An RMC is a company registered with Companies House set up to undertake the upkeep of the communal areas and to manage the service charge on the building or estate. The company will have initially been created by the developer and will be contractually based on the legal documents of your purchase.
Directors will be appointed by the developer and are normally senior members of their organisation. Typically, after the scheme has been completed the initial Directors will resign and handover the running of the company to its shareholders. Whilst there are some technicalities as to who can become a Director of the company, generally, these posts will be filled by the owners of the flats or houses.
There are typically two types of RMC companies (those limited by ‘shares’ or by ‘guarantee’) however in nearly all cases the company falls under the ‘Limited’ structure. This means the company has certain annual obligations such as filing company accounts and secretarial duties. The Property Institute (TPI) offers a comprehensive guide Understanding Resident Management Companies for further information.
You may have completed a director’s nomination form as part of your purchase or you may have nominated yourself to stand as a director. As a potential director you should be aware of your obligations. The role is voluntary, and you will not be paid for the work or time you put in. You will be legally registered at Companies House and will be a recognised shareholder.
The Memorandum and Articles of Association (Mem & Arts) for the Management Company clarify the duties of the Company, its Directors and the rules which the company must follow. They dictate how the Management Company makes decisions and to a certain extent define processes such as how to call meetings and nominating new Directors.
Watch the video to find out more about RMC Director roles and responsibilities.
The Companies Act 2006 (Statutory Law) defines how Directors of all companies must operate. The Act provides general guidance on the duties of the Directors and should be read in conjunction with your company’s Mem & Arts. We strongly suggest you familiarise yourself with the variety of laws that impact the management of your development such as Health and Safety legislation and Landlord and Tenant Law.
Take some time to read and familiarise your lease or transfer – these documents explain the RMC’s obligations. Additional guidance on leasehold is provided by gov.uk.
This essential insurance covers past and present Directors who may have inadvertently breached their duties to the RMC. Grange advises all their clients to take out cover to help protect themselves from a personal claim. Click here to read more about D&O Insurance.
In our experience, Board members have a variety of backgrounds, skills and experience. Individual members may therefore be allocated specific areas to oversee based on their skill sets; for example an accountant may take control over budgets and accounts.
As a Director, one of your responsibilities will be to consider the appointment of a Managing Agent, part of which will involve agreeing the level of service and support that your development requires.
Grange Management provides professional guidance and support helping RMC directors on all matters relating to the management of their development. With delegated authority levels our aim is to ensure that directors are not overly burdened on a day to day basis and are consulted on matters that require decision and consent. We work closely with directors to review and complete the annual service charge budgets in addition to the annual service charge accounts. With the right support from your managing agent, directorship should not be a complicated or time consuming obligation.
If you’d like to learn more about how to change managing agents, we’ve outlined the process step by step here.
Buildings insurance is top of the list for most RMC Directors. It is a crucial task that requires in-depth knowledge of the building/development, its history and the insurance market.
Few Directors receive formal training on the risks associated with either underinsuring or over insuring a property. Even fewer have expertise in navigating the complexities of the insurance market. For most Directors, partnering with a reputable and experienced insurance broker or intermediary such as a property management company is the most reliable way to secure the right policy.
A building with the correct level of cover ensures that residents and owners are protected against the costs associated with physical damage to their homes or properties. With so much responsibility resting on the procurement of insurance for the building, Directors should consider giving themselves the same level of protection.
Many Directors understand their criminal liabilities, such as maintaining accurate financial records and submitting them on time. However, civil liabilities may not always be considered. It is important to note that Directors and Officers of an RMC can be held personally accountable for the outcomes of their decisions. This may seem unfair, especially since many take on the role voluntarily with the intention of helping.
However, difficulties can arise, especially when finances are involved. This, in addition to overseeing building maintenance and insurance, managing service charges, handling financial records, and staying informed about legal updates means that D&O Insurance should be a major consideration for anyone taking on the role.
Serving as a Director or Officer carries a significant level of trust, and individuals in these positions are personally responsible for any negligent actions or breaches of duty. In this role, there is no limit to your liability.
Legal costs are not only incurred if wrong doing is established – simply defending against claims can lead to significant expenses, requiring legal advice and representation.
Whilst Directors act in good faith, they can still be accused of anything by residents. These are some examples of the type of issues that can arise:
Taking out insurance provides cover for defence costs and/or compensation for civil liability charges relating to a “wrongful act” in connection with RMC matters.
Wrongful acts are either actual or alleged and can include breach of trust/duty, libel and slander, error, wrongful trading and neglect.
This type of insurance policy offers financial protection to both the RMC and its Directors and Officers. It covers the expenses incurred in defending against such claims or prosecutions and, depending on the specific policy terms, may also cover the cost of settlements or awarded damages arising from a variety of circumstances.
For more information on setting up an RMC, contact Richard Smith on 01483 411700 or by email.