Company Formations

Flat Management Company

A Property (or Flat) Management Company can be a company limited by shares or a company limited by guarantee. It can be used by property developers planning to sell flats or apartments in a development to spread the freehold across the individual owners or it can also be used purely as a vehicle to manage the maintenance of a property comprising of several units or apartments.

A typical use of a property management company is where a large house has been divided into a number of flats, each flat being owned by one or two people or where a block of flats, or commercial properties are divided into units and there is a need for somebody to own the building as a whole, including common parts such as stairways and gardens etc. Unless there is a landlord of the property, the simplest legal device is for a property management company to be set up to own the freehold of the property, and for each owner of a flat (or other unit) to have an interest in that company.

Some property management companies also take on the maintenance and repair of the fabric of the property and its common parts. In these cases 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. and is required to file accounts each year at Companies House. Alternatively for 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 (which exists to hold the freehold of the building) may then be maintained as a dormant company keeping the administration of the company to a minimum.

Limited by shares or by guarantee?

In practice it makes little difference for most purposes which type of company is used. The essential practical difference arises when one of the units in the property is sold. In a company limited by shares, the share that relates to that unit also has to be transferred. There is no equivalent process for a company limited by guarantee, and only the register of members needs updating when properties are sold.

Company limited by shares

For a company limited by shares the capital will normally  be set to one share for each unit in the property. The company’s articles provide that shares may only be held 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. (In some complex property developments, where there are large differences between the sizes of the units there may be arrangements for more shares to be issued to the owners of the large units).

Company limited by guarantee

Such a company does not have a share capital so there are no shares and no shareholders. The company is controlled by its members through general meetings. The holder of each unit will automatically be entitled to be a member of the company, and this right will transfer to the new owners on a sale. Where the unit is in joint names, the owners may be joint members. The members elect a board of directors in the same way as in a company limited by shares.

Company formation

We can help with the formation a new Flat Management Company. Our company formation package includes all required company registers, minutes and share certificates completed in full, along with appropriate company articles of association. All professionally presented and delivered via e-mail or in hard copy.



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