Property Management Companies

What is a Property Management Company?
A property management company is a particular type of company: one set up to hold an interest in a property which is divided into units, each unit being owned separately. A typical example is a large house which has been divided into a number of flats, each flat being owned by one or two people. Such a company can also be used for large blocks of flats, housing estates and commercial properties divided into units.

Why are they used?
Where a property is divided into separate units (such as a house divided into flats) there is usually a need for somebody to own the building as a whole, including common parts such as stairways, gardens, access paths, etc. Unless there is a landlord of the property retaining this interest, the simplest legal device is for a company to be set up to own the freehold (or head lease) of the property, and for each owner of a flat (or other unit) to have an interest in the company.

The company may also be a mechanism for management of the common parts and general condition of the property, though this may not always be the best arrangement for smaller companies (see below).

What does such a company actually do?
This varies from company to company. In many cases the the most important use of the company is to hold the title to overall property and some do no more than that.

The active company
Many of these companies take on the maintenance and repair of the fabric of the property and its common parts. Typically this may include the costs of cleaning and decorating halls and stairways, maintaining grounds and gardens, security and caretaking services, repairs to roofs, gutters, etc. Such a company will usually proceed by electing a board of directors at a first general meeting once the company is set up, and subsequently at each annual general meeting. The board, which is accountable to the shareholders, will take responsibility for the company's various activities and its finances. The company should have its own bank account, and records must be kept of all expenditure and receipts. The company raises funds by levying subscription or other charges on the members. It has to file accounts each year at Companies House.

The dormant company
With a small property with little or no routine maintenance, it is often simpler for such matters to be arranged between the owners of the flats without involving the company at all. The advantage is that the company may then be maintained as a dormant company under the Companies Acts, allowing pro forma dormant company accounts to be registered at Companies House and keeping the administration of the company to a minimum.

What type of company should be used?
A property management company will always be a private limited company. It may be limited by shares or limited by guarantee. Our recommendation is that it should be a company limited by shares, and these notes are prepared on that basis. Please contact us if you wish to discuss the formation of a company limited by guarantee.

A property management company is set up so that it is always controlled by the owners of the units in the property. They will all be members of the company and will also elect a board of directors to run it.

It is essential that the company has memorandum and articles which have been drawn up for this particular company. A standard trading company is not suitable.

The Memorandum and Articles
The company's articles will be based on Table A (a specimen set of articles laid down under the Companies Acts) but with a number of very important modifications. These will vary according to the circumstances, but will include:

Objects
The property management company should have objects which are to hold that particular property (identified by its address). There should, however, also be provision for the acquisition of other property in case, for example, it is decided at some later date to acquire an adjoining piece of land as a garden, car park, etc. Further objects cover such things as repairing and maintaining the property, raising the funds to do so, etc.

Share capital
The share capital should be limited to one share for each unit in the property. For example, if a property is divided into four flats the company should have a share capital of just four shares, one for the owner of each flat. Where a unit is held in joint names, so will the share in the company. The company's articles provide that shares may be held only by someone who owns a unit in the property and that anyone selling their unit must transfer their share to the person buying it. No other shares may be issued.

Directors
The company must have at least one director. In a small company, where there are only a few shareholders, our recommendation is that there should be one director for each unit. Where a unit is held in joint names, the director for that flat should be entitled to nominate the other joint owner as an alternate director, so that they may attend board meetings if the person appointed as the director for that unit cannot do so.

An arrangement more suitable for larger companies is for the shareholders to elect a board of directors, usually at the Annual General Meeting. The articles should provide that only a shareholder may be a director of the company.

Subscriptions
There must be a provision for the company to raise subscriptions or levies on the members from time to time to pay for the activities of the company. This should be included even if the company is intended to be kept dormant.

The Company Secretary
Like any other company, a property management company must have a company secretary, who has responsibility for ensuring that the company complies with the requirements of the Companies Acts. These include seeing that the company maintains its statutory registers, sends annual returns and accounts to Companies House, keeps minutes of General Meetings and Board Meetings, etc. The company secretary may be one of the members or directors of the company, or a professional company secretary (such as ourselves) may be appointed.

Companies Acts Requirements
Though not a trading company, a property management company must meet all the requirements of the Companies Acts, including:

Maintenance of Statutory Registers
Every company must maintain certain statutory registers which must be kept at the company's registered office (or in some cases at another address notified to Companies House) and made available to any person who wishes to inspect them. The registers relevant to a Property Management Company are:

Register of members
Register of directors
Register of secretaries
Register of directors' interests (company limited by shares)
Register of charges
Although not absolutely essential, it is also usual for a company limited by shares to keep registers of allotments and transfers.
All the registers must be complete and kept up to date.

Registration of changes
When any of the details of the company are changed, eg a change of directors or transfer of a share on sale of one of the units, the change must be registered in the correct manner. For example, each change of directors must be recorded in the company's own register of directors and notified to Companies House on the appropriate form (currently a form 288a, b or c).

Annual Returns
Every year the company is required to make an Annual Return to Companies House with the annual registration fee (currently £15). The form records such details as the registered office, directors, secretary and shareholders. Failure to complete and return the Annual Return on time can render the company and its directors and company secretary liable to a fine.

Annual Accounts
All limited companies are required to send copies of their accounts to Companies House within the statutory time limit (10 months after the company's Accounting Reference Date in the case of a private company). These rules are currently being enforced very strictly and arrival at Companies House even one day late may be punished. Property management companies may take advantage of the provisions introduced in 1994 exempting small companies from the need to have their accounts audited. As described above, a company in which there has been no financial activity during the financial year will be a dormant company under the Act and a pro forma set of accounts may be registered.

Annual and Extraordinary General Meetings
There are detailed rules about the calling and conduct of general meetings. Unless it passes an elective resolution to claim exemption, every company must hold at least an Annual General Meeting each year.

Using Incorporation Services Limited
You will see from our home page that our directors have many years experience of registering all types of companies, including property management companies. We can provide both a comprehensive company formation service and a continuing secretarial service so that the company is maintained in good statutory order throughout its life.

The initial formation
To register a property management company we need the following information:

The proposed company name
The name must be different from every other name on the index of companies. This is something we check from the Companies House computer. It is usual to use the address of the property, eg 1 Station Road Limited, 1 Station Road (Anytown) Limited, or 1 Station Road Management Company Limited.

The address of the property
Holding this property will be the main object of the company.

The number of units (eg flats) in the property
This will determine the company's share capital.

Details of the directors. company secretary and shareholders

After the Company is Registered
Once the company is set up it is important that the shares are allocated to the various owners of the units in the property and that the statutory registers and the forms notifying the share allotments to Companies House are properly completed. These are important matters. This will be done automatically if the company is formed using our standard service. The company will probably own the freehold of the property and it is vital that the company be kept in compliance with the Companies Acts

Acting as company secretary
Even after the initial formalities are completed, there are the continuing responsibilities of keeping the company in compliance with the Companies Acts, as outlined above. These matters cannot be ignored or left to chance. Failure to send returns and accounts to Companies House may lead to the directors being fined or, much worse, the company being struck off the register.

Small companies
Our services can be tailor-made to suit the circumstances of the case, but the following is a typical example.
A small property management company is often best advised to be kept dormant for the reasons given above. In these circumstances, we can take over the complete maintenance of the company for a modest annual charge. A typical arrangement would be for the company's registered office to be at our offices in Newcastle upon Tyne. The statutory registers would be kept there and made available for inspection during normal office hours, as required under the Companies Acts. All changes notified to us would be recorded in the company's registers and notified to Companies House, as appropriate. Each year we would attend to the filing of the annual return and accounts. When a flat in the company is sold, we would attend to the registration of the transfer of the share and issue a share certificate, dealing with all correspondence with the solicitors for the vendor and purchaser.

Our Charges
The main items are:

• Property management company formation £185.38
  
• Annual secretarial service £150.00 plus VAT (£176.25).
  
• Share transfer £25 plus VAT (£29.38) (as an additional charge when acting as secretary)

Please telephone or email us if you want to register such a company. The registration will be done electronically but we need to collect some additional information from you to proceed.