Buying a flat? What does a management company do?
If you are buying a flat it is very important that your solicitor checks out carefully what the arrangements are for dealing with matters such as insurance and maintenance of those areas that are shared with the other flat owners. These are often referred to as ‘the common areas’. These would include for example the gardens, landings, parking areas, and of course the structure of the building.
A well-run development will normally have a management company to take care of these issues. The most satisfactory arrangement is where this company also owns the freehold, and all the flat owners are members of the company. This ensures a certain amount of control over the running of the development. You will then have the option to go to company meetings and have your say about how much is to be spent on the common areas. If you are really interested in such things you could even become a company secretary or a director, and have direct responsibility for the running of the company.
A well-run company will take regular payments towards the costs of insurance and maintenance and repairs. This is referred to as a service charge. Taking advance payments towards future costs is a good idea as this avoids receiving a huge bill in one year when there is a major repair required, such as a new roof. This is referred to as a ‘ sinking fund’.
Where there is a poorly run management company, or where there is no formal arrangement for the common areas and insurance, it can be very difficult to sell the flat. Also if the common areas fall into disrepair then the property starts to look shoddy and again this affects its saleability.
Claire Nunes
Cambridge Property News - Jan 2007
