RMC Board Checklist Before Signing a Management Contract

Last updated: 19 September 2026

An RMC board should check five things before signing a building management contract: clearly defined service scope, transparent fee structure, insurance and indemnity cover, measurable KPIs, and a workable exit clause. In London, block management fees typically range from 8% to 15% of the annual service charge, according to Neon Property Services (2026), so scrutinising cost against scope matters from day one.

Key Takeaways

• An RMC (Resident Management Company) director owes statutory duties under the Companies Act 2006, and signing an unvetted contract can expose the board personally.
• London block management fees typically sit between 8% and 15% of the annual service charge, per Neon Property Services (2026).
• Insurance commissions on leasehold buildings cover have sometimes exceeded 50% of the premium and were rarely disclosed to leaseholders, according to Fuller Gilbert (2026).
• The Leasehold and Freehold Reform Act 2026's commission ban was targeted for 1 April 2026, affecting roughly 4.8 million leasehold homes across England and Wales, per Fuller Gilbert (2026).
• Priority First's own onboarding data shows three new buildings, including a 10-checkpoint serviced residence, taken fully live within a fortnight in July 2026 — evidence that mobilisation speed is a legitimate contract benchmark, not a vague promise.

What Is an RMC and What Are Directors' Legal Duties Before Signing?

An RMC, or Resident Management Company, is a company limited by guarantee whose shareholders or members are the leaseholders of a block, formed to own or manage the freehold on their behalf. Company law treats RMC directors exactly as it treats any other company director, so the Companies Act 2006 imposes statutory duties including the duty to act within powers, promote the company's success, and exercise reasonable care, skill and diligence.

Directors who sign a management contract without proper diligence risk breaching those duties even though most RMC directors are unpaid volunteers. Written evidence submitted to Parliament has highlighted RMC director vulnerability to exploitation by unregulated managing agents, particularly where boards lack property or legal expertise (UK Parliament Written Evidence).

Before signing anything, the board should obtain independent legal advice on the draft contract, check it against the RICS Service Charge Residential Management Code, and minute the decision-making process. This protects both leaseholders' money and the directors themselves.

What Key Services and Scope Should the Contract Define?

Scope of services is the section of a management contract that lists exactly what the managing agent will and will not do for the annual fee. Vague scope clauses are the single biggest source of later disputes, because "general management" can mean anything from monthly site visits to full compliance oversight.

The board should require the contract to itemise:

• Frequency of site inspections and who conducts them
• Service charge budgeting, collection and year-end accounting
• Contractor procurement, tendering thresholds, and Section 20 consultation duties under the Landlord and Tenant Act 1985
• Health, safety and fire risk assessment coordination
• Insurance placement and claims handling
• Correspondence response times for leaseholder queries
• Emergency out-of-hours contact arrangements

The ARMA Model Management Agreement, published by the Association of Residential Managing Agents, is a useful benchmark template because it separates core services from chargeable extras. Boards signing a bespoke contract should compare each clause against this standard and query any omission.

How Should Management Fees Be Structured, and What Hidden Costs Should the Board Watch For?

Management fees should be structured either as a fixed annual sum per unit or a percentage of the service charge, and the contract must state which basis applies before the board signs. In London, block management fees typically range from 8% to 15% of the annual service charge, according to Neon Property Services (2026), giving boards a benchmark for negotiation.

Percentage-based fees can create a perverse incentive, because a rising service charge automatically increases the agent's income regardless of performance. A fixed fee per unit, reviewed annually against RPI or a similar index, often gives leaseholders more predictable costs.

Hidden costs are where boards lose the most. Insurance commission has historically been the worst offender: the FCA's 2022 review into the buildings insurance market found that almost a third of the cost of insurance premiums could be made up of commission and fees, according to Flat Living Magazine (2026). In some cases, commissions on leasehold buildings insurance have exceeded 50% of the premium and were rarely disclosed, per Fuller Gilbert (2026).

This is changing. New FCA rules effective 31 December 2023 mandate hard disclosure of commissions and other remuneration received for placing insurance to leaseholders, according to the UK Parliament Public Bill Committee memorandum (2026). The FCA stated that "from the new year, insurance firms will be forced to act in leaseholders' best interests, treat leaseholders as customers when designing products", according to the FCA. The board should ask the agent for a written commission disclosure before signing, not after the first invoice arrives.

Fixed fee vs percentage fee: a quick comparison

Fee model	How it works	Main risk for the RMC	Best suited to
Fixed fee per unit	Set annual amount per flat, reviewed yearly	Can under-resource a demanding block if set too low	Smaller blocks with predictable running costs
Percentage of service charge	Agent fee rises and falls with total spend	Little incentive to control costs, since higher spend means higher fee	Blocks wanting fee flexibility for variable major works
Fixed fee + itemised extras	Core services fixed, additions billed separately and pre-agreed	Requires vigilant checking of "extras" invoices	Boards wanting maximum budget predictability

What KPIs and SLAs Should Measure the Managing Agent's Performance?

Key Performance Indicators, or KPIs, are measurable targets written into the contract that let the board judge whether the agent is actually delivering, rather than relying on assurances at the AGM. A service level agreement, or SLA, sets the standard and timeframe attached to each KPI.

Useful KPIs for a building management contract include:

• Response time to urgent maintenance requests, typically 24 hours for genuine emergencies
• Response time to routine leaseholder correspondence, often five working days
• Number and frequency of documented site inspections per year
• Percentage of service charge accounts reconciled and issued on time
• Contractor invoice turnaround and query resolution time

Vague KPIs are worthless. A clause promising "regular inspections" tells the board nothing; a clause requiring monthly inspections with a written, dated report uploaded to a shared portal tells the board everything.

This is where evidence trails matter as much as promises. Priority First's operational data from a 16-building prime central London estate, live since March 2026, recorded over 4,100 nightly patrols with 250 to 280 photo-backed patrols per building, each carrying officer ID, GPS location and timestamp. That level of per-site, photo-verified reporting is consistent with the FCA's broader push toward disclosure and accountability in leasehold services, and it shows boards what a genuinely enforceable SLA looks like in practice: not a promise of "regular patrols", but a portal the board can check without ringing the office.

What Insurance and Client Money Protections Should the Contract Require?

Professional indemnity insurance is cover that protects the RMC if the managing agent's negligence causes the company financial loss, and the contract should state the minimum indemnity limit the agent must maintain. The board should request a current certificate before signing, not a verbal assurance that cover "is in place".

Client money protection is equally critical, since the managing agent will typically hold and administer service charge funds on the RMC's behalf. The contract should specify that service charge money is held in a designated client account, separate from the agent's own operating funds, in line with the RICS Service Charge Residential Management Code.

Insurance placement itself deserves particular scrutiny given the sector's recent history. The Leasehold and Freehold Reform Act 2026's commission ban was targeted to take effect on 1 April 2026, affecting approximately 4.8 million leasehold homes across England and Wales, according to Fuller Gilbert (2026). Boards signing contracts around this date should confirm the agent has updated its insurance placement terms accordingly, and should ask explicitly how commission, if any, will be disclosed going forward.

What Checks Should the Board Make on the Agent's Qualifications and Accreditations?

Regulatory and professional accreditation is the clearest signal of an agent's competence and accountability, and the board should verify it independently rather than accepting a claim on a sales brochure. Priority First notes that membership of the Property Ombudsman is a legal requirement for managing agents under the Consumer Rights Act 2015, so the board should confirm registration directly with the scheme.

RICS membership, or membership of the Association of Residential Managing Agents (ARMA), indicates the agent has agreed to work within a recognised code of conduct, such as the RICS Service Charge Residential Management Code. The board should also request references from at least two comparable existing clients and, where possible, speak to their RMC boards directly.

The Leasehold Knowledge Partnership recommends checking Companies House filings for the agent's own corporate history, including any linked entities, before appointment. A pattern of dissolved companies under different trading names is a warning sign no brochure will disclose.

Common Mistakes RMC Boards Make When Negotiating These Contracts

The most frequent mistake RMC boards make is signing a template contract unchanged, without querying clauses that favour the agent over the leaseholders. Boards under time pressure, often following a difficult AGM, tend to prioritise speed over scrutiny.

Other recurring errors include:

• Accepting an auto-renewing contract with no easy exit if performance disappoints
• Failing to benchmark the proposed fee against the 8% to 15% range typical in London, per Neon Property Services (2026)
• Not requesting insurance commission disclosure before signing
• Treating the managing agent contract and the security or facilities contract as unrelated, when overlapping responsibilities at handover often create gaps
• Failing to minute why the board chose one agent over another, leaving directors exposed if leaseholders later challenge the decision

Mo Hassan, Managing Director of Priority First, has made a related point about facilities providers generally: "Rankings tell you who has scaled, not who turns up when a lift fails at the weekend. The strongest facilities management companies are the ones who already know the building because they are already in it for security, so nothing gets handed to a stranger. Look for one accountable team, not a list of subcontractors with a shared logo." The same logic applies directly to management contracts — a board should ask who is physically accountable on site, not just who signs the paperwork.

Your RMC Building Management Contract Checklist

• Confirm every director understands their Companies Act 2006 duties before the vote to sign
• Request an itemised scope of services benchmarked against the ARMA Model Management Agreement
• Benchmark the proposed fee against the 8–15% London range from Neon Property Services (2026)
• Obtain written insurance commission disclosure ahead of the April 2026 ban deadline
• Verify Property Ombudsman membership and RICS or ARMA accreditation directly with the scheme
• Insist on measurable KPIs with evidence, such as photo-logged inspections or a client portal
• Set a notice period the board can actually act on, not a rolling multi-year lock-in
• Agree a documented dispute resolution and exit procedure before, not after, a problem arises

FAQ

What should an RMC board check before signing a building management contract?

An RMC board should check the scope of services, fee structure, insurance and indemnity cover, KPIs, and exit terms before signing. Independent legal review against the RICS Service Charge Residential Management Code is strongly recommended.

What is the difference between an RMC and an RTM company?

An RMC is a Resident Management Company that typically owns the freehold and has managed the building from the outset. A Right to Manage (RTM) company is a separate legal route allowing leaseholders to take over management functions without buying the freehold, and the 2026 Act raised the non-residential floor area limit for RTM claims from 25% to 50%, bringing many more mixed-use buildings into scope, according to the LeaseVault UK Reform Tracker (2026).

How much do managing agents typically charge for block management?

Managing agents in London typically charge between 8% and 15% of the annual service charge, according to Neon Property Services (2026). Fixed fee per unit is an alternative structure worth comparing against this range.

What insurance commission disclosures must managing agents provide leaseholders?

New FCA rules effective 31 December 2023 require hard disclosure of commissions and other remuneration received for placing insurance to leaseholders, according to the UK Parliament Public Bill Committee memorandum (2026). Boards should request this disclosure in writing before signing any contract.

How long should a managing agent contract notice period be?

There is no single statutory notice period, but boards should avoid contracts with terms exceeding three years without a clear break clause. A notice period of three to six months gives the board a realistic opportunity to switch agents if service falls short.

Can RMC directors be personally liable for a managing agent's failures?

RMC directors are not automatically liable for an agent's failures, but they can be held to have breached their own Companies Act 2006 duties if they failed to exercise reasonable diligence when appointing or monitoring that agent. Written evidence to Parliament has specifically flagged RMC director vulnerability where boards lack expertise to properly vet agents (UK Parliament Written Evidence).

What happens if the RMC board doesn't monitor its managing agent's performance?

Without ongoing monitoring, a board risks paying for services that are not delivered, missing safety and compliance failures, and losing the evidential trail needed to challenge the agent later. Contracts with clear KPIs and photo-logged or portal-based reporting remove this ambiguity from the outset.

Securing Compliance and Continuity with Priority First

Building management contracts often fail at the point where security, facilities, and compliance responsibilities overlap and nobody is clearly accountable for any single one. Priority First addresses this by combining building management and facilities management with SIA-licensed manned guarding, keyholding and CCTV monitoring under one accountable team, so RMC boards are not left coordinating separate contracts for separate risks.

Priority First's own onboarding data shows three new prestige residential sites in central London, including a 10-checkpoint serviced residence, taken fully live within a fortnight in July 2026, with the first provable, photographed patrol delivered within days rather than the weeks of "bedding in" typical of contract handovers.

If your RMC board is reviewing an existing management contract or preparing to appoint a new provider, contact Priority First for a building management and security assessment tailored to your block.

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