When structuring a new build development which features shared areas such as roads, landscaped areas, play areas or other communal facilities, it is essential to plan for the long-term management and maintenance of those areas. This is typically achieved through either appointing or setting up a management company to deal with the maintenance of such areas who collect service charges from estate residents and use the funds to either carry out or appoint an agent to carry out the maintenance works.

There are two main types of management company. In this blog, we look at the key differences between the two and how to decide which one might be the best option for your development.

Professional Management Company

A professional management company is a private company which usually has its own team and contractors to deal with the management of residential developments without the appointment of a managing agent. This type of management company is suitable for larger, complex or mixed-use developments needing various degrees of maintenance. Where a professional management company is required, the developer will usually appoint such a company at the outset of the development so a clear management structure is agreed and in place from the beginning.

Key Features:

• A management agreement is generally entered into between developer and management company setting out each parties obligations relating to the construction, transfer and ongoing maintenance of the managed areas.
• An estimated service charge budget can be obtained from the management company at the start of the development and provided to buyers to ensure transparency as to service costs at the outset of a development
• The day-to-day control of this type of management company stays with the company and the individual residents do not have to worry about the maintenance or appointing an agent to carry out the works
• Residents may have limited control over the decisions of the management company
• Residents will not receive membership or a share in the management company
• Provides formal, structured approach to maintenance with such management companies usually having trained professionals working for them to deal with any issues which may arise

Resident Run Management Company

This type of management company is again set up by a developer at the outset of the development however the ownership and directorship of the company is handed over to the individual residents of the estate, typically after the final plot on a development is sold and any landscaping scheme is completed. They are more appropriate for smaller developments where the open space and shared infrastructure on a development is relatively small and does not require complex maintenance.

Key Features:

• Residents have control of the company and can choose how the development is managed.
• Residents may choose to appoint a management agent to deal with the day to day management activities but oversight of this would stay with the residents
• The Officers (Directors and Secretary) of the company would be appointed from the residents of the estate
• Residents are able to have direct control over decisions and spending relating to the management of the managed areas
• Residents would be able to set their own budgets based on the actual maintenance required or they could choose to contribute towards maintenance costs as and when required on an as-hoc basis
• The approach is less formal and provides greater flexibility for residents

The key things to consider when deciding which management company is appropriate for a new build development may be:

Scale and complexity of the development

Larger scale estates with complex needs might benefit from the structure of a Professional Management Company whereas smaller or mid-sized estates may be better suited to a residents-run model

Level of Resident Engagement

Consider whether the residents would be willing and able to take on the responsibility of running a resident’s run management company or whether it may be more practical to outsource the maintenance to a professional company

Cost Considerations

A professional management company’s costs including professional charges may be high for a small development with a small number of plots. Alternatively, this may be cost effective for a larger development.

Ultimately, the features and makeup of the new build development will be deciding factors when determining which type of management company might be best for a new build development. It is important that time is taken to consider this at the outset of the development process to ensure that a clear plan for the ongoing management and maintenance of the estate is in place which in turn provides certainty and transparency for buyers.

Should you require any further information or advice in respect of types of management companies and which one might be best for your development, please do not hesitate to contact our Residential Development Team .