Volunteer directors of residents’ management companies across the UK that have taken control of their own blocks can be handling five-figure service charge revenues.
Now Deacon Insurance has warned they may still be liable, even if they retire and move away from the block, as the consequences of any decision that they made will follow them. They could face potentially unlimited personal liability in the courts.
“While it is good news for other leaseholders that resident-controlled management companies have to be set up as limited companies so that directors have well-defined responsibilities, it exposes the volunteers to liability,” says Deacon’s managing director Nigel Feast.
“In fact, even though they are volunteers, the law treats them no differently than if they ran a big commercial organisation.”
Mr Feast said few leaseholders begrudged paying a little extra on their service charge to provide these volunteers with the directors’ and officers’ (D&O) liability cover and peace of mind they deserve.
“However, what directors may not realise is that the liability for their decisions follows them, even if they retire as directors or move away. If the D&O insurance has not been renewed, they could indeed face personal claims if a decision they made, for instance, affected the value of a neighbour’s flat.
“It’s not really as complicated as it sounds, and these policies cost only a few pounds per flat.”