Main Responsibilities of a Director

1. Acting in the Best Interests of the Company

Under the Companies House and the Companies Act 2006, directors must:

• Act in good faith 

• Promote the success of the company 

• Make decisions reasonably and responsibly 

• Avoid conflicts of interest 

• Not personally profit from their position unless authorised 

A director’s duty is to the company as a whole — not just their own flat or personal interests.

2. Overseeing Building Management

Even where a managing agent is appointed (such as a RICS-regulated managing agent), directors still remain legally responsible for oversight.

This typically includes:

• Reviewing service charge budgets 

• Approving major works 

• Monitoring contractor performance 

• Reviewing fire, health & safety, and compliance matters 

• Insurance arrangements 

• Reserve fund planning 

• Ensuring lease covenants are enforced fairly 

The managing agent acts on behalf of the directors — not instead of them.

3. Financial Responsibilities

Directors are responsible for ensuring that:

• Service charges are properly demanded in accordance with the lease 

• Funds are held correctly 

• Accounts are prepared 

• Company filings are made 

• Insurance is maintained 

• Contractors are paid appropriately 

• Reserve funds are planned sensibly 

Although day-to-day accounting is often delegated, directors should still:

• Review accounts carefully 

• Question unusual expenditure 

• Ensure proper controls exist 

4. Legal and Compliance Duties

Directors must ensure the company complies with:

• Lease obligations 

• Company law 

• Fire safety legislation 

• Health & safety requirements 

• Data protection obligations (where applicable) 

• Building Safety legislation (where relevant) 

Examples include:

• Fire risk assessments 

• Asbestos management 

• Lift inspections 

• Legionella assessments 

• Building insurance 

• Consultation requirements under Section 20 for major works 

Ignoring compliance issues can expose the company — and potentially directors personally — to claims.

Potential Liabilities of Directors

Most directors worry about personal liability. In practice, honest volunteer directors acting reasonably are rarely personally pursued.

However, liability can arise where directors:

• Act dishonestly 

• Misuse funds 

• Ignore professional advice 

• Fail to insure the building 

• Breach company law 

• Discriminate unfairly between leaseholders 

• Fail to address known safety risks 

• Act outside the lease 

Examples of potential exposure:

• Health & safety prosecutions 

• Breach of fiduciary duties 

• Misappropriation of service charge funds 

• Defamation or harassment claims 

• Unlawful procurement or conflicts of interest 

Many management companies therefore arrange:

• Directors & Officers (D&O) Insurance 

• Professional managing agents 

• Independent accountants 

• Specialist legal advice 

These significantly reduce risk.

Benefits of Being a Director

Despite the responsibilities, there are significant benefits.

1. Greater Control Over the Development

Directors can influence:

• Standards of maintenance 

• Contractor quality 

• Service charge spending 

• Long-term planning 

• Building improvements 

This often leads to better outcomes than absentee freeholders or poor agents.

2. Protection of Property Values

Well-managed developments generally:

• Maintain higher property values 

• Experience fewer disputes 

• Attract buyers more easily 

• Avoid deterioration and deferred maintenance 

Poor management can significantly damage saleability and mortgageability.

3. Transparency and Accountability

Directors gain visibility over:

• Service charge expenditure 

• Insurance commissions 

• Contractor procurement 

• Reserve fund levels 

• Major works planning 

This can help prevent poor practices or excessive charging.

4. Ability to Appoint or Change Managing Agents

The directors normally control:

• Appointment of managing agents 

• Performance monitoring 

• Tendering exercises 

• Contract termination 

This gives leaseholders practical influence over standards of management.

Common Misunderstandings

“The managing agent is legally responsible.”

Not entirely.

The managing agent acts under instruction. Ultimate responsibility generally remains with the company and its directors.

“Directors can do whatever the majority wants.”

Not necessarily.

Directors must:

• Follow the lease 

• Follow company law 

• Act reasonably 

• Treat leaseholders fairly 

Even unanimous resident opinion cannot override the lease or legislation.

“Directors cannot be sued.”

They can be, particularly for:

• Negligence 

• Breach of duty 

• Discrimination 

• Misuse of funds 

• Defamation 

• Health & safety failings 

However, properly acting volunteer directors are usually well protected where they act honestly and take advice.

Good Practice for Directors

A well-run management company will usually:

• Appoint a competent managing agent 

• Hold regular board meetings 

• Keep proper minutes 

• Maintain adequate reserves 

• Obtain multiple quotations 

• Take professional advice 

• Keep decisions transparent 

• Maintain D&O insurance 

• Communicate regularly with residents 

In Simple Terms

A residential management company director is essentially:

• A custodian of the building 

• A company director under company law 

• A decision-maker for service charge expenditure and maintenance 

• A representative of the wider interests of the development 

The role carries responsibility, but when managed properly with good professional support, it is usually manageable and highly beneficial for the building and residents as a whole.