What happens when a Residents Management Company shareholder moves out?

When a leasehold is sold, the seller is removed as shareholder and the new owner becomes a shareholder due to transfer of ownership.

Why do new estates have management companies?

Management companies are responsible for looking after the communal areas of the estate (amongst other things). They are becoming popular on new estates of leasehold houses, as a way to ensure that the condition of the neighbourhood is maintained to a high level, including roads, footpaths and green spaces.

Members of a Residents Management Company cooperate to manage their block of leasehold flats. SAM Conveyancing explain how a residents management company works and is different from a Right to Manage company

If you don't have a residents management company you may still have the right to manage.

Get in touch for legal support with a section 22 notice or Tribunal support.

What is a Residents Management Company

by:

Caragh Bailey

Last Updated: 11/07/2023

Read by:

93

4 min read

Key Takeaways

RMCs are not-for-profit organisations formed by the residents of a block of flats who want to manage their building themselves.
A residents management company (RMC) is different a from a right to manage (RTM) company.

each flat representing one share

Directors are appointed by fellow shareholders, to oversee the management of the building on behalf of the company.

What are the responsibilities of a residents management company?

A residents management company takes on all the responsibilities that would normally fall on the freeholder, or landlord:

Enforcing obligations on leaseholders.

An icon showing a gavel. Directors of a Residents Management Company must enforce the statutory and contractual obligations of the company and the leaseholders

Including invoicing and collecting service charges and ground rent, chasing and collecting arrears and taking action where tenants breach the terms of their lease. They must also make sure that the company adheres to legislation, consulting with the leaseholders on any proposed major works costing more than £250 to each leasehold.

Health & safety and fire risk assessments.

An icon showing a fire exit. A Residents Management Company is responsible for health and safety and fire safety including risk assessments

All communal areas and external areas need to be properly risk assessed, as well as any contractors entering the premises. If the residents management company do not conduct sufficient risk assessments they may be deemed liable for accident or injury. The residents management company is also responsible for installing smoke and fire alarms.

Electrical safety assessments.

An icon showing a hand an electrical plug. A Residents Management Company is responsible for electrical safety and testing

The management company is also responsible for assessing electrical standards and testing all electrical equipment provided by the landlord (white goods etc). Fixed wiring in all communal areas must be checked every five years by a qualified electrical engineer.

Cleaning, repairs and maintenance.

An icon showing a hand and spanner. A Residents Management Company is responsible for maintaining the building

Cleaning, repairs and maintenance of the roof, exterior, communal areas (inc. stairs and lifts), external gates and car parks. The management company is responsible for ensuring the contractors employed for these tasks are qualified to carry out the works safely. An avoidable accident or fall may result in an enquiry and prosecution.

Meetings and Administration

An icon showing a board meeting. A Residents Management Company is responsible for holding meetings and executing company admin and accounts

As a company the RMC must hold an AGM as well as any general or board meetings, to supervise the accounts and budget. Annual accounts must be prepared and submitted to companies house, building and public liability insurance policies must be adequate and company secretarial responsibilities must be fulfilled.

What is the difference between RTM and RMC?

The right to manage is a statutory right granted to qualifying leaseholders, who can apply to take on certain responsibilities of the management of their block. It is usually enforced by residents who are fed up with their current management, whether that is the freeholder directly, or an appointed management company.

Where all residents of an RMC are shareholders, only qualifying leaseholders have the right to manage. An RTM company separates the running of the building from the ownership of the freehold.

Do you want more ownership over your building and its management?

You will need to set up a private limited company to establish either a residents management company or a right to manage company. If you want full control over the building, you may be better of pursuing collective enfranchisement, where you and other leaseholders purchase the freehold, together.

Free Initial Leasehold Advice

Arrange a free consultation with one of our experienced conveyancing executives on:

Lease extension.
Purchasing the leasehold, freehold or share of freehold.
Selling a leasehold property with a short lease.
Extending the lease at the same time as you sell.

We specialise in lease extensions and have RICS valuers for the premium/negotiation and solicitors for the section 42 notice and formal or informal extension. Request a tailored quote for:

RICS Lease Extension Valuation or L2 Homebuyers Survey.
Serving of the section 42 notice or section 13 notice on the freeholder.
Negotiation with the freeholder (with the support of your RICS valuer).
Completion of the legal work, including deed of variation.
Application to Tribunal to determine the premium.
Vesting order for absent landlords.

What is the role of directors in residential management company?

The directors are responsible for the running of the company, including technical legal awareness and compliance and handling challenging interpersonal situations regarding both policing and enforcing the responsibilities of the other shareholders. The directors must avoid conflicts of interest and cannot accept benefits from third parties which could compromise their ability to exercise independent judgement.

Directors are nominated by the other shareholders, or they can volunteer with shareholder agreement. The specific responsibilities of the directors are laid out in the companies articles of association. If the residential management company is responsible for 6 or more dwellings it may be wise to involve the help of a professional managing agent as the role can be complex.

We recommend that directors of any company consider taking out public liability insurance to protect themselves against a potential mistake.

Frequently Asked Questions

Estate

Written by: Caragh Bailey

Caragh Bailey is a Lead Property Content Specialist at SAM Conveyancing, having joined the firm in 2020. With a portfolio of over 150 technical conveyancing, house survey and mortgage guides, she has become a primary authority on the end-to-end sale and purchase process.

Caragh specialises in complex legal workflows, including Help to Buy redemptions, equity transfers, shared ownership structures, trust deeds for tax planning, and joint ownership disputes. Her expertise extends to leasehold reform and RICS home surveys, where she provides clear, factual guidance on independent legal advice for specialist mortgage products and intricate ownership structures.

Reviewed by: Andrew Boast

Andrew Boast FMAAT is a qualified accountant, conveyancing specialist and author with over 25 years of experience in the UK property sector. Since beginning his career in 2000 within established SRA and CLC-regulated conveyancing solicitor firms, Andrew has overseen the legal journeys of more than 75,000 clients.

He is the author of the property guide 'How to Buy a House Without Killing Anyone' and a frequent contributor to mainstream UK media on legislative updates, property law, first-time buyer guides, conveyancing best practices, and stamp duty changes. Andrew specialises in resolving complex title issues, property conflict disputes, and property tax options, streamlining the enquiry process to reduce transaction times and maintaining a client-friendly focus.

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