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What Does a Flat Management Company Do?

The cheapest way to start a new company registration
#3. What Does a Flat Management Company Do?

What does a flat management company do?

Establish Flat Management Company

Flat management companies typically manage common parts of the building. They may have other responsibilities. Your property probably has parts common to all the flat owners living in it: boundaries, roofs, halls, drives and gardens being typical examples. These require maintenance, insurance, lighting, etc. The individual flat owners usually fund these costs, by making periodic contributions into a pooled fund.

Many flat management companies choose to account for these transactions within the company. If your company just pays a few bills, perhaps for repair or maintenance, then your advisor may say that these payments need not go through the company's books. Less formal arrangements, such as collecting the money through a residents association, may be satisfactory.

Flat Management Company Registration Note

Important Note:

Residents often use a limited company for collecting a central pool of cash for carrying out repairs and maintenance to common parts of the property. If a limited company used in the management of a block of flats, it is often a condition of buying a flat that the buyer becomes a member or shareholder of the company. Call us to discuss your needs and see how we can help.

The company could then continue to own the freehold (or head lease) of the property, but it would conduct all accounting transactions elsewhere - the company would then be 'dormant'.

You would still have to prepare accounts, present them to members, and submit them to Companies House and HMRC, but all that would mean is a simple balance sheet that does not have to be audited. You should seek professional advice before adopting this approach to ensure that you are complying with the legal requirements.

What is a flat management limited company?

In law, a limited company is a 'person' in its own right. This means it can own property (such as a freehold or leasehold) and enter into contracts in its own name. It exists independently and separately from the people who manage or own it. There are different types of limited company: "public companies", whose shares can be bought and sold by the general public, and "private companies".

It is unlikely that a public company would be suitable as a flat management company. When a property is divided into a number of flats, each flat owner usually has a lease of their own flat, but they may also be a member of a management company that owns the freehold (or lease) of the entire building.

As members of the company, the flat owners have their say in running it. If the members own shares in the company, it is common practice in the company's constitution (its "articles of association") that shareholders who sell their flats must also transfer their shares to the new owners. This ensures that, at any given time, the limited company represents the interests of all the current flat owners, and it remains a separate legal entity regardless of who holds its shares.

Some limited companies do not have shares and are instead "limited by guarantee". In England and Wales, this includes commonhold associations and the "right to manage" companies. If your company is limited by guarantee, it means that the members have agreed to contribute to the assets of the company if it is wound up. In this web-page, the term a "shareholder" and "member" means the people who own the company. Instead of having a company, you may wish to consider two other options: -

1. If your organisation does not own property but simply collects money from residents for repairs and maintenance, and pays bills when they arise, then less formal arrangements may be appropriate such as a residents association.
2. Residents could consider buying the freehold of their properties in their own names or as trustees.

If you are uncertain whether the options above are appropriate for your circumstances you may want to seek professional advice

Flat Management Company Incorporation Note

Important Note:

The RMC residents management company will have a memorandum and articles of association specially drawn up to allow the company to own, manage and administer a leasehold or freehold property, which is normally divided into several dwelling units or flats, with each leaseholder owning a share in the company. The leaseholder will be obliged to transfer the ownership of the share to the new leaseholder when disposing of the property. Call us to discuss your needs and see how we can help. RTM Limited by Guarantee Companies