Flat Management Company

deFoix

Hi all,

Can anybody give me some advise (or point me in the right direction) of the best arrangements for setting up a flat management company to own the freehold title of my block of 4 flats?

There's lots of things to consider and I've spoken to two property lawyers already and not had clear answers. So for example:

a) Company limited by shares or guarantee? - I heard that shares is worse because of extra faff dealing with transfer of share certs... but others say shares is better, why?

b) Should the 'reasonable service charges' required by each lease be done on the companies books or should this been outside the companies jurisdiction?

c) Having a dormant company sounds better for ease of accounting but does this depend on the answer to b) or not? I heard that service charge monies are held in trust by the company so might not count as 'significant accounting transactions'.

e) Are there any standard form articles of association? Can't find any freely available on the web?

f) How should the directors voting rights work for deciding freeholder prerogatives? Does anyone have examples e.g. unanimous for 'major' items and 'majority' for minor? Extensions to the house, large one-off service charges are probably major items.

g) Should all the 4 leaseholders be directors? Do we need a secretary? Do we need an accountant?

As above any info or experience on this would be very gratefully received.

Thanks,

G_M

Lots of useful info on http://www.lease-advice.org/

Search around the site.

elverson

g) One of the Directors can also be the Secretary.

deFoix

I’m quite shocked given the number of ‘share of freehold’ properties being bought and sold that some of these issues aren’t discussed more on this forum. Anyway for other’s benefit I have complied a list of advice on the topic as set out below. Even after reading all this guidance myself I’m still not clear on a number of areas.

It would seem to me that if you have bought a ‘share of freehold’ or are thinking of buying one these types of questions should be in the forefront of your mind.

Association of Residential managing Agents guide for Residents’ management companies.
http://arma.org.uk/downloader/v94.pdf

Institute of Chartered Accountants in England and Wales guide on Residential Service Charge Accounts.
https://www.icaew.com/en/library/subject-gateways/accounting/accounting-by-industry/service-charges-and-service-charge-accounts
https://www.icaew.com/-/media/corporate/files/technical/technical-releases/legal-and-regulatory/tech-03-11-residential-service-charge-accounts.ashx?la=en

More guidance on service change accounts:
https://www.hscpm.co.uk/downloads/private/HSCPM_Service_Charge_Booklet.pdf


These are model articles of association for “Right to Manage” companies (defined in section 73 of the Commonhold and Leasehold Reform Act 2002) provided in Statutory Instrument No. 2767. You may not have a RTM company but the articles should give a flavor of what is normal. Things to note:
Articles give the company power to:
• Insure the premises in accordance with the lease agreements
• Levy service changes in accordance with the lease agreements
General rule is that majority decisions of directors is binding.
Members must be qualifying tenants and joint membership is allowed (2 people owning leasehold of one flat etc.).
Company is limited by guarantee.
http://www.legislation.gov.uk/uksi/2009/2767/pdfs/uksi_20092767_en.pdf

CML Handbook – Requirements for Management Companies
https://www.cml.org.uk/lenders-handbook/englandandwales/?srch=management+company&search=Submit#C9114

Leasehold advisory Service:
http://www.lease-advice.org/article/owning-share-freehold-flat/
http://www.lease-advice.org/podcast/becoming-a-director-of-a-resident-management-company-2/
http://www.lease-advice.org/article/share-of-freehold-when-joint-owners-should-consider-a-declaration-of-trust/

Regards

deFoix

...and for whoever is interested (nobody seems to be) you can download any companies Articles (FOR FREE!) using The Gazette Official Public Record service:

https://www.thegazette.co.uk/companies/

Search for a company like "XYZ Flat Management Company" and you'll get 000s of results.

Regards