It can be very flattering to be put forward as an RMC Directorship contender. The implication is that you are seen as responsible, capable and trustworthy- who wouldn’t like that?
You may think that you have the time, the skills and the willingness to do a great job- and you may well do. But there’s a lot to being a Director, and all points should be considered before you decide to sign on the dotted line.
If you’re thinking of leading your building’s RMC, read on to find out exactly what the job entails.
What is an RMC?
A residents management company is a limited company that is set up to handle the management of the communal parts of a block of flats/apartments. They act on behalf of the landlord or freeholder and in line with the terms of the lease.
The board of the company as well as its shareholders are usually made up of leaseholders within the block who have volunteered their services and are led by a Director who holds the most responsibility.
RMCs are set up as a standard Limited company, which means they have the same annual obligations as any other limited company such as holding an Annual General Meeting, filing of company accounts and completing company secretarial duties.
What Duties Fall to an RMC Director?
Many responsibilities fall to the RMC as a whole and, as their fearless leader, the Director should make themselves fully aware of their obligations and powers. The first place to look is at the company’s Memorandum and Articles of Association:
- Memorandum of Association: a legal statement signed by all initial shareholders or guarantors agreeing to form the company
- Articles of Association: written rules about running the company agreed by the shareholders or guarantors, directors and the company secretary
The next port of call should be a thorough read of your lease and The Companies Act 2006, which lays out the statutory law around how company directors should behave. Generally, the below duties will fall to you as Director:
Insurance
It will be up to you to ensure that the entire building is protected with suitable insurance policies. This includes Buildings Insurance. It’s vital that your policy is kept up to date with an accurate Buildings Sum Insured. To make sure this is the case, your property should be re-valued at least every 5 years by a Chartered Valuation Surveyor. Your policy should include:
- “All Risks” cover (including subsidence)
- Employers Liability Insurance
- Public and Property Owners Liability cover
- Lessees’ fixtures and improvements
- Alternative Accommodation or Loss of Rent
- Loss or unauthorised use of Metered Utilities (Water)
- Cost of tracing leakage of oil or water
- Loss of or Damage to contents in communal areas
- Damage to underground Pipes and Cables
- Unrestricted cover on vacant or rented flats or apartments
- Machinery breakdown
- Damage to fixed glass, shower trays and sanitary fittings
- Storm damage to fences and gates
- Legal expenses
- Replacement of communal door locks following theft of keys
- Personal accident cover for voluntary workers
- Fidelity guarantee
Health & Safety
Booking the necessary risk assessments, documenting them and acting on their advice is another legal obligation. This will include fire and electrical safety assessments, legionella and asbestos surveys, as well as following day to day health and safety law. This is all vital to providing a safe environment for leaseholders, visitors and contractors, and failure to comply can result in being prosecuted by the Health & Safety Executive.
Maintenance
It is the duty of the RMC to ensure that the building is actively maintained. This will include the roof, communal areas and the exterior. All will need to be maintained in line with any risk assessments as well as the requirements set out in the lease. For most, this will involve setting out a fully budgeted annual maintenance plan.
Repairs
Even with the most far-reaching maintenance regime, repairs will occasionally be necessary to maintain the safety and aesthetics of the communal areas, roof and exterior.
Appointing Contractors
Part of maintaining and repairing the building will involve choosing and vetting contractors. It is the RMC’s responsibility to ensure they have the appropriate training and qualifications to carry out their work safely and to an acceptable standard. Of particular note is the need for solid Working at Height procedures.
Enforcing Leaseholder Obligations
For some, this is where things get a bit sticky. Part of your role will involve enforcing leaseholder obligations… otherwise known as ‘awkward conversations with neighbours’.
You’ll need to chase up late service charge payments and make sure that leaseholders are maintaining their units appropriately. This can lead to some difficult conversations and a strain on otherwise friendly relationships.
Knowledge of and Compliance with Property Law
You’ll need to keep yourself up to date with current tenant and landlord law including things like Section 20; a consultation procedure that must be carried out if works to the building will cost each leaseholder more than £250.00.
Accounting and Service Charges
In order to insure, maintain and repair your block, service charges must be handled correctly. Collections, budgeting and chasing payments will all fall to the RMC. As mentioned previously, as a limited company, the RMC will also need to file company accounts for each tax year.
How to Protect Yourself as a Director
If after reading the above you still feel you are suited to and ready for the challenge, then go for it. But a word to the wise: make sure you’re protected.
RMC directors or officers can be held personally liable for their actions while working on behalf of leaseholders. While this may seem unfair when most directors are volunteering to handle things on behalf of their fellow leaseholders out of a desire to help, sometimes things can go sour- especially if finances are impacted due to RMC decisions.
Taking out Directors and Officers Liability insurance provides cover for defence costs and/or compensation for civil liability charges relating to a “wrongful act” in connection with RMC matters such as:
Breach of trust | Breach of warranty | Neglect | Error | Omission | Misstatement | Misleading statement
Tip: Different policies may contain different definitions so do read the small print.
Here’s a brief outline of an example claim: Leaseholders of a block of flats successfully brought an action against the residents committee for failing to appoint a building company in a timely fashion to repair external brickwork on the building. Damage had been caused following a heavy rainstorm and reported to the committee, however repair work had not commenced several months later, when a subsequent rainstorm caused further damage. This is the kind of situation that could have been successfully “managed” had the committee in question put an appropriate insurance policy in place. You can find out about our Directors and Officers cover here and read more about why it’s so important here.
