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Flat Management Company

Where there are multiple tenants a Flat Management Company is normally used to protect the interests of the leaseholders. We can either incorporate the flat management company for you as a Limited Liability Company or Limited by Guarantee.

A Flat Management Company has its Memorandum and Articles of Association specially drawn up to allow the company to own, manage and administer a freehold property, which is normally divided into several dwelling units or flats, with each leaseholder owning a share in the company. The leaseholder will be obliged to transfer the ownership of the share to the new leaseholder when disposing of the property.

A limited company explained

When a property is divided into a number of flats, each flat owner usually has a lease of their own flat but they may also hold shares in a management company that owns the freehold (or lease) of the entire building. Normally, the company’s constitution will say that shareholders who sell their flats must also transfer their shares to the new owners. This ensures that, at any given time, the limited company represents the interests of all the current flat owners.

Some limited companies do not have shares and are instead ‘limited by guarantee’. If your company is limited by guarantee, it means that the members have agreed to contribute to the assets of the company if it is wound up.

Reasons for a limited company

One reason why residents of a block of flats would have a company is to own the freehold or ‘head lease’. Freehold gives outright ownership of the property to the company. A ‘head lease’ is a lease granted directly to the company, who may in turn grant subleases of the property (or parts of it) to the flat owners. The company is also often used for collecting cash for carrying out repairs and maintenance to common parts of the property. Often it is a condition of buying a flat that the buyer becomes a member or shareholder of the company.

Role of the limited company

Flat management companies typically manage common parts of the building. These costs are funded by the individual flat owners, who make periodic contributions into a pooled fund.

If your company just pays a few bills, perhaps for repair or maintenance, then these payments need not go through the company’s books. Less formal arrangements, may be satisfactory. The company could then continue to own the freehold (or head lease) of the property, but all its accounting transactions would be conducted elsewhere – the company would then be ‘dormant’.

The main requirements of this Act affecting flat management companies are that they file.

  • an annual report and accounts
  • a confirmation statement
  • changes in directorships or registered office address

Members involvement in company management

Generally a company must hold at least one meeting of its members every year, known as the annual general meeting where the members elect and remove directors.

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