Question 1

Enfranchised Flats

Accepted Answer

Q: We enfranchised in 2001 and so have acquired some experience of running the flats having employed a managing agent almost immediately. For some years now, in order to keep down costs, one of our directors (initially voluntarily and later with a small remuneration of £400 pa) has tested the emergency lighting, replaced faulty light bulbs and seasonally altered the time clocks for the common way lighting. We had previously been advised that this was covered under our Directors’ insurance, but recently we have received the following comments from the insurance broker

“As a director he is automatically considered to be an employee. The first thing to consider is the employers’ liability (EL) cover.

As a Director I assume he is not being paid a wage (for his role as a director) – or being remunerated for his services. However as a part-time caretaker he may well be considered to be an employee. Here there is a fine line between a wholly independent contractor and an employee. If an independent contractor, he heeds public liability cover. However, I fear that his current role may be seen as an employment situation. This brings with it the requirements of any caretaker to have a contract in place.

If there is an employment contract the current EL contract covers caretaking duties. However, the Health and Safety and training requirements then fall on to the Board/you as property managing agent. Thus risk assessments for work, training to work from ladders and perhaps manual handling, use of protective equipment etc. NI and other issues also follow on from this along with pensions.

The Directors and Officers policy is not really where the cover lies, this protects directors against their failure to follow legal requirements, for example Health sand Safety.

Here a decision needs to be made if he is an employee or a contractor and definitely an agreement to cover the chosen role needs to be set up. If a self-employed caretaker/contractor then he will need his own public liability cover as any other contractor. But if an employee the cover is in place, but all the other employment rights need to be addressed.”

I accept that we need to regularise our Director’s position and that this will probably mean that we have to employ a subcontractor because our director is not a qualified electrician. What baffles me is the assertion that all directors are employees. As with many others in our situation, our time is given on a voluntary basis. Please will you clarify this position for me. I was elected, as were other subsequent members of the board. If we are employees, who is our employer? Should we therefore have a written contract and with whom? Do we have other obligations as employees apart from those outlined in your ‘Rights and Duties of Leaseholders (and Directors)’ document from your website? Any further light you can shed on this situation will be gratefully received. FPRA Insurance Expert Belinda Thorpe replies: I can confirm that a director or other resident carrying out caretakers’ work would not be covered under their directors & officers liability insurance. This is a normal situation in many blocks of flats and as you have Employers Liability cover to protect the resident director, then this makes sense. Whether or not you chose to set the resident director up with a contract for being a caretaker or not, you should complete the risk assessments for work, using equipment, use of ladders etc anyway. If you appoint a contractor then you should carry out an assessment on them also, a copy of an assessment form is attached to assist. I guess where a director is normally appointed to a company it will be normal for the director to also be working within a company. In the case of being a director for a residents’ management company or association this is very different. You are simply directors appointed to manage the needs to the residents’ management company or association. I am not sure what benefit an employment contract would provide. You are not remunerated, you may prepare service charges and/or prepare accounts but I am not sure that you need an employment contract to provide you with security in this role as the responsibility as a director will outweigh your responsibility for being an employee. Question submitted January 2018

Question 2

Enfranchised Flats

Accepted Answer

Q: We enfranchised in 2001 and so have acquired some experience of running the flats having employed a managing agent almost immediately. For some years now, in order to keep down costs, one of our directors (initially voluntarily and later with a small remuneration of £400 pa) has tested the emergency lighting, replaced faulty light bulbs and seasonally altered the time clocks for the common way lighting. We had previously been advised that this was covered under our Directors’ insurance, but recently we have received the following comments from the insurance broker

“As a director he is automatically considered to be an employee. The first thing to consider is the employers’ liability (EL) cover.

As a Director I assume he is not being paid a wage (for his role as a director) – or being remunerated for his services. However as a part-time caretaker he may well be considered to be an employee. Here there is a fine line between a wholly independent contractor and an employee. If an independent contractor, he heeds public liability cover. However, I fear that his current role may be seen as an employment situation. This brings with it the requirements of any caretaker to have a contract in place.

If there is an employment contract the current EL contract covers caretaking duties. However, the Health and Safety and training requirements then fall on to the Board/you as property managing agent. Thus risk assessments for work, training to work from ladders and perhaps manual handling, use of protective equipment etc. NI and other issues also follow on from this along with pensions.

The Directors and Officers policy is not really where the cover lies, this protects directors against their failure to follow legal requirements, for example Health sand Safety.

Here a decision needs to be made if he is an employee or a contractor and definitely an agreement to cover the chosen role needs to be set up. If a self-employed caretaker/contractor then he will need his own public liability cover as any other contractor. But if an employee the cover is in place, but all the other employment rights need to be addressed.”

I accept that we need to regularise our Director’s position and that this will probably mean that we have to employ a subcontractor because our director is not a qualified electrician. What baffles me is the assertion that all directors are employees. As with many others in our situation, our time is given on a voluntary basis. Please will you clarify this position for me. I was elected, as were other subsequent members of the board. If we are employees, who is our employer? Should we therefore have a written contract and with whom? Do we have other obligations as employees apart from those outlined in your ‘Rights and Duties of Leaseholders (and Directors)’ document from your website? Any further light you can shed on this situation will be gratefully received. FPRA Insurance Expert Belinda Thorpe replies: I can confirm that a director or other resident carrying out caretakers’ work would not be covered under their directors & officers liability insurance. This is a normal situation in many blocks of flats and as you have Employers Liability cover to protect the resident director, then this makes sense. Whether or not you chose to set the resident director up with a contract for being a caretaker or not, you should complete the risk assessments for work, using equipment, use of ladders etc anyway. If you appoint a contractor then you should carry out an assessment on them also, a copy of an assessment form is attached to assist. I guess where a director is normally appointed to a company it will be normal for the director to also be working within a company. In the case of being a director for a residents’ management company or association this is very different. You are simply directors appointed to manage the needs to the residents’ management company or association. I am not sure what benefit an employment contract would provide. You are not remunerated, you may prepare service charges and/or prepare accounts but I am not sure that you need an employment contract to provide you with security in this role as the responsibility as a director will outweigh your responsibility for being an employee. Question submitted January 2018

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