Who owns and controls a Residents' Management Company?

The leaseholders. In a typical RMC the leaseholders are the members or shareholders of the company, and they elect directors from among themselves. Those directors are responsible for managing the building and its service charge, though they usually appoint a managing agent to handle the day-to-day work.

What is the difference between an RMC and Right to Manage (RTM)?

An RMC is normally set up when the block is built or the leases are granted, and is named in the lease as the party responsible for management. Right to Manage is a statutory right under the Commonhold and Leasehold Reform Act 2002 that leaseholders acquire later to take management away from a freeholder who currently controls it.

Can I still challenge my service charge if an RMC manages the building?

Yes. The service charge must still be reasonable under Section 19 of the Landlord and Tenant Act 1985, and any leaseholder can apply to the First-tier Tribunal under Section 27A to challenge charges — even where the company demanding them is controlled by fellow leaseholders. Being a member, or even a director, of the RMC does not bar you from applying.

What happens if my Residents' Management Company is struck off or dissolved?

If the RMC stops filing its accounts and confirmation statements, Companies House can strike it off. On dissolution its property — potentially including the freehold, the bank balance and the reserve fund — passes to the Crown as bona vacantia under the Companies Act 2006. The company can usually be brought back through administrative restoration, generally available to a former director or member within six years of dissolution, or otherwise by court order. Restoration requires the outstanding filings and penalties to be dealt with, so acting early is considerably cheaper.

Does an RMC have to follow Section 20 consultation?

Yes. The Landlord and Tenant Act 1985 treats anyone entitled to enforce payment of a service charge as the landlord, so an RMC must consult under Section 20 before carrying out qualifying works costing any leaseholder more than £250, or entering a long-term agreement costing any leaseholder more than £100 a year. If it fails to consult properly, the contribution is capped at those figures unless the tribunal grants dispensation.

Is service charge money held by an RMC protected?

Yes. Under Section 42 of the Landlord and Tenant Act 1987, service charge contributions are held on a statutory trust for the leaseholders who paid them. The money must be kept separate from the company's own funds and applied only to the purposes the lease permits, and any surplus or reserve fund remains trust money rather than company profit.

What is a Residents' Management Company?

In many blocks of flats, the lease does not leave management in the freeholder's hands. Instead it names a Residents' Management Company as the party responsible for repairing, insuring and servicing the building, and for setting and collecting the service charge. The leaseholders are the company's members, so — at least in principle — the people who pay the charges are also the people who control how the money is spent.

How an RMC is structured

An RMC is a normal company registered at Companies House, usually limited by guarantee or by shares. Each flat typically comes with membership of the company, so buying the flat makes you a member and selling it passes that membership on. The members elect a board of directors — unpaid leaseholder volunteers — who take the decisions and sign off the accounts. Because directors are rarely property professionals, most RMCs appoint a managing agent to run the building day to day, issue demands and prepare the service charge accounts.

RMC vs Right to Manage

The two are easily confused because both put leaseholders in charge. The difference is timing and origin:

An RMC is normally set up when the block is built or the leases are first granted. It is baked into the lease from the start as the responsible party.
Right to Manage (RTM) is a statutory right under the Commonhold and Leasehold Reform Act 2002 that leaseholders acquire later — typically to take management away from a freeholder or their agent.

If your lease already names an RMC that the residents control, you generally do not need RTM: you already have the management. RTM is the tool for blocks where the freeholder, not the leaseholders, currently holds the reins.

Good to know: being run by fellow leaseholders does not put an RMC above the law. The service charge must still be reasonable under Section 19 of the Landlord and Tenant Act 1985, demands must be valid, and any member can apply to the First-tier Tribunal under Section 27A if they think a charge is wrong.

How service charges work under an RMC

The money you pay an RMC is not the company's to spend freely. Under Section 42 of the Landlord and Tenant Act 1987, service charge contributions are held on a statutory trust for the leaseholders who paid them — so the funds must be kept separate from the company's own money and applied only to the purposes the lease allows. Any surplus, and any reserve fund, remains trust money rather than company profit.

The RMC also stands in the landlord's shoes for the purposes of the Landlord and Tenant Act 1985, because that Act treats anyone entitled to enforce payment of a service charge as the landlord. In practice that means an RMC must meet exactly the same standards a freeholder would: charges reasonable under Section 19, consultation before major works under Section 20, the 18-month rule in Section 20B, and demands carrying the prescribed summary of rights.

Being a director of your RMC

If you sit on the board, you carry real responsibilities: keeping proper accounts, holding service charge money on trust, consulting on major works under Section 20, and filing at Companies House. Getting the numbers right protects both the building and you personally — which is exactly where an independent line-by-line check of the charges is useful.

You also take on the general duties every company director owes under the Companies Act 2006 — to act within the company's powers, to promote its success, to exercise reasonable care, skill and diligence, and to declare and avoid conflicts of interest. That last one bites more often than people expect: awarding a contract to a firm you have an interest in, or voting on works to your own flat, needs declaring. Most RMCs carry directors' and officers' insurance for this reason, and the premium is normally a legitimate service charge cost.

When the RMC is dormant, struck off or dissolved

This is the most common way an RMC goes wrong, and it is usually accidental. Volunteer directors move away or lose interest, the confirmation statement and accounts stop being filed, and Companies House eventually strikes the company off the register. On dissolution the company's property — potentially including the freehold, the bank balance and the reserve fund — passes to the Crown as bona vacantia under the Companies Act 2006. The building still needs insuring and repairing, but the entity responsible has ceased to exist.

It can usually be undone. A struck-off RMC can often be brought back by administrative restoration, available to a former director or member generally within six years of dissolution where the company was still operating when it was struck off. Otherwise restoration is by court order. Restoration treats the company as having continued in existence throughout — but it means bringing the filings up to date and paying the penalties, so acting early is much cheaper than acting late.

If your block's service charge demands have started arriving from an unfamiliar entity, or have stopped arriving altogether, checking the RMC's status on the free Companies House register is a sensible first step. Where the lease provides for it, a freeholder may have a step-in right to manage while the RMC is out of action.

Buying a flat in a block with an RMC

An RMC block is generally a good sign — the people paying the charges control them — but it shifts what you should check before exchange. Look at the company's filing history and whether the accounts are up to date; ask how many directors are actually serving, since a board of one is fragile; and read the last two or three years of service charge accounts for the reserve fund balance against any major works on the horizon. A block with no reserve and a roof due is a bill waiting to land on you. Most of this arrives in the LPE1 pack, and buying into a block usually makes you a member of the company, so you are taking on a share of the governance as well as the charges.

Can you challenge an RMC's service charge?

Yes — and the fact that your neighbours run the company changes nothing legally. Any leaseholder can apply to the First-tier Tribunal under Section 27A of the Landlord and Tenant Act 1985 for a determination of whether a service charge is payable and how much. Being a member or even a director of the RMC does not bar you from applying.

What does change is the tone. A challenge to a freeholder is adversarial by nature; a challenge to an RMC is a dispute with the people on your stairwell, and it is worth exhausting the informal route first — asking for the invoices under Section 22, raising it at the AGM, or standing for the board yourself. Tribunals see plenty of RMC cases where the underlying problem was an overwhelmed volunteer board relying on a managing agent nobody was scrutinising.

What is a Residents' Management Company (RMC)?