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How To Be A Successful Resident Director
If you’re a Director of a Residents’ Management Company, or a similar leaseholder-controlled company, it’s important to find out How To Be A Successful Resident Director ….. otherwise you’re in danger of failing in your complex and important task. The starting point is recognising that you have three roles, which run side by side ….. and you have to balance the responsibilities and duties that each role entails.
Depending on which “hat” you’re wearing, you are,
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A Leaseholder
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A Shareholder or Member
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A Director
Each role has individual pros and cons – and sometimes you’ll be faced with a conflict of interest, in which case you’ll need to know what to do and say. This guide should help you with your decision-making process – so you ensure you’re successful in your Resident Director role.
A Couple of Examples
The types of situations which will land in front of you are as varied as the British weather. So, for the sake of simplicity we’ll use two examples – at opposite ends of the “seriousness spectrum”. They are:
The Leaseholder Role
As we said above, you have three roles – have three hats to wear – and each of them raises different questions, different answers and different priorities. The leaseholder role is your personal viewpoint, your individual pros and cons as the leaseholder of the flat, bound by the terms of the lease and its rights and obligations. This is where you look at things personally, individually, and with YOU in mind.
If the leases say that (for example) no pets are to be kept in the flat, unless the Landlord’s prior written permission has been obtained ….. there are two viewpoints to which you may need to apply your mind ….. wearing your leaseholder hat.
Firstly, another leaseholder in another flat elsewhere in the building may contact the Board of Directors to request permission from ‘the Landlord’ ….. from the Residents’ Company ..… to keep a dog as a pet. Wearing your leaseholder hat and considering things from your personal viewpoint, you will consider the request upon its merits – weighing up the circumstances of the Building, the individual leaseholder, the leaseholders as a whole, and any other factors – but applying your personal view and opinion. As a leaseholder you may not have a problem with this request, particularly if the dog and the flat are on the other side of the building, away from you. Your personal individual opinion as a leaseholder may say “not a problem, grant permission”.
On the other hand, it’s possible YOU are the leaseholder asking for permission to keep a dog. In that circumstance, you clearly have a conflict of interest. You are most definitely interested in the outcome of the question and therefore you cannot take part in the Board of Directors’ discussions. You would put forward your personal argument as to why you should be allowed to keep the dog – but you would take no further part in the decision making process – leaving the rest of the Board to discuss and make their decision.
Turning now to the other extreme – the request to build a loft extension.
If the leases say that (for example) the leasehold is not permitted to alter the ‘demised premises’, nor add to the demised premises, nor ‘cut or maim’ the building ..… unless the Landlord’s prior written permission has been obtained ….. there are again two viewpoints to which you may need to apply your mind ..… wearing your leaseholder hat.
Firstly, another leaseholder in another flat elsewhere in the building may contact the Board of Directors to request permission from ‘the Landlord’ ….. from the Residents’ Company ..… to build a loft extension. Wearing your leaseholder hat and considering things from your personal viewpoint, you will consider the request upon its merits – weighing up the circumstances of the Building, the individual leaseholder, the leaseholders as a whole, and any other factors – and applying your personal view and opinion. As a leaseholder you may not have a problem with this request, particularly if the proposed extension and the flat are on the other side of the building, away from you. Your personal individual opinion as a leaseholder may say “not a problem, grant permission”.
On the other hand, it’s possible YOU are the leaseholder asking for permission to build the loft extension. In that circumstance, you again clearly have a conflict of interest. You are most definitely interested in the outcome of the question and therefore you cannot take part in the Board of Directors’ discussions. You would put forward your personal argument as to why you should be allowed to build the extension – but you would take no further part in the decision making process – leaving the rest of the Board to discuss and make their decision.
In both the above examples, your leaseholder role is fairly similar. Your personal viewpoint is what guides your leaseholder opinion ..… and if there is a conflict of interest you do not take part in the Board discussions which lead to a decision.
The Shareholder Role
In addition to being an individual leaseholder in the Building, you are also a shareholder (or member) of the Residents’ Company. Setting your leaseholder hat to one side, you put on your shareholder hat and you consider the request from this different position.
The shareholder role requires you to consider things from the Company viewpoint:
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What is good for the company?
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What do the leases say the company should do?
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What does the law of the land say the company should do?
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Are there financial benefits for the company?
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Are there financial costs for the company?
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What do the managing agents advise from a professional viewpoint?
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What other factors affect the company decision?
Your shareholder role requires you to set aside your personal views and opinions, and consider the pros and cons for the company.
So, taking our dog scenario again – you need to consider each of the questions above and any other which come from the individual circumstances at your building ..… including the opinions of other shareholders/members of the company.
It could be there is no particular downside to granting permission, other than the possibility that the dog may become ‘a nuisance’ in the future. It may be therefore that a licence is granted, which allows the leaseholder to keep a dog “provided the dog is not a nuisance” and if the circumstances change “the licence can be revoked at any time”.
Turning now to the loft extension scenario – this is probably a far more serious question from the company point of view. Again, the above questions would need to be answered – but in this scenario there are obvious laws of the land to consider; e.g. planning permission and building control requirements. There is also the question of whether the existing structure can take the weight of an additional flat on top.
Furthermore, there is a leasehold legal consideration – namely that the new extension will be utilising space which is currently a communal part of the building structure. That has implications for all the leases and the company must be careful not to breach the terms of other leases if permission is granted and the demised premises of one flat is changed.
Your shareholder role may well want you to recommend that the company obtains formal legal advice, before permission is granted or denied. As a shareholder you would not want the company to get into a costly legal position, as that would devalue your ‘slice of the company’ as a shareholder.
On the positive side for the company – there may well be a financial benefit to granting permission. That may well need to be quantified by professional advises also – but could bring income for the company – which would increase the value of your shareholding.
Lastly, we turn to your third role …..
The Director Role
In addition to being an individual leaseholder and an individual shareholder (or member), you are also a Director of the Residents’ Company. Setting your leaseholder hat to one side, and your shareholder hat to one side, you put on your Director hat and you consider the request from this third position.
Again, the Director role requires you to consider things from the Company viewpoint – but solely looking at the company as a whole, not at any benefit for you as an individual shareholder. So again you consider:
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What is good for the company?
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What do the leases say the company should do?
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What does the law of the land say the company should do?
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Are there financial benefits for the company?
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Are there financial costs for the company?
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What do the managing agents advise from a professional viewpoint?
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What other factors affect the company decision?
Your Director role requires you to set aside your personal views and opinions, and your shareholder views and opinions, and you consider the pros and cons for the company as a legal body.
So, taking our dog scenario again – you need to consider each of the questions above and any other which come from the individual circumstances at your building ..… including the opinions of all the leaseholders ….. and all the shareholders/members of the company. Your Director role requires you to look at all the ‘evidence’ objectively and professionally, with all your legal responsibilities as a Director of a company.
Again, it could be there is no particular downside to granting permission, other than the possibility that the dog may become ‘a nuisance’ in the future. It may be therefore that a licence is granted, which allows the leaseholder to keep a dog “provided the dog is not a nuisance” and if the circumstances change “the licence can be revoked at any time” ..… as described above.
But you’ll also need to consider whether granting permission will create a precedent – making it difficult to refuse permission if a different leaseholder requests permission in the future. Considering this particular request with the future in mind, is always worthwhile.
Turning once again to the loft extension scenario – this is definitely a far more serious question from Director of a company point of view. Again, the above questions would need to be answered – but wearing your Director hat, there are serious legal questions, building structure questions, and financial questions to consider.
You as a Board of Directors will need professional legal advice from a specialist leasehold solicitor. You’ll also need professional valuation advice – as you’ll be selling part of the communal structure and airspace ..… which has a value ….. and the company will need to be compensated for that transfer of value. Those professional fees and costs will need to be reimbursed by the person requesting permission, as those company costs cannot be recovered via service charges.
In addition to the positive financial benefit of the company selling some space - there may also be a benefit in terms of utilising the scaffolding which will be erected for the build … in order to gain access to the building elevations, for painting and/or repairs. Not having to pay for separate scaffolding may reduce service charge costs on major works considerably, with no downside for the leaseholder building the loft extension.
Three Roles – Three Hats
Hopefully the above demonstrates that your three roles are interwoven, they are complicated, and it is important to consider each of them individually so that your contribution to Board discussions is objective and professional.
But in the real world, you won’t just get requests to keep dogs and requests to build loft extensions. In the real world there will be requests for all sorts of things – and there will also be people who go ahead with things without asking for permission when they should. As a Director you need to understand the wording of the leases – and where you don’t understand any part of them, you need to obtain specialist advice, either from your property manager, or from a leasehold lawyer, or both.
You’ll also need to understand the Memorandum & Articles of Association for your company. That is the rule book for the running of your company and again, if you don’t understand, get professional advice. It is better to ask before – rather than finding out in Court afterwards.
Keep Good Written Records
Your role as a Resident Director is a formal position. You are there to do a professional job, objectively, in a business-like manner, for the good of the company, the shareholders, your fellow leaseholders, the residents of the building ….. and the wider neighbourhood within which the building sits. It’s an important role and needs to be taken seriously.
When you and your fellow Directors carry out your duties successfully, there will be happy smiling faces around you. But no matter how wonderfully you do the job – one day, somebody will be unhappy and a dispute will arise. The old saying “You Can’t Please All Of The People All Of The Time” is definitely true for leasehold property management and Residents’ Companies. Therefore you need to aim for the good, but be prepared for the worst.
You therefore need to Keep Good Written Records.
Whether you’re dealing with a dog, a loft extension, or the normal day-to-day running of the building – you need to record:
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Who asked what and why?
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What advice did professionals give?
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What did the lease say?
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What did the Memorandum & Articles of Association say?
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What was the Board vote?
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Board Minutes should be sufficient – not too short, not too long.
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Update shareholders / leaseholders as appropriate.
In Summary .....
Regularly reviewing this guide on How To Be A Successful Resident Director will help you ensure you and your fellow Directors remain objective, calm and business-like. A quick monthly or quarterly check of your three roles, will keep things fresh in your mind – and will you keep on the right path.
It will also ensure you have a correct balance of leaseholder, shareholder and Director. Thinking a little bit about ‘each hat’, will result in success ..... for you, your fellow leaseholders and your board of Directors.
It’s what we love to see with our successful resident Directors, within the Casserly Property Management portfolio. And we’d love to see you achieve it too. If you have any questions or would like a little more guidance, do take advantage of our free, no obligation consultation. You can book a convenient date/time using the button, below.
Best wishes,
Paul
Paul Casserly
Casserly Property Management
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