Residential Management Companies – Common Questions

Residential Management Companies, also known as an RMC is usually specifically set up to maintain and manage ‘communal areas’.

Here is some more information relating to Residential Management Companies.

What does a RMC do?

    • The communal areas and services within any given development which do not belong to nor are the responsibility of a specific person (for instance an individual leaseholder, house owner, or the lessor), must be owned by a legal body.
    • Communal areas might include areas such as landings and staircases, bin stores, access roads and forecourts, car parks and gardens, as well as the main structure of, say, an apartment block or blocks. In most circumstances the legal body charged with looking after such areas and services would be a RMC.

Who owns the RMC?

    • In a RMC set-up, leaseholders and house owners will be shareholders or members, as appropriate, of the company, and thus they are effectively the owners of the company.

What type of company is a RMC?

    • A RMC may be a company either limited by Shares or Guarantee. The Company’s Memorandum, and Articles of Association, and the leases/conveyances that have been created, will set out the objectives of the company. These documents will also detail how the RMC should manage and administer communal areas, for the benefit of leaseholders and house owners.

Companies Limited by Guarantee

    • A company limited by guarantee is usually incorporated (formed) primarily for organisations that although requiring corporate status are ‘not for profit’. Whilst the objective of a RMC is not usually to make a profit, if it should make a profit a company limited by guarantee cannot distribute that profit to its members.
    • The limited by Guarantee Company has no share capital, and the members of the company are ‘guarantors’ rather than shareholders, the members undertaking to pay a nominal amount in the event of a shortfall upon the cessation and winding up of the company.

Companies Limited by Shares

    • Usually formed for the same reason as a company limited by guarantee, the key difference between a company limited by shares and one limited by guarantee is that the ‘shares’ company has shareholders rather than members, with each share having a value (say £1, £2, £20, as appropriate). The company is known as a ‘limited liability company’.
    • Limited liability does for the shareholders what it says. It gives the owners of the company (its shareholders) protection if the company fails. This means that if a company is put into liquidation, those who own the company will only be required to pay what they have already paid or agreed to pay towards settling its debts- usually what they have paid or agreed to pay for their share.

The Registered Office

    • All companies incorporated in the UK are required to have a UK registered office address.
    • The registered office is the main correspondence address used by Companies House for the delivery of all documents.
    • Documents delivered to the company’s registered office are in all usual circumstances deemed to have been properly served on the Company.
    • In addition to acting as ‘corporate’ Company Secretary, Amber Company Secretaries Limited will also act as Registered Office for a client company.

Keeping the company going

    • Whether a RMC is limited by guarantee of shares it is imperative that the company continues to trade in order that the performance of the company’s obligations may be fulfilled.
    • If an RMC cease trading for any reason it is likely that this would adversely affect the value or saleability of leases or freeholds.
    • It is therefore all the more important that if a RMC is at all unsure as to how to perform its obligations, or unsure as to the extent of the same, it takes appropriate advice and appoint properly versed professions to advise or act on their behalf.

We are always happy to speak to Directors of Residential Management Companies and explain how we can help with your development.