LETTERS email info@flat-living.co.uk tel 0845 257 6374 fax 0845 257 6319
Compensation Scheme for service charge funds
An article in the last issue of Flat Living magazine by the chair of the Federation of Private Residents’ Associations stated that the limit of protection for service charge funds is £50,000 per scheme if a bank goes into receivership. This is inaccurate and it is important that your readers know the true position. Service charge monies held in trust are protected by the Financial Services Compensation Scheme (FSCS). In September 2010 the FSCS announced an increase in the protection limit for savers from £50,000 to £85,000 with effect from January 2011. Moreover, this protection is not an £85,000 maximum per block or savings scheme. In April 2009 the Communities and Local Government Dept. issued a guidance note on this topic. It made clear that, while any claim would be dependent on the circumstances and evidence available at the time of the claim, the FSCS would generally expect to treat the tenants (not the landlord) as being individually entitled to the protection available for that proportion of the money in the account to which they were entitled by statutory trust. (In this context “tenants” means lessees.) This means that each tenant would potentially be eligible for a maximum of £85,000 compensation to cover the loss of their individual proportion of the deposited funds. Your readers might be further reassured to know that all ARMA members are required each year to submit proof from an independent accountant that they hold service
Flat Living
Summer 2012
Flat Living
Opinion
If you have a question or would like to share with other readers your ideas or experiences of living in a leasehold block, we want to hear from you. Address your comments or queries to the Flat Living team at info@flat-living.co.uk a risk assessment and they referred me to the local council. The council replied to say that we were no longer regarded as an HMO so basically didn’t need it. I have prepared the assessment using forms I downloaded but our company have not officially agreed to adopt it. I’m now completely confused as to whether we need it or not. Please can I have some guidance.
BloCk MAnAgeMenT I am one of the four directors of an RMC. We have a managing agent who only does very little as we chose to run the building and company ourselves. A director has been asked to step down by the residents which she has. The managing agent is now telling me that although this director has resigned she is still a member of the block management team and can take part in the running of the building, make decisions and have voting powers on certain issues (which the managing agent does not clearly define.) but has no legal liabilities. They also say members of the management team are appointed and removed by the directors. We are quite surprised by this information. Can you please give us your opinion on this?
Name withheld
Helen Christie, ARMA Technical Officer replies As a lessee, you are likely to be a member of the Residents’ Management Company (RMC) if the company is limited by guarantee, or a shareholder if the company is limited by shares. You therefore have two hats: that of a lessee and that of a member of the company. There are both legal and practical reasons why these two identities are separate and distinct from each other even though they may be the same person. As a lessee you are contractually bound under your lease to abide by the covenants to the RMC or landlord and your rights are not fettered by the fact that you are also a member of the RMC. As a member of the RMC you will be entitled to take part in decision-making charge monies in trust as required by law. Michelle Banks Chief Executive, ARMA
Bob Smytherman also corrects his previous article in his column this issue. Turn to page 30 for more.
Dee Paice
How many hats are you wearing? (albeit probably restricted to voting for the removal of the board) and will have a say at company meetings. Your liability to the RMC and its creditors is limited to the extent of your shareholding or guarantee (commonly £1). As a member of the company, you have no responsibility for its day to day running and your rights and obligations are those set out in the Articles of Association of the company. As a director of the RMC, you are responsible for the day to day running of the company, have personal liabilities and your rights and obligations are those as set out in the companies Act 2006 and any service contract. To help lessees better understand the differences between their roles as residents and as members/shareholders of their RMC, ARMA has produced an advisory note which can be downloaded free from www.arma.org. uk (see also pages 40-41 of this issue for more on this subject).
Fire safety
I’m a subscriber to Flat Living and I’ve been looking at your web site on Fire Safety. Please can you offer clarification on our situation. We have 5 flats in a converted Victorian Listed
building that is part of a large terrace. Between us we own the freehold and we self manage. Some months ago when I became aware of the change in legislation I contacted the Fire Service about needing
Kevin Boreham, fire safety and compliance specialist with Mainstay Property Managers replies Article 31(10) of The Regulatory Reform (Fire Safety) Order 2005 states “premises includes domestic premises other than premises consisting of or comprised in a house which is occupied as a single dwelling.” Put simply any property with communal areas, be it a single stairwell, plant room or storage rooms, requires a fire risk assessment to be completed. From the property description you have provided I have made the assumption that there are communal areas used by all residents. Therefore your thinking would be correct and a fire risk assessment would be required. The fire safety pages of the ‘Department for Communities’ website (http://www.communities. gov.uk/fire/firesafety/ firesafetylaw/) makes it very clear as to the types of properties affected and who the responsible persons are. They also have a number of forms and guidance documents which will help you complete an assessment for simple premises. A word of warning: the listed status of the building needs to be taken into account when considering any fire safety improvements.
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