Becoming a director of a management company
If you have a leasehold property in the UK, in most cases the freehold will be owned by a company. This can be known interchangeably as:
- a property management company
- a residents' management company
- a flat management company
- a freehold management company
Sometimes you may be fortunate enough to be offered an ownership stake of the management company when you buy your property, better yet, you may be offered a seat on the board of directors. You could have as many as 3 distinct legal roles:
- Leaseholder - this is your personal capacity as the owner of your leasehold property.
- Member / shareholder / guarantor - your capacity as an owner of the management company.
- Director - your capacity as a director of the management company.
The significance of these distinct roles can be tricky to get your head around. Which is why we'll be discussing them in this post.
Being a director of a management company
You should know whether you're a director of a management company, but if you're in doubt, check the Companies House register. You can either search for your own name, or the name of the company.
Your powers as a director
The powers held by directors of management companies are set out in the company's articles of association, you can find these in the filing history on the Companies House register.
If your management company has the model articles of association, you and the other directors are responsible for the day-to-day management of the company. This can be a significant responsibility if you have never managed a property or a company before.
Your responsibilities as a director
Your management company will have a lease with each leaseholder. These contain various legal obligations that the directors are responsible for ensuring the management company fulfils. They cover things such as:
- Maintaining the roof and exterior of the property
- Carrying out necessary repairs
- Keeping the building insured
The leases could also contain various obligations for the leaseholders, like payment of service charges and maintaining the interior of their own property. As a director, you're responsible for making sure these obligations are fulfilled.
Because of this, you should familiarise yourself with what the leases say.
As well as this, you need to make sure the management company complies more generally with landlord and tenant law.
If the board of directors is not comfortable with this aspect of the role, or they lack the necessary expertise, you can appoint a professional managing agent to do this for you.
Your duties to the management company and its members
It is your duty to act in a way which ‘promotes the success of the company for the benefit of its members as a whole'. This means you need to consider the long-term impact of any decisions that you take, and the way in which it will affect the owners of the other properties, their tenants, the environment and the wider community.
Being a member of the management company
If you're unsure whether you're a member of the management company, you can check the company's confirmation statement in the filing history on the Companies House register to see the most recent list of members.
Your powers as a member
Generally, you will not be involved in the day-to-day management of the company. Although you will usually have the power to appoint or remove directors, and it is these directors who will make all the key decisions.
If you want to be involved in the management of your building, the best thing for you is to be both a member and a director of the management company.
If you're only a member, you will only have limited rights, unless the articles of association provide otherwise.
Will there be an AGM?
You will need to check your company's articles of association to see whether the board of directors will have to hold an AGM each year.
Even if there is no legal requirement for an AGM to be held, unless every member is also a director, it's good practice for the board to hold annual meetings with members to keep them updated on the activities of the management company and any proposed expenditure.
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- 17 Dec 2020 - How Do Management Companies Make Decisions and Manage Disputes?
- 10 Dec 2020 - Becoming a director of a management company
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