New build Management Companies: what owners need to know

If you own a new build property or live in a development where there are communal facilities or areas, there will more than likely be a Management Company to ensure standards of the property remain high for residents.

In this blog, our New Build Team Leader, Abi Harrison, explains more about the role of a Management Company.

What is a Management Company?

A Management Company takes care of the ongoing maintenance and upkeep of the communal areas and shared facilities within the development.

Examples of shared facilities/services include:

• Communal grounds and parks
• Storage and bin areas
• Lifts
• Footpaths
• Roads
• Communal heating, lighting, and air conditioning
• Cleaning services for windows
• Private drainage services

The Management Company may employ gardeners and other tradespeople to carry out maintenance and repairs within the development. This ensures that the estate and development remain in good repair and condition. The services provided will be detailed within the Transfer or Lease and will be available to you before exchange.

Almost all modern developments are run by Management Companies. Therefore, if you are buying a new build property, you are very likely to deal with a Management Company once you have moved into your home.

Do I have to pay a Management Company?

Yes, the Management Company uses the money you pay for service charges to maintain the property and ensure everything is kept up to date.

If you own a new build, you (along with the other owners) will pay an annual management fee for these services.

How much are service charges?

Service charge costs vary and usually depend on the size of the development and the managed areas. However, upon completion, an apportionment of the service charge will be collected by the developer.

When you purchase a new build, your solicitor can advise on the estimated costs as the service charge budget will form part of the contract documentation provided by the developer’s solicitor.

The prospect of paying an annual fee to a Management Company can be off-putting to some potential buyers; however, these companies provide an essential service to ensure new build estates are well maintained.

Who runs the management company?

In most cases, the developer will create the Management Company and employ a managing agent to provide the services.

In smaller developments, it is common for each property owner to take a share in the Management Company and collectively run it. This is known as a Residents’ Management Company.

What is a Residents’ Management Company?

A Residents’ Management Company (RMC) is set up by the developer during the construction of the development. The legal documents will include provisions for becoming a member of the RMC. Following completion, property owners will be entitled to become members of the Management Company.

A Residents’ Management Company is owned by each resident, who then becomes a member of the RMC. Sometimes the owners can be appointed as directors.

The residents are then able to make decisions. They can appoint a managing agent to carry out the day-to-day management on behalf of the RMC.

Once all plots on a development have sold, the control of the Management Company is then handed over to the RMC. Not all property owners have to become a director, but it will be a legal obligation to become a member.

The advantages of a Residents’ Management Company

• An RMC allows greater control for residents over things like service charge budgets, repairs, contractors and long-term planning
• It can reassure residents that they are getting better value for money; for example, by shopping around for contractors and avoiding inflated managing agent fees
• It offers flexibility to appoint or replace managing agents
• It gives owners more control over expenditure

The disadvantages of an RMC

• It can be time-consuming for the directors/members
• There is a risk of poor management

Contact our new build solicitors

If you are thinking of buying a new build property, our New Build team can help. Call us on 0117 325 2929 or complete our form for a quick quote.