Reality Check on RMCs

Government appears to be under the illusion (no prizes for guessing why) that RMCs – Residents Management Companies – are the norm and are functioning well. We know from our members experiences that this is far from the truth and the contribution below reflects many of the obstacles which are put in the way of implementation. We also know that RMCs are not being implemented at all in many developments. Read on to hear one members experience:

Developers & managing agents are obviously operating a number of different scams. Here’s ours. (Numbers for ease of reference only.)

1. Developer builds big estate consisting of many different types and levels of home, from shoebox flats (leasehold) right up to luxury houses (“freehold”).

2. Developer refers in the Sale Contracts, in a very understated way, to owners eventually controlling the estate themselves.

3. Developer gives management contract to a managing agent, on apparent understanding that the agent can fully control the estate themselves for as long as they wish.

4. When all the homes have been built and sold, a few home-owners ask when all home-owners will be taking control of the development.

5. The managing agent tells all home-owners that it was, indeed, planned for home-owners to take control of the estate, but, “sadly”, “unfortunately”, the agent has examined all the legal documentation and discovered that because of the complexity and mixed nature of the housing it will not be legally possible. Agent also adds that because of the “legal complexity” of the development even a residents’ association would have no legal standing, and would be no more than a chat-club. On hearing this most owners think, “Musn’t grumble” and just accept it. But a few do not.

6. A few home-owners consult their solicitors and spend 3 months applying massive pressure on the developer to honour the Contract of Sale’s reference to home-owners being given control of the estate, to self-govern, to run it autonomously.

7. After 4 months of pressure, developer and agent announce that home-owners WILL, indeed, take control of a Residential Management Company, and that an election of owners as directors of that company will occur in a few more months’ time.

8. After 4 more months the agent and developer hold a meeting to elect owners as directors with immediate effect, but home-owners say they cannot become directors of a company of which they know absolutely nothing, as they would immediately become liable for who knows what issues concerning the estate. The majority of home-owners present at the election meeting vote not to hold the election.

9. A small number of owners then volunteer to work with the developer to ensure that all is in order so that eventually owners may take control of the RMC and the estate. The group soon discovers all sorts of “skeletons in the cupboard”, such as, for example, that although owners would have control of the RMC the managing agent would, effectively, be unmovable (unsackable) and that the managing agent would therefore effectively retain ultimate control over the estate, that the owner-directors would play second-fiddle to the agent in perpetuity; that the developer has failed to honour other clauses in the deeds like ensuring that the sewer system becomes entirely the responsibility of the local water authority; etc.

10. The owner-volunteers then spend almost 2 full years seeking to remove the above obstacles but both the agent and the developer do not facilitate the process – they effectively obstruct it. The volunteers engage a solicitor, and the battle goes on.

11. After 2 full years, many issues have been dealt with, but several very important ones remain, such as the managing agent trying to keep a grip on the estate’s management agreement so that the agent will always remain in ultimate control – and thus be able to raise service charges, and do anything they wish, by putting forward whatever (possibly bogus) justifications they wish.

We have made progress and are determined to succeed. The situation has been shared with several newspapers but so far they have shown no concern or interest in the story. If we don’t have “break-through” in the next 6 months we will take the matter to MPs.

We are not alone in this particular kind of developer-agent scam. At Companies House we have discovered that the developer has set up at least 20 other RMCs for at least 20 other developments which they have built, most of these RMCs having been set up several years ago, but the directors of those RMCs still remain employees of the developer, i.e. those RMCs have not been handed over to home-owners, they are dormant/unactivated. But surely we at our development are not the only home-owners who are having to fight very hard to ensure that what was promised to us at the time of purchase actually becomes reality.

If you are in much the same situation as outlined above, please comment, and maybe we can help each other.

David Cade

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One thought on “Reality Check on RMCs”

  1. Hi David,

    Residents at Pembroke Park through their residents’ association have tried every possible way to rid ourselves of an appalling HA/Management Company, but at every turn, they have found yet another way to prevent us doing so. This has included leading us up the garden path indicating that they would consider one of the best management companies in the UK taking over the communal areas and Freeholders, the majority. At the last moment they pulled the plug on us. We are a mixed tenured estate and each tenure has serious issues with the current HA/Management Company who surprise, surprise are one and the same. What a conflict of interests! They take great delight in reminding us that Freeholders have no rights under the law and that we all signed a TP1, which we had to do in order to complete our conveyancing. This convoluted document means you sign away your rights. Developers never, never inform you of this. We have to make the government understand the PLIGHT of ALL the Freeholders in the UK, the lack of proper legal regulation and implementation to force these incompetent and corrupt HAs/Management Companies from continuing in this opaque and manipulative way which only benefits them and their profits. Sadly, this is all part of the broken housing policy across the UK.

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