Are Flat Management Companies suitable for managing community wide schemes? 

Flats are normally managed by a company limited by shares or by guarantee. Community schemes have to be managed by a Community Interest Company (CIC) or Development Trust (DT). These schemes have an asset ‘lock’ that ties the assets into the management company indefinitely thereby preventing community assets being sold off in the future. The asset ‘lock’ is not a feature of traditional management companies.

Tenants of flats are directors of a flat management company. Managing community assets requires wider participation, so there is a need for other parties to be directors and members of the company to bring in additional skill sets. A CIC or DT allows not just those in flats but other residents and third parties with a wider interest in the community to participate, such as a local school, housing association or faith establishment.

Flat management companies often do not have an AGM and can be run by an individual arranging the insurance and building maintenance as necessary, or through a relationship with a managing agent. Community Management Schemes tend to be more complicated and time intensive in terms of maintenance: energy centres have a technical requirement, managing community buildings and space requires more specialist compliance management with health and safety for public buildings and outside spaces. Unless there is a large team of committed volunteers, a community management scheme will almost always need a professional property manager to run it.

Community Wide management schemes typically have more assets to manage. That makes them more time intensive and expensive for the property manager. For example, running community activities such as fairs and bonfire night parties all entail a cost. For these reasons, the traditional resident-run flat management company is not likely to be the correct vehicle.

Matt Ashley is an Associate at Osborne Clarke Solicitors