FTT Appointed Manager in Doghouse. Now what?

FTT Appointed Manager in Doghouse. Now what?

9:42 AM, 23rd August 2021, About 2 months ago 76

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A friend has just forwarded me a copy of a recent service charge case where the First Tier Tribunal makes 5x references to the Appointed Manager subverting the management order and another 5x references to the Appointed Manager breaching his fiduciary duties. The report concludes that the Appointed Manager did this for his own financial gain.

I have highlighted in yellow the most relevant portions of the 35-page report: Click here to view the report. Some examples given in the report are:

1. Charging £93,000 for major works that should have cost no more than £25,000.
2. Entering into a ‘management agreement’ with his own daughter’s block management company – where he is the sole shareholder.
3. Granting major work contracts to companies that the Appointed Manager had an undeclared financial interest in – and denying the connections when explicitly questioned on the matter.
4. Transferring service charge and reserve fund monies into his own ‘non-trading’ company bank account – and denying any connection with the company when explicitly questioned on the matter.
5. Using leaseholders’ reserve fund contributions to offset the service charge arrears of the freeholder.

Although this Appointed Manager’s management order is at an end at this particular building, my friend informs me that the Appointed Manager is the First Tier Tribunal Appointed Manager at another 7 buildings; manages c.150 buildings through his daughter’s block management company – where he is the sole shareholder and continues to operate without a care in the world.

Is it me, or is there something wrong with this picture?

Paul



Comments

by Vivienne Somerville

8:58 AM, 17th September 2021, About a month ago

Reply to the comment left by BernieWales at 15/09/2021 - 10:23Could the reason for IRPM and ARMA members' deafening silence to your article be much simpler?
Could it simply be that some IRPM and ARMA members that read about the Blackheath Road FTT case where Richard Davidoff was found to have lied about his undeclared associations with contractor companies; siphoned off leaseholder funds and inflated service charge costs for his own financial benefit thought to themselves:
'There but for the grace of God go I'
They may have thought this because they themselves have done or are doing exactly the same things but they haven't been exposed in the same way that Richard Davidoff has been exposed by the Blackheath Road FTT decision report.
In my view, the issues exposed in the Blackheath Road FTT case are not isolated to Richard Davidoff and ABC Estates. Although the extent to which Richard Davidoff was found to have attempted to enrich himself at the expense of leaseholders was extreme, these issues occur pretty often in the world of residential block management.
If 99.99% of Tribunal Appointed Managers and managing agents were professional and honest as you believe them to be @BernieWales, there would be no need for the FTT to exist and it certainly wouldn't be overrun with so many cases.

It ought to be borne in mind that the majority of leaseholders when faced with managers like Richard Davidoff will not make a fuss and would rather sell up and move on rather than risk blighting their own property by commencing a dispute. The FTT applications that are actually made are a tiny reflection of the size of the problem ...

by BernieWales

9:37 AM, 17th September 2021, About a month ago

Reply to the comment left by Vivienne Somerville at 17/09/2021 - 08:58
In this country we have the concept that people are innocent until proven guilty. I therefore object to your attitude which takes the view that managing agents are guilty until proven innocent.

And the FTT will still be required when 99.99% of managing agents are professional and honest ... because disputes and legal queries will arise for both honest and dishonest agents and leaseholders. Where people are involved there will always be differences of opinion, which the FTT can make a determination upon.

by Nick Hargrave

11:36 AM, 22nd September 2021, About a month ago

Upon going back to the case, there is one other noteworthy area which may be a case for HMRC to look at further.

In paragraph 80 it is noted that Mr Davidoff says Mark Reed, Head of Block Management at ABC, was a "self-employed contractor. The tribunal then notes that Mr Reed has always styled himself as ABC's Head of Block Management. From our block's own experience of ABC, Mr Reed has never appeared to be anything other than an employee in his work.

Given recent developments on IR35 et al, it is worth checking whether this arrangement still exists - which could potentially now be construed as tax avoidance.

by Shreena Shah

16:46 PM, 23rd September 2021, About a month ago

Reply to the comment left by Nick Hargrave at 22/09/2021 - 11:36@Nick. Tax avoidance is a likely explanation as to why a company would choose to contract with someone as a self-employed freelancer when they bear the hallmarks of an employee of the company. Certainly, when considering IR35, HMRC would look more to the reality of the working relationship than how a business chooses to frame someone.
It would be interesting to know how many other ‘contractors’ are working at ABC. A lot of companies presume that no one would ever check up on this.
On the subject of HMRC and Richard Davidoff, some of you may recall from my previous post on this thread that two of my properties let by ABC Estates were turned into cannabis farms found destroyed in starkly similar circumstances to each other. In both cases, every payment made by the tenant, including all rent and deposits were paid into ABC’s business account in cash only. ABC collected the rent and paid it to me so I never knew this at the time. It is a legal requirement for certain businesses including Estate agents to be registered with HMRC for Anti-Money Laundering supervision, this helps ensure compliance with the Money Laundering Regulations 2017. Aldermartin Ltd is on this register. In one instance, a cash payment (deposit plus first month’s rent) was paid to ABC of over £5000! Richard Davidoff has said in writing to us many times both publicly and privately that ‘cash is legal tender’ and that many tenants pay them in cash. The issue here is that the payments were EXCLUSIVELY in cash. A bank account also, of course, accords a further form of legitimacy when vetting a tenant. ABC never had a bank account on file or a bank payment from either tenant – and says there is nothing wrong with that. I wonder what HMRC/ the NCA would have to say about that….

by BernieWales

17:32 PM, 23rd September 2021, About a month ago

Reply to the comment left by Shreena Shah at 23/09/2021 - 16:46
So, Shreena ... has ABC put you in a position where you are living off the proceeds of crime? That's a scary thought.

by Shreena Shah

17:49 PM, 23rd September 2021, About a month ago

Reply to the comment left by BernieWales at 23/09/2021 - 17:32@Bernie. It is a scary thought. I would not explicitly say. But I certainly think it is for HMRC to investigate, trace the money and decide whether a) money has in fact been laundered and b) whether ABC Estates has the proper anti-money laundering practices in place that are customary within the industry.
I will say that I have spoken to many other estate agencies now and every single one is definite about the following: they would never accept cash only payments from a tenant throughout the entire tenancy, they would find payments exclusively in cash like this highly suspicious, they would require at least the first payment to come from a bank account and that to accept cash only in this way is against the money laundering protocols they all have in place.
This... plus the lack of referencing... you may recognise the name of the employer's reference of one of my 'tenants' from this forum - Valens Contractors Limited.

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