# Becoming a Director of a Management Company?



## Querying (26 Sep 2008)

Hi

Just want to get some opinion and advice on what the pitfalls may be of becoming a director of a management company?  My husband has volunteered due to problems with the current management company, and while he tells me that himself and the other new director will be covered by insurance against any personal liability etc, I would just like to get some opinion on this?  and also perhaps hear of other opinions and views?  I'm a bit concerned that he doesn't know what he is taking on, and as he is somebody who is always overly helpful in his job, I wonder will he find himself in the same position with neighbours etc if he takes this on?

many thanks


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## room305 (26 Sep 2008)

He'll be covered by insurance should somebody take a case against him for reckless trading (e.g. continuing to run the company despite knowing it to be insolvent) or if he fails to file accounts and manages to get the company struck-off.

However, that's the mundane and less worrisome end of running a management company. What are his plans for tackling bad debts? People can become pretty intimidating when asked to pay a debt they had not planned on paying.

If your husband's actions result in having the bailiff beating on people's doors and seizing items of property it could make him something of a social pariah among certain sections of your community.

I will balance this by saying he will be very much appreciated by those who are paying their debts, especially since he will probably be able to lower their service charges considerably.

What size is estate and do the directors plan on appointing a management company? If it's a large estate that's the best option for your husband - he can monitor the actions of management agent, tie them to specific performance variables, and it's never him that goes knocking on doors asking people to pay up. Also two directors is a small number, I'd go for at least three as there is less likelihood of suggestions of impropriety with the company finances.


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## shesells (26 Sep 2008)

As someone who is a director, I made the decision to take it on because I don't trust anyone else to safeguard my investment. As a director I am bound to act in the best interests of all owners, which is what we do. We try to ensure the development is in good condition and that it's a pleasant and desireable place to live.

A good working relationship with the management agent will help reduce any risks of your husband being targetted directly. We employ the agent to chase bad debts etc, if necessary they pass the matter to solicitors and the offending unit bears the costs of this process. Any correspondence or follow up by your agent on rule breaches etc should come direct from the agent and not mention directors directly so this reduces the risk that any gripes may become personal.


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## NorthDrum (27 Sep 2008)

I am also in a situation where I am considering becoming a director of a management company. But like others I am reluctant because its only something I am going to do because I want to make sure that its done right.

The management company we deal with are poor to say the least, so the first thing I will be doing is looking to get a new management company and a new landscaper (as I think our existing landscaper is totally out of order with their quotes).

Im honestly not worried about what residents think of me getting the management agents to get solicitors involved in chasing them up for fees. As far as I am concerned I am paying these peoples maintenence fees and I dont intend on being a sucker. I dont care how far we have to goto get the fees. I heard that 50% + is a good takeup rate of fees, well Im not going to accept anything less then 90%.

This is of course is only IF I become a director. No matter who you ask, people have differant opinions and reasons why you should and shouldnt take on the role.


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## room305 (27 Sep 2008)

NorthDrum said:


> I am also in a situation where I am considering becoming a director of a management company. But like others I am reluctant because its only something I am going to do because I want to make sure that its done right.
> 
> The *management company* we deal with are poor to say the least, so the first thing I will be doing is looking to get a new *management company* and a new landscaper (as I think our existing landscaper is totally out of order with their quotes).
> 
> ...



I think you mean management _agent_, rather than management company. If your development is small and you're willing to negotiate with maintenance and landscaping companies as well as chase debts then I'd question the need for a management agent at all.

It might help if you layout very clearly the procedure for debt recovery so nobody can claim to be taken unawares. If you are taking over as residents from the developer I would afford those carrying significant debts the opportunity to repay in installments. It will prove cheaper in the long run.


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## Yorrick (27 Sep 2008)

If you becoming a Director I recommend that you read thoroughly Robert Gogans book Apartment living in Irerland.It is an excellent reference book for anyone involved in apartment management.
I am a Director of a small Management Company and we manage our complex of 50 apartments. It is the only way of guarding your investment. You cannot rely on others to do so.
Be sure that the Management Company has Officers Insurance which will protect you and the other committee members against liability
The Companies Office has brochures which ourline the responsibilities of Directors.

Incidentally I would not accept anything less than 100% paying of Management fees. Dont let anyone away or else the Manageement Company will collapse.

There is great ignorance among apartment owners. Many see the Management Company as the enemy when in fact all owners are shareholders in the Manageement Company. They mistake the Manageement Company for the Management Agent


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## Querying (27 Sep 2008)

Thanks all, I'll get my husband to read all of your responses and hunt out that book. 

The situation is that there is already a management company, and the two directors were actually the builders.  Our estate was built in 2 phases by two different builders, and hence while there is one residents association, there are two management companies.  The first phase of the estate was purely houses, and I believe that there are very few problems with collection of their fees.  The problem has arisen with our phase two primarily because it includes a small number of apartments and duplexes (one up one down type), and it is here that there are a significant number of non-payers.  Naturally enough, there are responsible duplex/apartment residents there who have been paying their charges, but they were being affected by the management companies decision (lead by the two builder directors) to stop waste collection and landscaping services because they basically said they ran out of money.  This results in those residents who had paid their fees being unfairly penalised.

When the builders then said they were going to charge for being directors of the management company, it was decided that as they are obviously not interested in doing the job, that it was needed for some of the residents to step in.  I believe that the management company 'will' take care of all debt collection etc, and that my husband will not have to get personally involved with any residents, but I will certainly check with him that that will be the case.

As you have said, it is this possibility of people knocking on our door with complaints which concerns me.  I certainly won't have any time for that kind of nonsense or for anyone who thinks that he is there to take abuse from them because they have chosen not to pay their bills.  (can you tell I have far less patience than he does!  I don't suffer fools gladly!).

Thanks for all the brilliant advice - best to get as much information in advance as possible and know the right questions to ask in advance.

q.


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## jdwex (27 Sep 2008)

Querying said:


> I believe that the management company 'will' take care of all debt collection etc, and that my husband will not have to get personally involved with any residents, q.


 
Do you mean the management *agents*


> 'will' take care of all debt collection etc,


??


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## Querying (28 Sep 2008)

jdwex said:


> Do you mean the management *agents* ??


 
they're a property management company - is this an agent rather than a management company?  My husband has always referred to them as the management company.

I say that they 'will' because I'm a bit of a pessimist and will believe these promises when I see them! LOL


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## shesells (28 Sep 2008)

Yes property management agents regularly complicate the issue by calling themselves management companies. It's the biggest area of confusion when it comes to managed deveopments.


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## 10amwalker (29 Sep 2008)

As a director of a management company of in excess of 250 units I offer the following advice:

1. Non payment or slow payment of service charges- check your lease there is generally a condition allowing the management company charge interest- it can vary from 12 to 20 %. We request our managing agent to levy interest every quarter.

2. Do not allow the debt to grow too large before engaging a solicitor. The solicitor does not need to be one of the big debt collection firms.

3. Tender for the necessary services- or be involved in the selection process if your managing agent is proposing certain companies. 

4. Make provision for the sinking fund in your budget. 

5. Depending on the challenges facing you as a director- the situation you have inherited - have the board meet your insurance broker, auditor and solicitor. We have learnt a great deal from these meetings. Particularly for those with no experience of block insurance, directors and officers insurance, the audit process. 

6. I would encourage members of management companies to become directors if at all possible- it is the only way of having some say in the running of your company which directly affects your living environment.


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