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Flat Management Companies


Flat management companies are commonly used to store the freehold interest in a property and to provide facilities to the residents in the communal parts of the building.

The residents themselves usually act as the flat management company directors and shareholders. In large properties, it is not normally necessary for every person to be a director although each will normally hold one share.

The advantage of this structure is that the directors can manage the business of arranging facilities to the common building areas. In the event that one or more residents wishes to sell the property, all that is required is that they transfer their share in the flat management company to the purchasers.

A steady increase in the number of flat management companies has been partly due to regulations introduced to allow leaseholders the right to buy and manage the freehold interest in their property.

Commonhold and Leasehold Reform Act 2002

The Commonhold and Leasehold Reform Act 2002 contained several provisions that have been judges to be favourable to leaseholders. The immediate right to extend short leases irrespective of the time of residence has empowered occupiers to eventually consider managing the freehold for their own benefit.

By setting up a flat management company, the expenses incurred for the upkeep of the communal areas and the manner in which suppliers and services are bought in would be governed by the residence themselves. The degree of accountability is deemed to have increased as well as the effort to reduce the costs associated with their provision.

Running a Flat Management Company

The operation and running of a flat management company is similar to that of any other UK limited corporation. Where there are insignificant accounting transactions the filing requirements are no different to those for ordinary dormant companies.

One of the distinctions between a flat management company and other entities limited by shares is that the former normally have specially written memorandum and articles of association that govern their operation and purpose.

There are standard constitution documents available which can be used but where there are unique features relating to the property or the way in which is it to be run, then alterations might need to be in made.

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