What is the Residential Management Company for?
A Residential Management Company (RMC) protects the rights of Leaseholders. Its aims are to manage and administer the common parts for the benefit of all owners. Common parts may include the road, landscaped areas (not in private ownership), bin stores, internal communal areas and structures of any building which contains leasehold property within the company’s ownership. There is also a responsibility to enforce restrictive covenants breached by an owner if there is a complaint raised by another owner. The company documents give a wide range of other powers, but these are seldom, if ever, used.
Is the company like a trading business?
Although still a company which must comply with The Companies Act and which must report to Companies House, it is also a Residential Management Company. As such is governed by specialist legislation and codes of practice. It is different to a trading company as there are no assets, no profit or loss, and all monies are held in trust for all members of the company. The annual accounts for Companies House show ‘nil’ figures each year, as it does not generate an income. Whilst accounts are prepared and filed with Companies House; these are a reconciliation of the service charge monies received and spent. These are held on trust within the development’s designated Client Account.
Are directors at risk?
An RMC is limited by guarantee or by shares and the liability per member is limited to one pound. All property owners must be members of the company, and directors must be owners. This is with the exception of Special Directors being appointed in the event that there are no willing members to take on directorship. As with all RMCs, the company takes out annual ‘Directors’ and ‘Officers’ liability insurance to protect individual directors. However, as long as a managing agent handles the money for the company, no director has access to any funds held on the company’s behalf.
What do directors have to do?
As Managing Agent, Watsons provides secretarial duties to the company and will advise on and arrange all relevant management matters. Directors’ responsibilities include ensuring annual accounts are submitted to Companies House within the time limits, and that the agent carries out its duties correctly. They also act as monitors from time to time at the development.
Are directors rewarded?
Only from the knowledge they are contributing to the present and future management of all the owners’ properties, which in turn assists in the maintenance of property values, subject of course to overall market variations. The managing agent receives a fee, but no Director receives a salary and no expenses are reimbursed.
You can find out more about setting up an RMC.
For more information about our Block & Estate Management Services, please call 01603 226500 or email: management@watsons-property.co.uk.
