific responsibilities set out in the Companies Act 2006, the Landlord and Tenant Act 1985 and duties under health and safety legislation. Anyone who’s been following the progress of the Fire Safety or Health and Safety legislation post-Grenfell Tower will appreciate that many of these duties are very onerous, requiring training, which many volunteer directors are understandably less inclined to do.
I always advise anyone thinking of joining an RMC to ensure that the company has directors and officers’ liability insurance in place, to protect directors from any claim brought against them in respect of their actions as a director.
Directors also need to be aware of the block’s Articles of Association and any other documents governing the running of the RMC. They need to understand the nature and extent of any obligations on the landlord or the RMC in the leases themselves and ensure compliance with them.
A frequent cause of friction for example relates to the application of policies requiring leaseholders to alter their flat or introduce pets.
Fortunately, firms such as Bishop & Sewell have lots of helpful resources available to RMC directors both new and experienced. My colleagues’ frequent articles here on this blog should also give you some handy tips and signposts on how to avoid the pitfalls. Being an RMC director is a necessary and important role, but one to approach with your eyes wide open.
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The above is accurate as at 24 June 2022. The information above may be subject to change during these ever-changing times.