SFS do not form Flat Management Companies but we are happy to provide the following information.
How does a Flat Management company work?
In law, a limited company is seen as an 'individual' in its own right. This means it can own property (such as a freehold or leasehold) and enter into contracts in its own name. It exists independently and separately from the people involved.
Why have a Flat Management Company?
Flat Management companies are companies used to manage the whole of or parts of a site or building on behalf of its owners. When there are multiple tenants, Flat Management companies are normally used to protect the interests of the leaseholders.
In shared properties, there are often a number of areas that are common and used by all flat/unit residents. For example, communal halls, access areas and gardens. By having a Flat Management Company you can establish a system for collecting pooled funds in order to maintain and repair any common areas.
If the company will not own the freehold for the entire property then it may not be appropriate to have a Flat Management Company. A residents association may be more suitable.
The constitution of a Flat Management Company
A Flat Management Company has its Memorandum and Articles of Association specially drawn up to allow the company to own, manage and administer the property, which is normally divided into several dwellings, units or flats. When a property is divided into a number of flats, each flat owner has a lease of their own flat but they may also hold shares in a management company that owns the freehold (or lease) of the entire building.
Transfer of Shares - change of ownership
As shareholders, the flat owners have their say in running the limited company. Normally, the company's constitution will say that shareholders who sell their flats must also transfer their shares to the new owners. This ensures that - at any given time - the limited company represents the interests of all the current flat owners. However, it remains a separate legal entity regardless of who holds its shares from time to time.
