Taking back control of a Residents Management Company, a case study, pt 1

(Part 1)

It's recently come to my attention that there's a housing development in North London whose Residents Management Company (RMCs) seems to have slipped out of control of the residents themselves. As nearly half of RMCs are not member-controlled at some point in their existence, this isn't earth shattering. What makes this case interesting is:

• the RMC was initially set up by a *housing association*
• subject to various conditions, the housing association seems to have the power under the leases of flats to "step in" to the management of the flats
• it's unclear who the voting members of the RMC are
• there appears to be no bar on paper to resident control of the RMC but allegedly their attempts to gain control are being ignored

Who are the RMC members?

Membership of a company requires two things: that a member consent to join the company, and that the member's name and address be recorded in the company's membership register. Where the company has share capital, as most do, then the number of shares has to be recorded too.

In the case of this particular RMC, there is a vague statement in the company's articles of association that persons having a property interest in a particular development (e.g., owning a flat or house) can be registered as members of the company, and no-one else can be. But there are two issues here:

• if the directors don't register the owners as members of the company, then they're not members
• it's not clear what property interest qualified: in a block of flats, there's the owner of the block, who grants a head lease to a Shared Ownership provider, who grants a 125 year lease to a Shared Ownership leaseholder. Any or all of these three parties might be registered as RMC members for such a flat. Some RMCs make it clear in their articles of association which party should be registered, but this RMC does not.

The actual text of the membership provisions of the articles is as follows:

"Unit" shall mean any unit, being residential or otherwise, comprised in the Estate;

"Unitholder" shall mean any person or persons having an interest in any Unit comprised in the Estate [...]

[...] no person shall be registered as a Member of the Company who is not a Unitholder.

and "Estate" is defined merely by a placename, rather than by reference to, for example, a map or plan or Land Registry title.

Allegedly, and I must stress, "allegedly", a statutory request was made to the company, by the housing association itself, to obtain access to the membership list, and allegedly it was ignored. Maybe the request was invalid. Maybe it was ignored. But ignoring such requests is literally a criminal offence. So something doesn't add up here.

It is expensive for aggrieved individuals to prosecute Companies Act offences relative to the potential gains, and the housing association may well have concluded it wasn't worth the candle.

Flying blind

Without knowing exactly who the members are, it becomes very hard to:

• calculate how many signatures are needed to call a general meeting to appoint new directors
• send out notices for a general meeting if the existing directors ignore a request that they call such a meeting themselves
• check if the "right" individuals are even registered correctly as members
• canvass for votes in preparation for a general meeting
• checking who is entitled to attend and vote at the general meeting

There is no alternative to using the Companies Act for collective management of residential property. In particular, the much-trailed "commonhold" that the government is promoting as the default for new builds relies on exactly the same legal mechanisms as RMCs do. If those mechanisms are unworkable, then so is commonhold.