Freeholder disputes legitimacy of RTM’s appointed managing agent?

Freeholder disputes legitimacy of RTM’s appointed managing agent?

9:36 AM, 23rd August 2023, About 10 months ago 6

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Hi everyone, I’m seeking help for an issue the RTM (Right to Manage) is dealing with. The RTM gained legal status on April 28th, 2023, and we (I’m one of the two directors) hired a managing agent to handle the block on our behalf. Unfortunately, there’s a disagreement with the freeholder due to plans to add another floor on the roof and a bungalow in the garden.

Our agent has been very professional and helpful. During the takeover from the previous managing agents acting on behalf of the freeholder, she discovered that reserve funds were misused, the freeholder didn’t give serve S3 notice, and lots more.

The freeholder won’t talk to us or our agent.

However, our agent found out today that the building insurance was cancelled halfway through its term. She wrote to the freeholder to ask about it and to express her concern since having no insurance coverage is imperative. She also informed him that the RTM needs to get new building insurance (which was due by September 20th) as the RTM has assumed that responsibility as outlined in the Articles of Association.

Finally, the freeholder replied to our agent, saying new insurance is in place and we need to pay within 7 days. We were advised by our solicitor to get coverage right away through the RTM company. We should only pay up to the date he cancelled the other policy as the leaseholder had paid in advance.

Our main worry is that the freeholder is questioning the legitimacy of our chosen agent, who we picked through a group decision (5 members, including 2 directors). Our agent gave the freeholder a copy of the meeting minutes.

The freeholder mentioned that they’re consulting a lawyer about the legitimacy of her appointment.

Can the freeholder control or question our agent’s selection? Is this happening because she’s discovering a lot of wrongdoing?

Instead of having a meeting to choose a managing agent, should we have followed different steps?

Our agent is a member of IRPM, but not yet a member of ARMA, since she hasn’t been in business for 2 full years.

The ARMA fees for a small company like hers are quite high and anyway we are so pleased to have her on board, she is really looking after the interest of the RTM and leaseholders in general.

Thanks for your time in reading this!

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10:01 AM, 23rd August 2023, About 10 months ago

Useful information on lease-advice gov uk website setting out the role of the freeholder voting rights in an RTM and where freeholder has units outside the lease. Site called Right to Manage

Fed Up Landlord

10:11 AM, 23rd August 2023, About 10 months ago

The fleeceholder cannot question the legitimacy of the RTMs choice of MA. They are bluffing and the " consult lawyers" rhetoric is just that.If they have an objection to the MA they would need to go to the FTT for the appointment of a manager. They are just really miffed that you have got RTM and derailed their gravy train.They do however have the ability to vote.

It is usual for fleeceholders to cancel insurance on the date of acquisition, fail to pay funds over to buy some, and leave RTMs without insurance. Been there several times. Leaseholders have to make a loan to the RTM under it's Mem and Arts, and once SC funds are received, and if sufficient, are refunded to members via SC. This may take some time until the SC fund builds up. Check that your lease allows for this as well.

Do not use the reserve fund for refund as this can be challenged at FTT. It's there for major works.


11:09 AM, 23rd August 2023, About 10 months ago

Read or contact lease-advice and read RTM before you do anything.
You do not want to pay out unnecessary legal fees which are not allowable cost to service charge under provisions of your lease agreements.

Fed Up Landlord

13:18 PM, 23rd August 2023, About 10 months ago

Reply to the comment left by Kizzie at 23/08/2023 - 11:09
If the RTM has no insurance, and no money to pay for it, a loan to the RTM is the only way to secure funds other than by way of gift. Insurance is not classed as legal fees. Most leases contain a provision that insurance is a mandatory part of the lease, and not to have it is a breach of it. As an aside the issue was tested at an FTT I was involved in (with a barrister and solicitor) and the loan for insurance and it's subsequent repayment, was allowed both under RTM rules and the lease provisions.


10:17 AM, 26th August 2023, About 10 months ago

Reply to Fed up Landlord: yes insurance are not legal fees usually only allowable in service of section 146 forfeiture proceedings. An application for a determination to FTT whether under a particular lease a loan agreed where the FH has equal right to vote and may vote against, will depend
on what Articles state is the percentage of the vote whether the vote is carried. The loan itself is not service charge and borrowing by the company. A determination may be needed to allow this as a refund to LHs as allowable sc cost in addition to insurance premium as sc. The loan is reported as an active transaction in company accounts.

Lucy McKenna

10:50 AM, 26th August 2023, About 10 months ago

Reply to the comment left by Kizzie at 26/08/2023 - 10:17
For free advice you could contact the Leasehold Advisory Service, government backed. They have been very helpful on RTM and freehold matters.

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