The short answer
As an RTM director, you owe your duties to the company, not to individual leaseholders. Once the company acquires the right to manage, it takes over the landlord's management functions under the leases. That makes the board answerable for repairs, service charges, insurance and safety in the common parts, even when a managing agent does the day-to-day work. You can delegate the work. You cannot delegate the responsibility.
Your duties run to the company
The Companies Act 2006 sets out seven general duties that apply to every company director, including volunteers who are unpaid. In summary, you must:
- act within the company's articles and use your powers only for their proper purpose (section 171)
- promote the success of the company for the benefit of its members as a whole (section 172)
- exercise independent judgement (section 173)
- exercise reasonable care, skill and diligence (section 174)
- avoid conflicts of interest (section 175)
- not accept benefits from third parties because you are a director (section 176)
- declare any interest in a proposed transaction with the company (section 177)
The care and skill standard is measured against what a reasonably diligent person in your role would do, and against your own experience. A director who is a retired surveyor, accountant or solicitor will be held to the higher standard that experience brings.
What the company takes on
On the date the right to manage is acquired, management functions under the leases pass from the landlord to the RTM company. These cover services, repairs, maintenance, improvements, insurance and management.
The company also steps into the landlord's position under service charge law. In practice, the board is responsible for making sure that:
- budgets, demands and year-end accounts are prepared properly and on time
- costs are reasonably incurred and works are of a reasonable standard (Landlord and Tenant Act 1985, section 19)
- Section 20 consultation is carried out before qualifying works or long-term agreements
- leaseholders' rights to request summaries and inspect supporting documents are respected
Safety duties sit with the company too
Because the RTM company controls the common parts, it is likely to be a responsible person under the Regulatory Reform (Fire Safety) Order 2005. That means arranging a suitable fire risk assessment, acting on its findings, and meeting the Fire Safety (England) Regulations 2022 where they apply.
If the building is a higher-risk building (at least 18 metres or seven storeys high, with at least two residential units), the company may also be an Accountable Person under the Building Safety Act 2022. That brings duties to keep the building registered, assess building safety risks and maintain the golden thread of information.
Working with a managing agent
Most RTM companies appoint a managing agent, and most should. A good agent brings systems, contractors and experience that a volunteer board cannot. But the agent acts for the company, so the agent's failures become the company's problem.
The board's job is oversight: agreeing what the agent will report, how often, and which decisions come back to the board. If you have never seen your compliance schedule, your fire risk assessment action log or your bank reconciliation, that is the first gap to close.
When directors are personally exposed
Limited liability protects directors from the company's debts in most situations. Personal exposure is rarer, but it exists:
- the company can bring a claim against a director for breach of duty
- fire safety law allows a director to be prosecuted personally where an offence is committed with their consent or connivance, or is attributable to their neglect
- failing to file accounts or the confirmation statement at Companies House is an offence for which directors can be fined
Directors' and officers' insurance is worth checking. Many RTM companies hold it, but few boards have read what it excludes.
What a well-run board can show
Good governance is easier to evidence than to describe. A board in good order can usually produce:
- Minutes that record each decision, the reason for it and who will act
- An annual compliance schedule that the board has reviewed
- A fire risk assessment action log with an owner and date for every action
- A regular reporting pack from the managing agent
- A register of directors' interests
This guide is general information for boards of RTM companies in England. It is not legal advice. Take advice on your own building's circumstances.