Residents Management Company Handover. Advice?

[1.3GL]

Long time lurker. First time poster.

I own a house on a small estate of eleven houses. The houses were built five years ago, and the developer is finally preparing to hand over the management company to us.

So far, so good.

Unfortunately, the developer has been worse than useless in explaining how all this works to us. They don’t answer their emails reliably, and when you get through to them on the phone, it’s clear they don’t really know the answers to the questions I’m asking.

The developer initially wanted to appoint a management company, but alarm bells went off when they said this, as I assumed this would lock us into a ‘fleecehold’ arrangement, unable to challenge the company or install a new managing agent.

Now the developer has instructed their solicitors to hand the company over to us, but only three households are actually interesting in becoming directors.

Does anyone here have any experience on how to handle this, or at the very least know of any resources that I could access? I have no experience of this sort of thing, and I’m a little loathe to instruct a solicitor (at least, yet) as I expect this would be very expensive.

[slievenashaska]

I would expect the management company was set up so each of the eleven properties owned, or will own, one share in it and the company constitution will undoubtably be set up so only shareholders can be directors and the current directors which will be the developers will simply resign.

Once handed over then the directors and shareholders of the management company will have to make sure all the legal responsibilities of running the company are met - accounts to Companies House, notification of directors and company secretary, and anything else legal or sensible in relation to the land and property the company owns, for example a bank account, maintenance and liability insurance.

Up to the directors and shareholders (shareholders because the company constitution will undoubtably require an AGM to agree things) whether you appoint a management company - doing so takes work off the hands of the directors but it will likely cost a reasonable amount as there is usually a minimum fee irrespective of the size of what is to be managed.

Unsurprising that only three households want to be directors as most people are content to let someone else do the work, but be careful that they don't have their own agenda, particularly if it comes to spending everyone else's money.

[The Three D Mucketeer]

My Brother lives on a barn conversion site with about 6 properties, they share the responsibility for maintenance of an access road , septic tank , common areas. They set up a private limited company and each pay a yearly fee , all written into their deeds. Seems to work quite well but personally I wouldn't want anything to do with something "shared"

https://find-and-update.company-information.servic...

[dmsims]

Why do eleven houses need a management company ?

[LooneyTunes]

1.3GL said:

The developer initially wanted to appoint a management company, but alarm bells went off when they said this, as I assumed this would lock us into a fleecehold arrangement, unable to challenge the company or install a new managing agent.

Now the developer has instructed their solicitors to hand the company over to us, but only three households are actually interesting in becoming directors.

Does anyone here have any experience on how to handle this, or at the very least know of any resources that I could access? I have no experience of this sort of thing, and I m a little loathe to instruct a solicitor (at least, yet) as I expect this would be very expensive.

Presumably you have some communal areas, shared roads, landscaping etc that need managing?

The way it would often work, even with a management company/agent appointed, is that the Ltd company for the development would still exist. You'd retain the right to get rid of the agents and go down a DIY route if you wanted and/or provide instructions to the MC.

If you're taking it over, you will need to operate it as a company, file accounts, run bank accounts etc. The reality is that it isn't a lot of work and you can save a significant sum vs having an agent in place because you can take a more pragmatic (but still legitimate) approach to things such as risk assessment, sinking funds, commissioning maintenance etc.

Without question, the single biggest issue you will face is getting other householders to pay their share, either on an annual basis or when major works need doing. The only real leverage you have is when they want to sell... which means that some simply won't pay annually (leaving you needing to set everyone else's figures high enough to ensure you have the liquidity you need).

BUT look on the bright side: at least there is currently a management arrangement in place. I pulled out of a purchase where a similar sized group of properties had, unwisely, decided to dissolve their management company leaving nobody with responsibility. Guaranteed pain when the road/car park eventually needs doing.

One thing to be really clear with people about from the outset is *why* you're doing it and what you're not interested in/won't be doing. There may be some who think that it's your job to police the estate and/or get moaned at for every little thing they don't like.

Personally, and I know it is selfish, I'd probably not want to do it again. Part of that is, in part, due to the others being reluctant to capitalise on a new access request from an (offsite) neigbour: had they been more commercial the new access they wanted would have covered the service charges for many years... that might have gone some small way to offsetting the view of that neighbour's paddock being transformed into a view of the back of three houses,

Edited by LooneyTunes on Monday 27th July 14:03

[1.3GL]

Yes, that's right. Communal area maintenance, lawn mowing, hedge trimming etc. are the main costs.

The gardening charges currently are around £3600pa and we'd retain that gardener going forward. The package the developer put together for us, from a quote they'd received from a third-party management company, cost roughly £1500pa-ish, with public liability insurance of £500pa or thereabouts.

Total cost per house, all-in, was £500ish pa.

I think we're all broadly happy with this tbh. My big concern is that if the developer appointed the managing company that we'd effectively lose control of the company and have to cough up whatever this third-party company wanted to change forever, but it sounds like this wouldn't be the case, correct?

If we were to appoint a third-party company to manage, would we still need to be directors, or could we simply be shareholders in the company?

I can of course ask the solicitors this, but I'm acutely aware that they're acting for the developer, not us.

Maybe I'm overthinking this, but I want to get it right.

[MrBen.911]

We have a similar set up, albeit for a larger development.

We have a Ltd company of which the directors are a couple of our neighbours, and the Ltd company has appointed a Property Management Co to carry our all the day-to-day activity. We appointed a new Property Management Co a year or so ago, as the previous one wasn't doing a very good job - you're not tied into them forever, as you have control via the Ltd company.

We have an AGM, and occasional further meetings if there is an issue (we had a problem with a retaining wall etc).

[nwmlarge1]

1.3GL said:

I think we're all broadly happy with this tbh. My big concern is that if the developer appointed the managing company that we'd effectively lose control of the company and have to cough up whatever this third-party company wanted to change forever, but it sounds like this wouldn't be the case, correct?

If we were to appoint a third-party company to manage, would we still need to be directors, or could we simply be shareholders in the company?

I can of course ask the solicitors this, but I'm acutely aware that they're acting for the developer, not us.

Maybe I'm overthinking this, but I want to get it right.

I work for a residential property management company at a large site in London. We typically don't deal with small situations like yours.

All management companies would have to issue audited accounts and could be taken to tribunal over any unreasonable charges.

The ideal start point would be to understand all of their undertakings.

Do you have a serviced roadway which is not adopted?

This will have drainage.

Is there a soak away with a pumpset associated with the estate?

Do you have road way lighting and signage? both are maintained.

Do you have direct to the door phone or Broad band lines? if so then no costs.

Do the gardens have irrigation or a hose for the gardeners? if so this will have a standing charge and associated consumption costs.

Do you have an insurance policy for the estate?

Do you have any public rights of way through the estate? is there a budget for its upkeep?

Do you currently pay in to a reserves or sinking fund? there will be road way maintenance, garden maintenance (as plants fail) and other items like shared fencing, bollard, road markings etc.

The management fee will take into account dealing with all of the associated contractors in terms of banking, invoicing, insurances, liability insurance, emergency call outs, service charge management and debt recovery.

The company accounts will need to be audited annually and company secretarial duties with filing said accounts as well as notifying of directors changing.

Not all of these tasks are particularly arduous but they will take a consistent amount of time and effort. life quickly gets in the way.

I would take the time to speak with the land owner and ask to be involved with the tender process while appointing a managing agent. This will put your mind at rest that your homes are being managed by someone competent rather than a bit of bravado from a fellow resident who will have other priorities down the line.

I have worked with Right to Manage, Build to Rent and freeholders, and the RTM directors were well out of their depth when it cames to the volume of work involved.

You can tender this annually, usually with a 3 month notice period.

You can limit your liability if you go with a managing agent and have an easier life.

Hope its helpful.

[omniflow]

When I lived in a mansion block with 12 flats, it worked like this.

There was a limited company with 12 shares. Each flat owned 1 share, giving everyone 1/12 ownership of the company. Two directors were elected / appointed. For any expenditure by the company, both directors needed to sign the cheques. The company owned the freehold of the block.

There was a monthly service charge for each flat, calculated to cover costs such as cleaning of common areas, gardening, company admin, insurance etc, and then a bit each month into a sinking fund. It was a bit of a challenge getting people to step up to be directors, but we managed.

[LooneyTunes]

1.3GL said:

Yes, that's right. Communal area maintenance, lawn mowing, hedge trimming etc. are the main costs.

The gardening charges currently are around £3600pa and we'd retain that gardener going forward. The package the developer put together for us, from a quote they'd received from a third-party management company, cost roughly £1500pa-ish, with public liability insurance of £500pa or thereabouts.

Total cost per house, all-in, was £500ish pa.

I think we're all broadly happy with this tbh. My big concern is that if the developer appointed the managing company that we'd effectively lose control of the company and have to cough up whatever this third-party company wanted to change forever, but it sounds like this wouldn't be the case, correct?

If we were to appoint a third-party company to manage, would we still need to be directors, or could we simply be shareholders in the company?

I can of course ask the solicitors this, but I'm acutely aware that they're acting for the developer, not us.

Maybe I'm overthinking this, but I want to get it right.

Depends on the arrangement. Don't forget, Directors of a company work for the shareholders.

We left ours with an agent in place, three residents became directors, and we trimmer back quite a few of the costs: the biggest savings came from risk assessments where the agent had previously insisted they be done annually (there is, or was at the time, an entirely defensible approach of not updating unless there is a change of circumstance).

There is nothing stopping you challenging the proposed annual budget and cutting back on things like sinking fund contributions *but* the obvious consideration is that there's less there for the future. They don't have you over a barrel for ever more.