RMC who decides annual budget

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    RMC who decides annual budget

    Is the budget a board of directors decision or MUST it be ratified by shareholders at the A.G.M ?

    If so would it be an ordinary resolution or special requiring 75% to be ratified ?

    #2
    It is a decision the directors should be taking, I suspect however that all too often it is the agent who is making the decision. The agent should only advise the directors,

    Comment


      #3
      Thanks, fortunately we've a good property manager. I think it is better to be ratified by shareholders but looking to see if any legal basis.

      Comment


        #4
        There is nothing to stop the directors from calling a meeting of members and seeking approval from the members (in which case it would be a simple majority vote) but it rarely happens. In theory the members appoint directors to act and make decisions on their behalf.

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          #5
          Appreciated. It has been custom and practice to have it approved at A.G.M
          It is a shame that more people are willing to be directors. Of course that would be another thread.

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            #6
            Hi. as all these things there are codes of practice that are chocolate fireguards and there is the actual agency contract signed with the agent - usually provided by the agent and perhaps not understood that the RMC can insist on extra clauses to protect it.

            ARMA Charter IV: "Have written terms of business".

            4.2.1 "Must seek approval from the Client prior to demanding any service charges unless specific authority has been delegated to the Managing Agent for Service Charge Budgets".

            If the RMC has a contract with an ARMA agent, we all know here that this is bankable security...
            Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

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              #7
              Sorry, forgot to mention AGM. Directors should approve budgets as they have to manage the agents manage the lease liabilities. Asking members to vote is likely to produce howls of anguish at the costs. They would need a special resolution to over-rule the directors and on such event all the directors should resign and say, 'you manage your budget then'...
              Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

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                #8
                Thanks. Am I right to understand that with a 75% vote on a special resolution shareholders would be entitled to overturn budget ?

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                  #9
                  No, there is no special resolution required,

                  Comment


                    #10
                    Directors should always read the terms of a contract before agreeing to it,

                    Comment


                      #11
                      Once you get leaseholders who can over rule the Directors and managing agents, you are on a down hill slope, and if they can't afford it, the repairs, maintenence, preventative maintenence, it will never get done.
                      Directors must ACT like directors, and not strapped for cash leaseholders.
                      The lease will clearly state ( ususally ) "To keep the property ( building, driveway, boundary walls, garden Etc, Etc ) to keep the property well maintained, and in good order"

                      Anyone who does not wish to abide by the Lease and the R.I.C.S. code, should not even be asked to vote on maintenence, if fact, the lease and R.I.C.S. code is what has to be enforced, and no votes are required.( except directors to agree the annual expenditure - in acordance to all above.

                      The Directors and Agents Must enforce the lease, otherwise throwing it open to be varied by mere leaseholders, is a disaster waiting to happen.


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                        #12
                        I would say that the managing agent would pull the budget together based on the lease and after an inspection of the building..then I expect the managing agent to put the budget they have created to the directors who would then approve or disapprove of, amend it etc... then service charge demands are sent out according again to the times in.the lease.

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                          #13
                          It is important to remember that the members own the RMC and they have the power to change the budget, the agent and the directors.

                          The idea that the majority of members will not agree to spend any money has no validity, of course they will in order to maintain the value of their properties.

                          Many of the problems which exist with leasehold properties today are due to some individuals considering that they are not answerable to the members.

                          Comment


                            #14
                            Originally posted by eagle2 View Post
                            The idea that the majority of members will not agree to spend any money has no validity.
                            Sorry, it's very valid. I deal with this problem every day.

                            There is one place where they have no excess money in the bank for repairs or next years insurance.
                            I keep stating that we need £ x in the bank 1) for emergencies 2) for forthcoming repairs / insuramce / etc etc etc.
                            I produce a budget, and it is just ignored. They even say, I am not handing over any money. Period.
                            But will shortly have to resign, as this cannot go on. And certain Health and safety items are being ignored, and me as an officer of the company, and I deal with the repairs, can be sued if someone gets hurt / dies.

                            Another place is similar, they decide which items to repair maintain / not maintain. and only by how much they want to spend and not by that which they Must spend. So the place is a now tip
                            I left them a while ago. walls fallen down, and too much to describe more here.
                            ( Oh but it costs too much, so we wont have it fixed.)

                            Sorry, so perfectly valid.



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                              #15
                              An RMC should employ a good managing agent to decide what works are required and prepare budget.
                              Lessees do not have the skills or experience and think running an RMC is an excuse to spend nothing.
                              It will cost them dearly in the long run
                              Like Ram, I see this all the time.

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