Resident Management Companies RMC

A residents management company is a property management company that is set up by the residents of a building or block of flats (also referred to as a flat management company). The company is a non-profit organisation whose task is the management and maintenance of a building, the communal areas, the condition of walls, windows, roofs, etc., as well as safety and security. Commonly the shareholders of the RMC are also leaseholders of their properties, effectively managing the property on behalf of the freeholder, usually with a board of directors made up of residents who work on a voluntary basis.

The role of a resident shareholder in the RMC and as a leaseholder of a property are different. A shareholder in the company has the right to vote on decisions made by the RMC, whilst a leaseholder is generally bound by those decisions. The RMC, in turn, has responsibilities towards all leaseholders. This responsibility of the RMC is either via being a party to the leases, with responsibilities or covenants set out, or stated as being directly responsible for performing the landlord or freeholder covenants that relate to the management of the property.

The Commonhold and Leasehold Reform Act of 2002 sets out procedures for exercising the right to manage and for the subsequent management of buildings. It included safeguards to protect the legitimate interests of a landlord and any other occupiers of a building (e.g., tenants on short residential leases and commercial occupiers). It also established what is known as the Right to Manage (RTM), a legal process that enables leaseholders to acquire the right to take over the management of a freehold. This may be pursued by leaseholders where there is no RMC in place or where the leaseholders of a property are dissatisfied with the current management arrangements of the building. A Right to Manage (RTM) company must be a company limited by guarantee, with specific articles of association. In the RTM company, the leaseholders are company members rather than shareholders, as is the case with an RMC.

It is important to note that under the Building Safety Act 2022, both RMCs and RTMs have building safety responsibilities, as they are considered accountable persons (APs) and potentially principal accountable persons (PAPs) with legal obligations to repair any common parts of the building. Relevant, especially where a building is higher risk (18 meters in height or seven stories and with at least two residential units).

It is the organisation itself that is accountable for building safety, not the individual shareholders or members; however, the directors of the company are APs, responsible and, in certain circumstances, may be held jointly and personally liable. As it is unlikely that any of the company directors have expertise in the area of building safety, it is probable that they will seek professional support and advice and appoint a PAP. Not seeking the support of a competent person, not doing anything, or doing it themselves when the expertise clearly doesn't exist in the organisation could be considered as negligence and lead to prosecution.

The requirements of all PAPs under the Building Safety Act include:

• Storage and maintenance of building information: How it was designed and built, how it may have changed, and how it is maintained and managed. With information on all aspects of fire and structural safety, evacuation, complaints, and incidents, including documents, drawings, reports, and other records. The ‘Golden Thread’ of information, or the ‘Safety Case.’.
• Safety Case Reporting: Preparation of a ‘safety case report’ for their building, which identifies building safety risks (the risk of fire spread in the building and structural failure) and describes how they are being managed. The safety case report summarises the building safety information, or ‘safety case,’ for the high-rise residential building and shows the PAP is taking all reasonable steps to manage identified building safety risks.
• Engaging with residents: PAPs should engage with residents about safety issues. They must prepare a residents engagement strategy whereby residents and owners of residential units in the building can participate in making building safety decisions. This will provide residents with access to more information about the safety of their building, help them to know what changes are being made to their building, how they are consulted on the changes, and how it will impact them. It will also provide effective routes for resolution.

For further information on related topics follow these links Resident Management Companies (RMCs) in high-rise buildings, The role and responsibilities of accountable persons and principal accountable persons, Becoming a director or member of a residents’ management company, and Guidance About flat management companies, RTM companies and commonhold associations

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