Residential flat schemes—developer retains reversion but contracts out management and provision of services
Residential flat schemes—developer retains reversion but contracts out management and provision of services

The following Property practice note provides comprehensive and up to date legal information covering:

  • Residential flat schemes—developer retains reversion but contracts out management and provision of services
  • The choice of management company
  • Tenants' management company
  • Professional management company
  • Associated company controlled by the developer
  • Floating management company

One of the most common management schemes adopted by developers of residential flats is for the developer to retain the reversionary interest but to contract out the management and provision of services to a management company. Under this form of scheme, the developer can continue to collect the ground rents reserved under the flat leases, but divest itself of the ongoing management obligations under the landlord covenants in the flat leases.

The choice of management company

The developer has three options in these circumstances:

  1. a tenants' management company

  2. a professional management company

  3. an associated company controlled by the developer

Tenants' management company

Under this arrangement:

  1. the entirety of the development is divided between the flat leases; consequently, there are no common parts; the building is effectively ‘sliced’ in horizontal layers, with common elements (internal staircases, external downpipes, etc) being apportioned between the various flats

  2. each flat tenant covenants to repair its ‘slice’ of the building; whilst in theory each flat tenant could also covenant to insure its own ‘slice’, this would be administratively difficult (each flat tenant would have to be required to insure with a common insurer and on the same terms as each other) and so, in practice, the landlord will (or certainly should) insure the entire building subject to reimbursement by the flat tenants

  3. the scheme is set up as a letting scheme, which

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