Mid-year governance check for resident directors: prepare for the next budget cycle

Most resident directors find out that something has gone wrong with the company at the point it becomes expensive: a late filing penalty, an insurer declining cover, a buyer's solicitor holding up a sale because the register of members is out of date. Almost all of it is preventable with an hour's work halfway through the year.

Below is the check we run for RMC and RTM boards at the mid-point of the financial year — the moment when there is still time to fix things before the next budget cycle starts.

1. Companies House: identity verification is now the live risk

Identity verification for company directors became a legal requirement on 18 November 2025 under the Economic Crime and Corporate Transparency Act 2023. Each director verifies their identity individually, receives a Companies House personal code, and that code must be provided with the company's next confirmation statement.

For a volunteer board this is the filing most likely to be missed, because it is not the company secretary's job to verify on someone else's behalf — every director has to do it personally. Check now which of your directors hold a personal code and which do not, well before the confirmation statement date rather than in the week it falls due.

While you are there, confirm the rest: the confirmation statement date, the accounts filing deadline (nine months after the accounting reference date for a private company), the registered office address, and the PSC position.

2. The register of members, and the flats that changed hands

In an RMC, membership usually transfers with the flat. In an RTM company, every qualifying tenant is entitled to be a member. In both cases the statutory register has to reflect who actually owns what today.

A register that has not been updated since two flats sold is the single most common cause of a conveyancing delay in a small block, and it also means notices, accounts and voting rights are going to the wrong people. Reconcile the register against the year's completions at the mid-point, not at the AGM.

3. Directors' duties, and the conflicts nobody declares

Resident directors owe the same duties under the Companies Act 2006 as any other director: to act within powers, to promote the success of the company, to exercise independent judgement, to exercise reasonable care, skill and diligence, to avoid conflicts of interest, and to declare an interest in a proposed transaction.

In a block, conflicts are usually innocent and undeclared rather than concealed. A director whose brother-in-law is quoting for the redecoration, a director who is also in arrears, a director who wants the parking bay reallocated. The duty is to declare it and step out of the decision. Recording that in the minutes protects the individual as much as the company.

Confirm your directors' and officers' cover is in place and that newly appointed directors are named on it. Volunteer status is not a defence.

4. Section 20B: the notice that has to go out mid-year

This is the item most often missed, and it is expensive.

Under section 20B of the Landlord and Tenant Act 1985, costs incurred more than eighteen months before a service charge demand cannot be recovered — unless the leaseholder was notified in writing within that eighteen months that the costs had been incurred and that they would be charged.

Mid-year is when you identify any cost that has been incurred but not yet demanded: a job completed and invoiced but not yet included in a demand, an insurance premium paid outside the normal cycle, professional fees on a project still running. If it is not going to be demanded shortly, serve a section 20B(2) notice now. It costs nothing. Not serving it can write off the whole sum.

5. Where the budget actually landed

Six months in, compare actual expenditure against the budget line by line, not in total. A block that is broadly on budget can still be 60% through its repairs allocation with a winter to come.

Look specifically at the lines that behave differently from the rest: reactive repairs, water and energy, insurance where the renewal has already happened, and anything driven by a fire risk assessment action list. Where a variance is going to be material, leaseholders should hear about it now rather than in a balancing charge. It also tells you what next year's figure should actually be, which is the point of doing it at the halfway mark.

6. Arrears, and the deadline you cannot see

Review the arrears position by leaseholder rather than as a headline figure. One long-standing debt distorts the total and hides the pattern.

Two things matter here. First, recovery gets harder with age, not easier. Second, a service charge cannot be treated as admitted for forfeiture purposes until it has been agreed, admitted or determined by the tribunal or a court — so the sequence matters and starting it late costs a year.

7. Section 20 status for anything planned

Any qualifying works where a single leaseholder's contribution exceeds £250, or any contract running more than twelve months where a leaseholder pays more than £100 in an accounting period, requires statutory consultation. The notices and observation periods run to a fixed timetable.

Mid-year is the last comfortable point to start consultation for works intended in the next financial year. Beginning in budget season usually means the work slips a year, and starting the work without consulting caps recovery at £250 or £100 per leaseholder unless the tribunal grants dispensation.

8. Accounts, and the two documents people confuse

An RMC has company accounts filed at Companies House, and service charge accounts prepared for leaseholders. They are different documents governed by different rules, and a board that has filed one often assumes it has done both.

On the leaseholder side, section 21 of the 1985 Act entitles a leaseholder to a written summary of relevant costs, certified by a qualified accountant where the building contains more than four dwellings, and section 22 gives a right to inspect the underlying receipts and invoices within six months of that summary. Section 42 of the Landlord and Tenant Act 1987 holds service charge money on trust — which means it should sit in a designated account and be visible as such.

We set out the practical side of this in our guide to transparency in service charge accounting.

9. What is coming, and what is not yet in force

The Leasehold and Freehold Reform Act 2024 contains a package of service charge transparency measures — a standardised annual report, prescribed demand and information formats, and changes to how litigation costs are recovered. These are not in force. The consultation on implementation closed and the Government response followed in July 2026, with the substantive changes expected during 2027.

The practical position for a board this year is that nothing has changed yet, but the direction of travel is towards prescribed formats and shorter deadlines. Boards already keeping clean, itemised records will absorb that easily. Boards that cannot currently produce a costed breakdown on request will not.

Where to get help

We take on ten to fifteen properties a year and work with resident boards directly rather than through a call centre. What is covered is set out under block management, our fees are published in full at standard fees, and if you are considering a change of agent, transferring block manager explains the handover. Leaseholders looking at taking control themselves should start with right to manage.

If you would like a second pair of eyes on any of the above, get in touch.