A question we are asked regularly by RTM and RMC boards: our agent has instructed and paid for works we never approved - were they entitled to do that?
Within the authority given to it, yes. A managing agent acts under the management agreement, which usually sets a delegated spending limit per item and a narrower emergency authority for urgent safety or security work, subject to prompt reporting. Spending inside those limits does not need prior board approval. Spending beyond them is a breach of the agreement and a governance problem, and separately the works may require section 20 consultation regardless of the agent's contractual authority. If consultation was required and not carried out, recovery through the service charge can be capped at the statutory amounts unless dispensation is obtained.
A managing agent acts as agent for the client company. What it can commit the company to is determined by the authority the company has given it, which in practice means the management agreement, any board resolutions, and whatever has been agreed and recorded since.
Most agreements contain a delegated spending limit, often expressed per item, with anything above it requiring board approval. Most also contain emergency authority allowing the agent to act without prior approval where there is a risk to safety, security or the fabric of the building, subject to reporting the decision promptly. Both features are sensible. A board that must approve every £80 repair will not function, and an agent who cannot make a lift safe at 11pm on a Sunday is not much use either.
So spending without prior director approval is not automatically improper. The question is always whether the spending was within the authority the agent actually had.
Common problems are recognisable across many blocks. The agreement contains no spending limit at all, or one that has not been reviewed since it was signed. Costs are split across several invoices so that each falls under the limit. Emergency authority is used for work that was foreseeable rather than urgent. A long-term contract is renewed without reference to the board. Or the agent has genuine authority under the agreement, but the works also required section 20 consultation that never happened.
That last point is important and frequently missed. Contractual authority to spend is not the same as compliance with the statutory consultation regime. Where qualifying works exceed £250 per contributing leaseholder, or a qualifying long-term agreement exceeds £100 per leaseholder per year, section 20 applies. If consultation was not carried out and dispensation is not obtained, recovery through the service charge may be capped at those amounts even though the agent had contractual authority to instruct the work.
Start by establishing the facts rather than the blame. Get the agreement and identify the actual limit and the emergency wording. Get the invoices, the instruction and any correspondence. Establish when the decision was taken, on what basis, and whether the agent reported it. Then ask whether the work was genuinely urgent, whether section 20 was triggered, and whether the cost is reasonable and recoverable under the lease.
Only then decide the response. Sometimes the answer is that the agent acted within authority and the board simply was not paying attention to its own agreement. Sometimes the work was necessary but the reporting failed, which is a process fix. Sometimes authority was exceeded, and the board needs to consider the contractual position, whether the cost can properly be charged to leaseholders, and whether the relationship can continue.
The controls that work are unglamorous. Set a realistic delegated limit and review it annually. Define emergency spending narrowly and require same-day or next-working-day notification. Require a schedule of all expenditure above a lower reporting threshold at every board meeting. Require competitive quotations above a stated value. Insist that section 20 exposure is flagged before instruction, not after. Keep an approvals log so the board can see what it has authorised. And minute approvals properly, because a verbal nod from one director in a corridor is not a company decision.
Delegation does not remove the directors' duties under the Companies Act 2006. If a board leaves spending unmonitored for years and a problem emerges, "the agent did it" is not a complete answer to the members. The point of a spending limit is not to distrust the agent; it is to give the board a documented basis for the decisions taken in the company's name.
Clear spending authorities should be written into the management agreement from the start. We explain how we set those out in our RTM company management service.
Spending authorities are one of the first things we agree with new client boards, including those taking on a managing agent in the Romford area.
The right response to unapproved spending depends on your role and what the agreement says.
Having no delegated spending limit at all
Without a stated limit, arguments about authority become a matter of interpretation after the money has been spent.
Using emergency authority for foreseeable work
Deferred maintenance that finally fails is not the same as an emergency, and treating it as one bypasses proper approval.
Splitting invoices to stay under a threshold
Artificially dividing works can breach both the agreement and the section 20 regime.
Assuming contractual authority cures a consultation failure
Section 20 applies to the works themselves; recovery can be capped even where the agent was authorised to instruct them.
Most questions on this topic are management questions rather than legal ones, and the two are worth separating. A managing agent can tell you how something works day to day and what it will cost. A solicitor tells you what your rights are and how a Tribunal is likely to view them.
East Valley Properties provides management expertise, not legal advice. Where a matter turns on the wording of your lease or on formal proceedings, we will say so and work alongside your solicitor.
The official material behind this guide. We summarise it in plain English rather than reproducing it.
Consultation requirements and the statutory recovery caps.
The consultation procedure and the £250 and £100 thresholds.
Directors' duties, including exercising reasonable care, skill and diligence.
Approved code covering instructions, authority and reporting.
We manage small and medium residential blocks across Greater London and Essex from our Romford office. Fixed fees, no insurance commissions, and directors deal with us directly.
Answered by Romain Maillard - Director, East Valley Properties
Romain manages residential blocks and estates for RTM companies, residents' management companies, share of freehold developments and freeholders across East London and Essex.
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Based on the legislation and official guidance cited on this page.
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This answer has been anonymised. Personal details, addresses and company names have been removed. Guidance is general and does not replace advice from a solicitor or surveyor on your specific block. East Valley Properties is a managing agent, not a firm of solicitors or legal advisers.
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