Freeholders being taken for a ride?

by Readers Question

10:32 AM, 9th May 2016
About 2 years ago

Freeholders being taken for a ride?

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Freeholders being taken for a ride?

I own a buy to let flat. I am one of 18 freeholders. The new Manager, who was not elected, took over and increased our management fee by 70% because he wants £9000 per year for his pocket, plus the £12000 per year for maintenance costs we were paying previously (the complex of 18 flats in three blocks was only built in 2003, so doesn’t require high maintenance).taken

This manager, who owns one flat, will not provide contact details of the other freeholders – except his family members, who are trying to undervalue and snap up the entire complex cheaply. He says it is confidential information.

Please can anyone tell me if he is right, or should I have a right to contact other freehold owners of the same building direct, of which building we are all registered shareholders? After all, this is public information at the land registry, but I believe I should not have to go there.

It is my belief that this manager works for us and should comply with reasonable requests and facilitate direct communication between the owners. Am I wrong?

Ingrid



Comments

Graham Bowcock

13:26 PM, 9th May 2016
About 2 years ago

Hi Ingrid.

I think it would be wise not to pay until you have cleared up a few points about your situation.

You have said there are 18 freeholders - do you mean that 18 people jointly own the freehold or 18 people are leaseholders? You need to know the distinction between the freeholders and leaseholders. Basically there are three parties in these cases:

The freeholder - this may be a single individual (corporate or otherwise) or may be the leaseholders joined together. Where the leaseholders own the freehold they usually do so through a limited company, for operational convenience and management of liabilities.

The leaseholder - this is the "owner" of the individual properties. The property is occupied on a long lease from the freeholder.

Management Company - a management company is usually set up where the freehold belongs to the "members". The management company effectively takes instructions from the freeholder. This company does not have to be limited. A managing agent does not have to be appointed but where one is they are usually a private firm specialising in such managements. The managing agent will be responsible to the management company.

I am not clear if you are a leaseholder that also has a share in the freehold ownership - if so then the "manager" cannot appoint himself without the agreement of the members.

When you bought the property your solicitor should have established, by pre-contract enquiries, the exact basis of your ownership and who is involved. It may be worth you digging out the responses to those enquiries.

The good news is that you are protected by something known as a s20 procedure whereby a freeholder cannot make charges of more than £250 per property without undertaking detailed consultation. This includes the proposed fees, which for 18 modern flats seems very steep. Consultation includes obtaining competitive quotes.

I think you should quickly review your documentation and establish your correct position whilst requesting details from the purported manager as to how his costs have been established. I think you need to put him on the spot and maybe even refer to s20. Ask him on what basis he has been appointed - it seems that a lot of money is being demanded without good understanding (who's bank account will it go to?).

The Leasehold Advisory Service has a very good website.

As for contacting the other freeholders you can, as you say, obtain ownership information from the Land Registry. If you are a leaseholder then you may not have rights to be provided this information by the manager. If you jointly own the building then you will have better rights to obtain such information.

Good luck.

Graham Bowcock

In the cases of

Ingrid Bacsa

19:08 PM, 9th May 2016
About 2 years ago

Dear Graham
Thank you so much for your very helpful information - I will be looking up the "20s" and will write to the manager as you suggest. (my previous note to you froze as the cat sat on my keyboard, apologies if another reply was sent previously).

My legal standing is: freehold shareholder of the "limited" freehold company, as well as leaseholder of course.

The Leasehold Advisory could not help with my "freehold" rights question, so I will do as you suggest and put the "manager" on the spot. I believe I also have a right to see the Company bank statements, so I will ask for this too.

Do you think I should withhold the cost of my time and land registry fees if I have to get this freeholder contact information myself?

I understand he became manager of our limited company because the resigning manager did not acknowledge my - and possibly others' - interest in taking over the management. The new management's family purchased several of the flats very cheaply at the same time so it must have all been done with a golden handshake. The proposal was very misleading, as we were told the new manager would only charge a £500 fee, which indicated our £700 per flat would be reduced to £500. I imagine this was a shock for everyone, to suddenly be billed for £1200 per annum.

Again, thank you so much

Puzzler

19:32 PM, 9th May 2016
About 2 years ago

Graham's answer is spot on but you need to be clear about your position, please clarify for us. Also try the Leasehold Advisory Service, they have a free helpline but again you need to be clear about each party's position.

£12000 per year? Is that a typo? As Graham says he cannot just charge what he likes.

If you are all joint freeholders then there should be a management company with directors?

Graham Bowcock

8:33 AM, 10th May 2016
About 2 years ago

Dear Ingrid

Pleased to have been of some help.

I doubt you would have any claim for costs of your time in resolving issues - this sort of thing goes with owning property. It is probably the same for any Land Registry costs you incur but this will only cost you about £50 (£3 per title). I think you should concentrate on the matter in hand which is sorting out the structure and proposed costs.

Although the freeholders and leaseholders are connected this doe snot absolve the freeholder from the section 20 process - this is designed to give protection to people like yourself.

The limited company should prepare annual accounts and as a shareholder you are entitled to see these. They also need to be lodged at Companies House. Like any company the election of officers is a matter for the shareholders so you should have an AGM and get the chance to vote.

Good luck.

Graham

Puzzler

11:32 AM, 10th May 2016
About 2 years ago

Your post had not appeared when I wrote mine last night. I am surprised you say the LAS could not help. I have found them very helpful, you're also a leaseholder so I would try again.

SO the block is then self-managed i.e. not by a professional agent? If it is a limited company then there must be directors? From what you say these would be the family who you believe are acting with self interest?

How many directors are there? How many are required in the Articles? Is here an AGM? You need to study your lease as well.

Charges definitely come under the remit of the LAS who will help you with going to the Tribunal if necessary.

Puzzler

11:37 AM, 10th May 2016
About 2 years ago

Does the fee include any costs, such as buildings insurance, cleaning, maintenance? I pay around £200 per flat in general to the agent but it might be more in London, I don't know where you are. £1200 is not bad if it includes the bills.

However if it is self-managed they are not entitled to pay themselves.

You need to see the last accounts, which you should receive, if not then request them, you are entitled to them

Ingrid Bacsa

13:59 PM, 10th May 2016
About 2 years ago

Reply to the comment left by "Puzzler " at "09/05/2016 - 19:32":

Dear Puzzler - thanks for contributing to my query.

Yes, Self-managed; the unelected manager and his crew / family are directors - four of them were listed on record at Companys House, each I believe, with multiple appointments! (I will check the Articles for the required amount of directors).

When I bought the flat I inherited the freehold share and believed I was a director but apparently, I am currently listed as a share holder only, as are most of the 18 shareholders. ( I will check when I can, the past records, but I do not think we shareholders have ever been listed as directors, although I thought I was at the time of purchase). Yes, their personal fee of £9k does indicate "self interest" and there has never been an AGM invite or minutes sent out.

The LAS could not help with my Freehold rights, as they said they only deal with Leasehold problems, which I could take to the First Tier Tribunal. I wanted firstly to communicate with other owners to seek support in this, hoping that a majority opposition would avoid a court hearing, but the manager will not let me have addresses. It is very time consuming via the land registry source and I have not been able to spend this time as yet, so I will deduct a nominal amount from the £1200 they are demanding immediate payment for.

We shareholders own the limited company, we do not have an appointed managing agent, therefore I believe we ARE self managed,although "ourselves" have never been included by the Manager - or the original developer who managed first of all. We only receive invoices - and in the past, when we just paid £700 per flat, we got a copy of accounts - with all expenditures on the building lumped into one sum, ( despite my requesting a breakdown.).

I most certainly will request a copy of the accounts - with a breakdown - asap, along with bank statements, since we OWN the company! I would just have liked to have support from other freehold owners. Not sure how many flats his family have now scooped up, which is worrying. They all have different names, although one of them is Floorxxxx, who now own 3 or 4 flats, which has the same registered address as "xxxxx Court Apartments Limited". What a cheek!

They are replacing hall carpets this year - it may prove interesting when I request to see quotes for this!!

Any further advice would be very welcome. I will keep posting with updates

Great Site!!

Puzzler

14:07 PM, 10th May 2016
About 2 years ago

Well, for a start the directors have to be elected at the AGM. When is the next one?

You didn't answer my question regarding buildings insurance, who has paid that? You should get a copy.

You should have got a file from your solicitor with the most recent of these documents?

Whereabouts are you?

Puzzler

14:12 PM, 10th May 2016
About 2 years ago

Have you had a proper demand for the charges? With a statutory notice?

Puzzler

14:15 PM, 10th May 2016
About 2 years ago

also, it is your leasehold rights that are in jeopardy here, so I think you should try them again

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