The team from Block in a Box looks at the role and responsibilities of being a Residents’ Management Company Director.
Leading a Residents’ Management Company is no small undertaking. You’ll be working in a voluntary position that comes with legal requirements and responsibilities, compliance with ever-changing regulations and requires you to wear many different hats on a daily basis.
For some, the challenge is completely worth it. For others, it can mean biting off more than they can chew- even if they began with the best of intentions. Here we’ll discuss what is involved in taking your place as an RMC Director so you can decide for yourself whether or not you’re suited to the job.
The Legal Requirements
RMC Directors are treated no differently to any other director of a limited company, and this means fulfilling the below requirements:
- Working in line with the company’s rules as confirmed in the Memorandum and Articles of Association
- Working on behalf of the RMC and its leaseholders with their best interests in mind (never for the benefit of the individual)
- Compliance with HMRC and Companies House requirements including filing returns, and maintaining statutory records
- Maintaining the service charge accounts appropriately
- Compliance with all health & safety and fire risk legislation
- Insuring the block (and themselves) appropriately
- Ensuring that the Managing Agent carried out their work in line with the obligations laid out in the lease.
Annual duties include:
- Preparing, signing and submitting the company accounts
- Arranging the signing of all other statutory documentation
- Approving the annual service charge budget
- Operating on a board with other RMC directors and attending meetings with the appointed managing agent
- Working with the managing agent on expenditure and major works
- Providing clear instructions to the managing agent for all other items that may affect the smooth running of the development
Below we’ll go into more details re the health and safety, accounting and insurance requirements listed above.
Health & Safety
This is a huge area of moral and legal liability for RMC Directors. They must keep up with current legislation and guidance for the sake of avoiding prosecution and for the sake of resident safety.
Fire Risk Assessments are a legal obligation for those managing blocks of flats. Current guidance states only that the person or agent who manages the block is responsible for either carrying out or arranging ‘regular’ assessments and that the person who actually carries out the assessment must be ‘competent’.
- There is reason to believe the current assessment for the block is no longer valid
- There have been any significant changes within the block such as major works
For purpose-built blocks that are less than 20 years old and up to 3 storeys above ground level:
- Re-assessments should be carried out every 2 years if no significant changes have occurred
- A full re-assessment should be carried out every 4 years if no significant changes have occurred
For older buildings or with more than 3 storeys:
- Re-assessments should be carried out every year even if no significant changes have occurred
- A full re-assessment should be carried out every 3 years even if no significant changes have occurred
For buildings considered extremely high risk, a full re-assessment on an annual basis is advised.
A great Health and Safety Consultant, such as 4Site Consulting may be able to cover all of the below for you:
- Fire Risk Assessments and Fire Door Inspections
- General Health and Safety Assessments
- Asbestos Surveys and subsequent management
- Legionella Risk Management
- Contractor Management
- Staff Training
A good risk assessor will clearly identify the importance of each risk item on any assessment document and will state whether or not there is an urgent risk that requires immediate attention. The risk assessor should then set clear guidelines and timescales for any work to be carried out.
Once you’ve received your assessment reports, the recommendations made must be acted upon and documented.
Accounting tasks are often best left to professionals who have extensive training, up to date knowledge of the law and the time to dedicate to these vital tasks. However, hiring a professional accountant is not always possible.
Quite often, RMC Directors are automatically handed the task of accounting, but some thought should go into who among the Officers may be best suited to this detailed, time-consuming task. The ideal candidate will be meticulous, organised and thorough- with enough spare time to dedicate to the role.
Splitting the tasks among your team should also be considered. Often, a Director may be best placed to keep track of transactions and file receipts etc, while an Officer may be better placed to complete the annual statutory accounts. Either way, the accounting function shouldn’t be given to any one member of the team without due thought and consideration to their skillset and availability- especially as Directors may find themselves signing off on (and accepting responsibility for) incorrect accounts if the wrong decision is made.
As with all companies, an annual tax return is required by Companies House (guidance for which can be found here) and, often, this can be done online. Alongside this, RMCs will need to complete an annual statement of account for service charges too. Best practice for service charge accounting is set out in guidance issued by the Institute of Chartered Accountants in England and Wales (ICAEW) and ARMA- all of which can be found online and downloaded for free.
The insurance policies you’ll need as a minimum are:
- Buildings Insurance
When arranging this cover, you’ll need to make sure your building’s sum insured is up to date and accurate. You should also check that the description of the property is accurate and includes cover for the outbuildings, gates, fences, underground pipes and cables.
Most policies are index-linked to ensure the sum insured remains adequate – do confirm with your insurer that this is the case and make sure you read your policy wording thoroughly, questioning anything you’re unsure of.
- Directors and Officers Liability Insurance
RMC directors (and officers) can be held personally liable for their actions while working on behalf of leaseholders. While this may seem unfair when most directors are handling things on behalf of their fellow leaseholders out of a desire to help, sometimes things can go sour- especially if finances are impacted due to RMC decisions.
Taking out Directors and Officers Liability insurance provides cover for defence costs and/or compensation for civil liability charges relating to a “wrongful act” in connection with RMC matters.
- Lift Engineering Insurance and Inspection (if applicable)
While most blocks’ buildings insurance policies will cover damage to passenger lifts as a result of an insured peril (such as fire, accidental damage and malicious damage), these policies do not normally extend to damage caused by the breakdown of the passenger lift or to the legal requirement to have lifts regularly inspected.
Lift engineering and inspection policies are designed to help RMC directors to comply with their legal obligation to have their lift inspected by a competent authority at six-monthly intervals.
- Terrorism Cover
Unfortunately, this is something all RMC directors must consider. Even in the quietest, most rural areas, terrorism is a real threat and, during the untold stress of being involved in an incident, the last thing your leaseholders will need is to be told that their insurance doesn’t stretch to this sort of situation.
A standard buildings insurance policy will not provide cover for a terrorist attack and, however unlikely it may appear, if an incident did occur and there was no insurance in place, the RMC directors could be held responsible.
Taking on the responsibilities of an RMC Director is not something to be taken lightly. The rewards are high if you take pleasure in organisation, leadership and responsibility, but if you shy away from potential conflict and liability, it may not be for you.
Of course, much depends on the personalities and skill sets of the officers on your board as well as your previous experiences and your relationship with your neighbours. In the end, only you will know if this is the job for you and if your enthusiasm can weather any storms.
Block in a Box not only provides information on how to protect your block of flats against emergencies over winter. We can also help with utilities, repairs, insurance, health and safety, and just about any other issue a flat owner or manager might face. To learn more about leasehold management companies or freehold management companies, contact our friendly and professional team today on 0333 0154 145.