Life as a director in a block of flats by Jim Thornton of Hurford Salvi Carr Property Management

Holding it all together in stability and harmony are probably the Directors of the flat management company. It may be a Residents’ Management Company set up as a party to the leases, or it may increasingly be a Right to Manage (RTM) Company. People come and go, and so volunteer Directors are always needed.

But people are wary of the responsibilities of being a Director. Could I be prosecuted if there is an accident? Could I be liable for costs if somebody takes the company to court? Managing Agents are asked the same questions time and again. These are answered in a new Booklet called Help! They Want Me to be a Director.

THE TOP TEN QUESTIONS

The Booklet addresses the ten questions that are probably the most important ones. The guiding document for any Director is the Articles of the company. The Commonhold & Leasehold Reform Act 2002 brought in the Right to Manage, and with it a statutory set of Articles. In an Appendix, these RTM Articles have been analysed, and given an extra blank column so that readers can use these as a checklist for their own Residents’ Management Company.

What is not clear in the RTM Articles is how an RTM company earns any income. Increasingly there is a risk that a Flat Management Company can lose a case at the Leasehold Valuation Tribunal and be left with costs it cannot recover through the service charge. Since the RTM Articles cannot be changed (they are defined by statute), the Directors of RTM companies face particular problems in such a case, but there are options for Residents’ Management Companies.

HOW DEVELOPERS CAN HELP

It would be really helpful if all Flat Management Companies had the same Articles. If such an approach is adopted by more developers, it could lead to an industry standard where all flat owners know how the governance of their block works.

As long as Directors know what they are going into, act honestly and thoughtfully, and are supported by a good Managing Agent, then they have nothing to fear.

Jim Thornton is Managing Director of Hurford Salvi Carr Property Management

For a free copy call 01992 515595