Management Companies

Confused by being part of a management company? Don’t worry here's some handy info.

A management company is a vehicle to ensure private communal areas on a development receive maintenance. They will be set up in the planning stages of a development by the developer or their appointed agent. Not to be confused with the managing agent (the company you deal with regarding management) the management company is actually made up of the owners of properties on a development.

You may get confused with the relationship between yourself, the agent, the management
company and your freeholder. Therefore I have put together this diagram to help.

The freeholder will invoice the lessee for ground rent as per the terms of the lease. The lessee pays the management company a service charge as per the terms of the lease. The management company will hire a managing agent and pay them a fee based on an agreed service level which will be documented in the management agreement.  Even
though you pay the management company on a day to day basis you will most likely deal with the agent. This diagram is a generalisation. You will need to consult
you lease for your specific relationship.

If a management company has been set up on a development then each time a property is sold the new owners will become a member of the management company. Usually this will be a membership limited by guarantee however sometimes the company will be set up to give each member shares.

The idea behind management companies is that when all the properties on a development are sold and all legal issues tied up the members of the company can appoint directors and take control of their service charge. Often when created the directors of the management company will be employees of the developer or their appointed agent. These directors will remain in place for as long as necessary until such time when directors from amongst the members can be appointed. You will receive an invite to a general meeting of the company specifically for this purpose. Generally any member can become a director, those appointed to the board will have complete control of the service charge, how it is spent, what contractors to use, what agent (if any) to appoint etc.



The management company will be a legally registered company at companies house. Therefore do not be surprised to see costs for statutory accounts and company secretarial fees in you service charge. It is essential that the statutory documentation if filled on time to companies house, in the worst case the company may be struck off. This will lead to huge complications not only to maintain the development but also when trying to sell your property.

If you believe that your management company is not performing then you can apply to the LVT to appoint a manager.

Developments without management companies may also be able to follow the right to manage process to set up their own management company and take control of the development away from the freeholder.

If you have any specific questions please get in touch via the contact me page.