Frequently Asked Questions

Q
What is a residential managing agent (MA)? A block of apartments is, typically, owned by a landlord (the ‘freeholder’). In some cases, the owners of the flats have bought the freehold collectively and are shareholders in a freehold company formed for that purpose. In others the leaseholders have joined together to form a Right to Manage (RTM) company. The day-to-day running of the building is the responsibility of the freeholder/RTM and, particularly for larger blocks, a managing agent (MA) is usually contracted to help run the site, arranging contractors to attend to repairs, raising funds from the leaseholders and so on. A useful website for more information is http://www.arma.org.uk

Q
What are the landlord’s/RTM’s responsibilities?
Management functions are defined in the legislation as 'functions with respect to services, repairs, maintenance, improvements, insurance and management' and will typically include: Repairs, redecorations and maintenance of the structure of the building and the common parts (under the terms of the lease), including cyclical or seasonal maintenance and the maintenance of plant and facilities, lifts, and central heating boilers Provision of services – the lighting of the common parts, heating, cleaning, grounds maintenance, caretaking and porterage Arranging the insurance for the building Levying and collection of service charges, accounting and the provision of statutory and other information Compliance with all statutory requirements relating to the management and fabric of the building, plus day-to-day management of the building. Management functions do not include: Management of any non-residential parts of the building – commercial units, shops or offices, garages or storage not included in the leases Any non-qualifying flats and functions relating to forfeiture and possession. As noted often a managing agent (MA) is hired by the landlord/RTM to fulfil these duties on their behalf, but it must be remembered that the ultimate responsibility still remains in the eyes of the law with the landlord/RTM.

Q
What is the best sort of contract to use with a managing agent (MA)?
Many managing agents have developed their own contracts over time. So whenever you change over your managing agent, you will have to obtain legal advice on the new contract. To overcome this, ARMA has introduced a standard contract which all members are recommended to use.

Q
What is a service charge?
The service charge is a contribution from each leaseholder (in accordance with their lease) towards the expenses of running a block of flats. The service charge is designed to cover items such as utility charges for the common parts, buildings insurance, redecoration of the exterior of the buildings and the interior common parts, cleaning, health and safety etc. It does not cover items that are within individuals flats – these are for the leaseholders themselves to arrange.

Q
Why do I have to pay service charges and do you let me know how my service charge has been spent?
Service charges are levied for the maintenance and management of the building. The lease for your property will stipulate what you are obliged to contribute to, how this is calculated, and when it should be paid.
Following the end of the development's financial year the annual accounts are prepared by an independent firm of accountants. A summary is sent to every owner and the accounts will be fully explained.

Q
What are typical duties of a managing agent (MA) when managing a residential block of flats?
The managing agent will ensure that many essential things happen at your development and these are principally as follows: Managing the property on behalf of the landlord/RTM in accordance with the terms of the lease, current legislation and codes of practice
Providing services to leaseholders
Preparing the service charge budget
Issuing service charge demands
Collecting service charges funds
Collecting sums in advance to create a reserve or 'sinking' fund to ensure that sufficient money is available for future scheduled major works
Providing repairs and maintenance as set out in the lease
Producing the end of year accounts and reconciliation.

Q
What kind of financial systems are required when running a managing agent (MA)?
Systems must exist both to estimate the money required for works - and to collect the money which will be required for works and for other services. The managing agent will need to be familiar with how the lease allows charges to be raised in advance of requirements or in arrears.

Q
What kind of accounting procedures are needed to show the financial operations of a block management company?
Accounting procedures must show final management company accounts, and must set out annual statutory summaries to the leaseholders. The management company acts both as the landlord and as the financial overseer of all relevant matters relating to the apartment block, and the accounts must clearly distinguish between the financial affairs of the service charge and those in its capacity as a landlord.

Q
What are the benefits of having a professional managing agent (MA) undertake the duties outlined above?
Professional managing agents can take the burden of responsibility from a block management company by providing an organised and methodical approach to the planning and collection of service charges and reserve funds. As they manage a portfolio of properties they can identify when costs are out of sync and investigate why to find out where savings can be made. They will also organise timetables for redecoration and repairs, inspect and supervise works – plus they can deal with lessees (especially regarding collection of service charges and lessees responsibilities with respect to sub-let) as neutral third parties. This avoids any awkwardness that might arise between Board members and lessees, whom Board members may well know personally as neighbours or friends.

Q
What if I have a complaint about my managing agent (MA)?
We have a documented complaints procedure and are members of an Ombudsman scheme. If you are not getting full and timely answers to your questions you can take up your complaint with the Ombudsman (Property). If you continue to be unhappy, changing agent is not difficult. Speak to us about the process and how to plan a handover.

Q
Does the landlord have to consult with me about expenditure (if there is no RTM)?
For routine expenditure (running costs), the landlord must submit a detailed budget estimate with your service charge demands which you must not withhold. For non-routine items (eg re-decoration) incurring costs in excess of £250 for one or more flats in the development, the landlord has to raise various statutory notices (Section 20 notices) to inform you in advance and seek your input.

Q
If I’m unhappy with my managing agent (MA) how do I make a complaint?
All agents must follow strict procedures to ensure that every grievance is heard fairly and equitably. You can view our procedure here.

Q
What are the duties of the Company Secretary?
If you have a Residential Management Company (RMC) or a Right to Manage Company (RTM) you will need a Company Secretary. This can be a member of your own team or you can ask your accountant or managing agent (MA) to do this. Traditionally the Company Secretary will deal with Companies House on such matters as appointing/resigning a Director, issuing Notice Calls and associated documentation for Annual General Meetings (AGMs) or Extraordinary General Meetings (EGMs) and for filing the Annual Return (AR). The AR is a list of directors and shareholders at a particular date.
The directors of the RMC or RTM should be aware that the overall responsibility for accounts or Annual Returns being filed on time rests with the directors themselves and not with the Company Secretary. Being late in submitting either will incur fines that escalate over time and can lead to the company being struck off.
If your managing agent (MA) is your Company Secretary they will do the above duties for you. It is not a wise practice to ask the MA to do the minutes of any board meetings that they attend – they are there to report to you on progress. In addition the MA can only account for the time that they are with you and you may wish to discuss matters without them being present. This also means that you have given away the documenting of what should be done as an outcome of the meeting.

Q
What structure should our board take?
It is good practice for there to be a Chairperson to control the whole meeting and to communicate with the managing agent (MA), a Treasurer to manage the finances of the company and a Secretary to record minutes. The Secretary and the Chairman help prepare and distribute the agenda and papers in advance of board meetings and set board meeting dates. Sub-committees can be set up for certain projects e.g. central boiler plant replacement, external redecorations and so forth – this will make liaising with the MA more efficient.

Q
We have a Residential Management Company (RMC)/Right to Manage Company (RTM) and everyone is a shareholder – why do we need a separate bank account for our service charges?
The best way to think about this is to think of the RMC/RTM as if it were a completely independent landlord. You wouldn’t want your service charges being used to pay for their Directors & Officers insurance or Annual Returns costs would you? If there are Ground Rent charges involved again they should be separated from your service charges and so the RMC/RTM should ideally have a separate bank account if required (some RTM’s file dormant accounts as they have no income such as ground rent and no expenses – this saves on accountancy costs).

Q
We have a Residential Management Company (RMC)/Right to Manage Company (RTM) and everyone is a shareholder – why do we need a Directors and Officers insurance as we are all friends?
You may all be friends at the moment but things can change – a leak into someone’s flat can strain relationships, people can sell and the new leaseholders might not have the same views. Something could happen that years down the line turns out to be a wrong decision – you personally need the insurance to protect yourself from any action against you as a Director. It usually only costs a few hundred pounds and is a wise investment.