Many apartment buildings have established resident management companies (RMCs), which are owned by leaseholders themselves to deal with their management and maintenance.
RMCs are required to have directors, who are responsible for their day-to-day management. The directors are typically apartment owners who accept the appointment to gain further input and visibility on the decisions of the RMC, and because they regard it as their contribution to the community of the building.
However, acting as a director is usually an unpaid role and does carry some risk.
The work of the RMC could require a significant time commitment by directors, who will need to attend board meetings, keep up to speed with information and progress of matters and liaise with other leaseholders and third parties.
If difficult decisions need to be made, directors may find themselves in direct conflict with members of the RMC, who are also their neighbours.
Directors of RMCs are subject to various directors’ duties, which if breached can lead to personal liability for the director concerned. These range from specific duties set out in the Companies Act 2006 (eg avoiding conflicts of interests and promoting the success of the company for its members) to duties under health and safety legislation. Before accepting an appointment, a directors and officers insurance policy should be put in place, to protect directors from any claim brought against them in respect of their actions as a director.
Directors should familiarise themselves with the articles of association and any other documents governing the running of the RMC. They need to understand the nature and extent of any obligations on the landlord or the RMC in the leases themselves and ensure compliance with them.
To ensure consistency and fairness, directors should establish policies for when leaseholders require consent under their leases, eg for alterations, assignments, pets etc.
Furthermore, directors need to ensure compliance with landlord and tenant legislation – for example following the s20 consultation procedure (Landlord and Tenant Act 1985) if they intend to carry out works costing more than £250 per leaseholder.
Directors should consider whether it is appropriate to seek external advice or support, such as passing day-to-day responsibility for management to third-party managing agents or seeking input from professional legal advisers.
Christine Dubignon, partner, corporate, and Samantha Tomczyk, senior associate, residential property, Forsters