Another way in which blocks of flats differ from separate houses is that apartment buildings have to be ‘managed’.This means there has to be somebody to collect service charges, prepare accounts, chase up late or non-payers, organise major and minor jobs and generally be responsible for the day-to-day and future smooth running of the building.
That same person or company will also have to answer questionnaires when flats are sold, as well as providing three years’ worth of accounts and any other information a new buyer might require. It is a complex job and really needs to be done by somebody who knows what they are doing.
Management also has to be undertaken by somebody who is totally trustworthy. If the building has enfranchised, and has therefore become a limited company, accounts have to be filed annually to Companies House, and there must be a Company Secretary. Where there is an outside freeholder, that person will be responsible for the management of the block and will usually appoint a firm of managing agents, but if the residents have collectively enfranchised or won the Right to Manage, they will either have to manage the building themselves, or appoint their own managing agents.
If the building is owned by an outside freeholder, there may still be a Residents’ Association which will hold meetings and discuss affairs to do with the block.Where a block has not enfranchised or secured Right to Manage, and is happy with the management provided by the freeholder, it may not be sensible to rock the boat. If the residents, in the main, are not happy with the current management, they can take the steps outlined in the following chapter.
Make no mistake, residential block management is complex and time-consuming and nobody should underestimate the work and effort involved.
Many leaseholders do run buildings themselves and, indeed, for several years I was a Director of a block of flats which did undertake its own management. But ask yourself: do you really want to spend every weekend in the office, filling in questionnaires, answering queries, getting plumbers in to mend leaks, collecting money from recalcitrant payers – all for nothing? Plus if you are in dispute with a neighbour, you are always in danger of meeting that neighbour on the stairs or in the lift. When residents are also undertaking the management there is always the risk of personalising the situation.
Resident Management Companies
Leaseholders should be aware that if they do have a resident management company this does not mean they can do exactly as they like. Au contraire, as Del Boy might say. A resident
management company, even when run by the leaseholders themselves, is subject to exactly the same legal duties as an absentee or commercial landlord.
Duties of managers involve inspecting the physical fabric of the building, and maintaining and decorating it to the right standard. Managers must also have an intimate acquaintance with every aspect of the lease. In addition, those running the building will have to cope with disagreements and personality clashes when they arise. They must also have a thorough knowledge of every aspect of current and future leasehold law.
Maybe the most difficult aspect for resident management companies is dealing with arrears. Whereas a professional managing agent will handle this as part of the job, residents can feel distinctly uncomfortable taking a neighbour to court.
Advantages Of Outside Management
Where there are six or fewer units in a block, it may be cheaper and easier to manage the building yourselves. When I lived in a block of four flats where everybody owned a share of the freehold, each owner took it in turns to manage the building, and it worked perfectly well.
But with such a small building, there was no caretaker, no lift, and very little day-to-day management required. When major works were indicated, such as when the building developed a severe dry rot problem, we had meetings in each other’s flats and raised the money between us. It was all perfectly amicable, but this kind of ad-hoc management would not work in a larger block.
Wherever there are eight or more separate flats, I would say it is imperative to go for outside management, as then the workload becomes too great for amateurs, however well-meaning they are.
Management of buildings containing a number of self-contained units requires proper accounting procedures, an understanding of buildings and how they work. People management skills are useful in that there are often splinter groups within a block – almost always to do with payment of charges and fees.
Where residents run the block themselves, they are usually unpaid and part time. By contrast, a firm of managing agents deals with all the issues that crop up on a full-time basis and employ full-time staff for that sole purpose. Also, they have purpose-bought IT for account handling and they have ready access to lawyers,
professional bodies and fidelity insurance cover, none of which individual lessees may be able to match.
Fidelity cover to protect client funds is something that the self-managing lessees cannot probably obtain. Agents also have a separate professional indemnity cover to protect them and again, self-managers might find it difficult to obtain such cover.