It is often tempting for a new resident who has just purchased a property in a block of flats, to then want to become a member of the Board of the Resident Management Company (RMC) or the Right to Manage (RTM) Company. A property owner or resident may be attracted by this position for various reasons, and before they engage in this role it may be useful to know what the implications are, what their responsibilities are, and the duties that come with the position.
A Resident Management Company and a Right to Manage Company are limited companies, and the directors need to be aware of their duties and liabilities under company law. Each RTM company must have a Memorandum and Articles of Association which governs the purpose and running of the company.
All RMC and RTM company directors are unpaid volunteers. With the help of their managing agent, they will spend a considerable amount of time on behalf of the other residents in making key decisions and dealing with various aspects of managing the development. The Directors must ensure that they are familiar with the terms of their leases as well. It almost goes without saying that there will be a need for them to attend annual general meetings (AGMs), board meetings and general meetings.
Directors of RMCs and RTM companies should have the ability to make tough and difficult decisions when required, be willing to invest time in understanding the legal aspects and implications of their role, understand the lease, be committed to act with integrity, and be happy to engage in working closely with their managing agent and give up their time in dealing with various aspects of managing their development.
The duties the Directors have under the different areas of law can be summarised as follows:
To act within your powers
The Directors should make themselves familiar with the Articles of the Company to ensure they are fully aware and understand the collective powers they have.
To promote the success of the company
All decisions made by a Director must be made having the company and its members best interests at heart.
To exercise independent judgement
The Directors must ensure that all decisions are made without any influence by other Board members or fellow residents. When disputes between neighbours arise, the Directors must ensure that their decisions are not influenced by their personal preferences.
To exercise reasonable care, skill and diligence
Each decision a Director makes must be considered carefully and if in doubt it is recommended that professional advice is sought. The managing agent is usually the best first port of call for this.
To avoid conflicts of interest
Directors must excuse themselves from a decision or activity if their interest conflicts with those of the company.
Not to accept benefits from third parties
Directors should never accept any benefits from contractors or third parties engaged to undertake works on the development.
To declare an interest in a proposed transaction or arrangement
The Directors must declare in writing or verbally, ideally at a Board meeting both the nature and the extent of their interest.
For most Directors, their role on the board is an enjoyable challenge that they take seriously for the good of the development and of the residents within. Not all decisions will be popular, so the Directors will often be required to see the longer term benefit of a decision or the benefit that serves the greater good of the property. It’s a challenging, but also interesting and rewarding role that offers essential value to the those in the property.
If you would like to find out more, read our comprehensive customer information sheets below.
Customer Information Sheets
For further reading, we have produced detailed customer information sheets on the following related topics: