Flat owner not paying for agreed roof works?

by Readers Question

9:29 AM, 26th November 2020
About 2 months ago

Flat owner not paying for agreed roof works?

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Flat owner not paying for agreed roof works?

We look after a block of flats where roof works have been carried out. Each flat owner acknowledged the work should be done and now it has been completed 7 of the owners have paid their share but one says he can’t afford to pay the shared costs due to Lockdown.

The contract with the builder was with our management Co so the question is, would it be the management company that is legally liable or the individual directors?

Also, what is the course of action to take against the defaulting owner who incidentally owns several rental properties?

Many thanks for any assistance.

Peter


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Comments

Graham Bowcock

9:47 AM, 26th November 2020
About 2 months ago

Hi Peter
Sorry if this may be a bit of a lesson for you, but it is unwise for management companies to instruct contractors until they have the money in the bank. This can delay works (you only have to look at the cladding issue), but it does mean that the management company can discharge it's liabilities at all times.

If the management company has instructed the builder, then the management company must pay.

The good news is that directors are not generally liable as individuals (assuming the management company is limited), unless personal guarantees have been given, or some undertaking that invoices would be paid. For this reason, management company directors are always advised to have D and O insurance (directors and officers).

The management company can in turn sue the leaseholder, but you do need to make sure that all due process was followed in setting up the works (i.e. s20 notices, etc.). If not, then the management company may be liable without recourse for recovery of the money.

The directors are, of course, liable to the members (as opposed to the builder) and should not cause the company to operate in a manner whereby losses are incurred.

Depending on the sums involved, you may need some proper legal advice.

NewYorkie

13:43 PM, 26th November 2020
About 2 months ago

Reply to the comment left by Graham Bowcock at 26/11/2020 - 09:47
Provided all notices were served properly and there was no 'skullduggery' by the management company, the costs should be included in the service charge (not paid upfront by the leaseholders). It is unfair on the other leaseholders that one should not pay, and the management company would normally take legal action to recover the costs. Perhaps a payment plan can be put in place. But if the landlord is in such dire straits (as is entirely possible right now) that he cannot pay, then he should already be considering re-financing his properties or selling one to release any equity (of course, there may be none!).

JC Ward

19:04 PM, 26th November 2020
About 2 months ago

Reply to the comment left by Graham Bowcock at 26/11/2020 - 09:47
Thanks for your advice. We live and learn

JC Ward

19:08 PM, 26th November 2020
About 2 months ago

Reply to the comment left by NewYorkie at 26/11/2020 - 13:43
Thank you. It looks as if a substantial increase in Management fees are required. And it might be better to implement recovery action when Covid has passed and things are back to normal. Thanks

Seething Landlord

1:17 AM, 27th November 2020
About 2 months ago

Reply to the comment left by NewYorkie at 26/11/2020 - 13:43
In my limited experience it would be quite unusual for the management company of a small block of flats to have enough money in the maintenance reserve to pay for major repairs without raising additional cash from the leaseholders as a one-off levy. I therefore agree with Graham Bowcock that the funds should be raised before instructions are given for the work to be carried out.

Gary Nock

5:28 AM, 27th November 2020
About 2 months ago

The block managing agent, if there is one, should have a written agreement with the freeholder / Right To Manage Co that they only pay for work carried out if there are sufficient funds. Those funds can be raised through the service charge over a number of years as part of the reserve fund to avoid large one off increases, or via the Section 20 consultation route where any leaseholder is required to pay more than £250 towards such works. If the block managing agent has not followed the Section 20 consultation process then the monies are not recoverable. In addition all demands for payment have to be made in a prescribed format, with a Summary of Rights and Responsibilities attached or the demand is not valid. If all legal compliance has been complied with then you can take the leaseholder to County Court for non- payment. Any judgement for monies owed can be attached to the property so it can't be sold or remortgaged whilst the debt is outstanding. However, if it gets to County Court and the leaseholders defence is non- compliance with the myriad of regulations around block management, then the judge will remit it to a First Tier Tribunal for a determination as to whether or not the charges for the roof are payable. It's a legal minefield and you do need specialist advice. At the very least spend some time on the lease.org website.


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