Management Companies
If you are living in an apartment complex or a gated estate, it will have several common areas accessible to all the residents. These typically include the lobbies, stairwells, lifts and main corridors.
There may be other areas that the owners share collectively, such as the roofing and possibly some common parking places and green spaces around the development.
Many new housing schemes and apartment blocks have a management company which is responsible for the maintenance of these shared spaces and services.
Why a company?
The management company is established for two key purposes:
- To manage and maintain these common areas
- To be the legal owner of the leaseholds of each unit and the common areas
While most houses are owned freehold (where you own both the property and the land on which it is built), multi-unit development properties such as apartments are generally owned as leaseholds. You own the property, but not the land on which it is built.
While there is no legal obligation to form a management company, management companies are generally formed to manage multi-unit developments because:
- They can be an efficient means of management
- They resolve the leasehold issue
- The rules of company law (which they must adhere to) also offer an effective structure in terms of administration and ownership
Different forms of company
Management companies can come in different types, often depending on the stage of development of the properties:
- At one end of the scale, a management company may be set up by the developer or builder even before construction starts on the scheme
- Then as more units are sold, each buyer becomes a member of the management company (on completion of their purchase transaction and receipt of certificate of membership). But the developer often retains the largest shareholding, and therefore continues to control the management company
- At the other end of the scale is a finished development where all units have been sold, and the management company is now totally owned by the householders - perhaps after a residents' association has lobbied the developer for more control
Once you sign up to a management company agreement, remember that it is legally binding. It sets out your rights in terms of what the company will do for you, but it also places an obligation on you to pay for the services it provides.
Service charges
Unit owners pay an annual fee known as a service charge to pay for the maintenance of these common areas and other shared services such as cleaning and waste disposal.
The management company sets the service charge. If the homeowners own the management company, it is up to them to establish the level of service charge, how services are provided and whether the company should employ a managing agent to run its day-to-day affairs.
Learn more
Read more about your rights and duties as a member of a management company
Find out about managing agents
How well are you doing?
Answer this simple question to see how well you understand this section.
Question: If you have signed a management company agreement in your property development, do you have to pay the service charges?
Answer A: Yes, because you have signed a legally binding document