Ltd Co asking for a debt to be paid by one of its Directors?

by Readers Question

13:51 PM, 8th February 2017
About 2 years ago

Ltd Co asking for a debt to be paid by one of its Directors?

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Ltd Co asking for a debt to be paid by one of its Directors?

I have recently purchased a property with a share of the freehold. Each flat owner is a shareholder of the company which owns the freehold, and must pay towards the maintenance of the block. The block is self-managed by a couple of the residents, and do this for free.split the bill

There are a couple of problematic shareholders who never seem to pay their complete maintenance fees. Of course, they are being sent reminder letters, but does anyone know the position legally, and how we can get paid the outstanding debts? I am guessing a letter from a solicitor is the answer, but wanted to check what laws would be applicable prior to warning of such legal action.

I find it slightly strange as it is effectively a Limited company asking for a debt to be paid by one of its Directors.

Any assistance would be appreciated.

Thanks

MK



Comments

Neil Patterson

13:54 PM, 8th February 2017
About 2 years ago

Please also see answers on our recent article "Nightmare of only half the Freeholders paying for repairs?" >> https://www.property118.com/nightmare-half-freeholders-paying-repairs/88877/

Some answers quoted below:

Michael Freer says: Please view our official business sponsor profile
15/07/2016 at 11:42 (Edit)

It does sound like a very difficult position that you find yourself in. Be confident that you will find a solution, because there is one if you keep looking.

There are members here with much more knowledge and experience than me and so all I can give are thoughts on what I’d do in a similar position.

1) Is lawyer you’ve instructed a specialist in Leasehold property law? The average high street practice would not be suitable for such a case.
2) Have you spoken with the mortgage companies who have a charge on the flats not paying their due amounts? This may end up being corrected but I believe they would be interested as they expect the leaseholder to comply with the terms of the lease and where that isn’t the case, they will pay the amounts owing and add them to the mortgage.
3) Have you visited the site that has lots of advice in this area? http://www.lease-advice.org/

As above these are simply my thoughts and others will undoubtedly give more specific guidance.

Good luck with whatever direction you take and try to see this as a learning experience rather than a stressful one, as this way of thinking will allow you to think even more clearly. It may be one of your toughest lessons yet but you’ll have knowledge and experience at the end of it that will be of benefit to you and others around you and that will be a wonderful reward for your time, effort and patience.

David Price says: Read about me on my member profile
15/07/2016 at 12:57 (Edit)

This is a problem with many leasehold flats, you are not alone. Try a ‘no fee to freeholder’ solicitor and if that fails you will have to allocate funds for a hefty court case. Our last case with the Leasehold Valuation Tribunal (Now the First Tier Tribunal) cost £26,000 and we had two barristers ‘discussing the merits’ (AKA arguing) over a bill of 2 pence. We won in the end and still the leaseholder concerned did not pay. Took another two years before he sold his flat and the new owner was left with the bill.
Would be pleased to help if you care to contact me through Property 118.

Gary Nock

7:37 AM, 9th February 2017
About 2 years ago

If this is a leasehold flat then there is a lease. That will set out the proportion of service charges payable by each leaseholder.

It is usual for the limited company to "own" the freehold on behalf of the leaseholders and to either manage the development or engage a block managing agent.

Demands for service charges must be made in the prescribed form and in accordance with the lease otherwise they are not recoverable. Block management is a complex procedural process and service charge arrears are common.

Providing the service charges have been properly billed, then they are a legally enforceable debt like any other and are done so through the county court. The lesseholder can raise a defence in county court that the service charges are wrong or not properly served and the Judge will usually remit the case to the First Tier Tribunal for a determination. If the FTT determines it is payable then it returns to the county court for enforcement.

For further information go to the Lease website.

James Noble

10:21 AM, 9th February 2017
About 2 years ago

Similar problem, from the other side. I bought a leasehold flat by auction three years ago, did my own conveyancing and usual due diligence by asking seller's solicitors and managing agents if there were any outstanding debts. Told by solicitors that all bills received would be paid before completion - as per usual. (repossession by bank). All fine. Service charges bills arrived, and paid in full. No mention of any debt. A year later, management company changes, and new company suddenly discovers debt of historic service charges on my flat of £3k. They bill me for this. I explain it is no longer my concern, and should have been presented to the bank at the point of sale, not to me a year later due to inefficient managing company. I've seen spread sheet from old managing company showing no debt to my name, and an e-mail stating that they have never attempted to bill me for this. If the new managing company find a way to get the money off me, doesn't this drive a horse and coaches through the process of conveyancing? Any unscrupulous seller or inefficient managing agent need not disclose a debt at point of sale, even when asked, but then, months or even years later, allow the new leaseholder to pick up the bill. I am disputing this bill, but have I a case? James

Steven Burman

10:50 AM, 9th February 2017
About 2 years ago

James, it sounds as though you need to employ the services of a good solicitor. Unfortunately it does not always pay to carry out your own conveyancing although it does sound as if a conveyancing solicitor may well have been duped by the lack of transparency from the managing agent in this case.

I may be wrong and am happy to be corrected but my understanding is that the debt belongs to the previous leaseholder as you are only responsible for any outstanding charges that have been incurred from the point of purchasing the lease. The managing agents would have been asked to bring the service charge account up to date (which they failed to do) in order for any debt to be paid by the outgoing leaseholder. Any credit elements (e.g. prepaid building insurance) would have been apportioned.

I would resist making any payment but do not ignore the matter. Get yourself a specialist solicitor.

Gary Nock

11:38 AM, 9th February 2017
About 2 years ago

James - Steve is right. You are not responsible for charges that took place before you owned the property. And in any case if not billed within 18 months or a notice is given that expenditure has been incurred within 18 months then they can't bill it. See http://www.servicechargedisputeguide.info/section-20b-the-18-month-rule/

Martin Rdg

12:17 PM, 9th February 2017
About 2 years ago

David Price wrote - see above "Took another two years before he sold his flat and the new owner was left with the bill."

Normally a solicitor for the buyer of a leasehold flat would enquire from the managers of the freehold if anything was outstanding - I have a share of a freehold in a converted victorian house - 7 flats with equal shares. One owner was behind on his maintenance fees and wanted to sell- it was made quite clear to the purchasers' solicitors that we (the management co of the freehold) would not issue a new share certificate to the proposed new owner until all outstanding bills were paid - that soon had the desired effect and the monies owed were soon paid.

James Noble

13:05 PM, 9th February 2017
About 2 years ago

Reply to the comment left by "Gary Nock" at "09/02/2017 - 11:38":

Gary, Thanks for that. They began to bill me just over a year after the sale, so the 18-month rule will not apply. I doubt, however, if they conformed to the rest of the rules concerning this issue. Very interesting link. Many thanks - James.

James Noble

13:09 PM, 9th February 2017
About 2 years ago

Reply to the comment left by "Steven Burman" at "09/02/2017 - 10:50":

Steve, thanks for your comments. They may just help me sleep easier at night. I'm sure the problem remains at the door of the previous managing company. Of course, nobody really wants to pick up the tab. I've written, phoned, e-mailed on numerous occasions, and they usually take a couple of months to respond. The reply is always the same - it's with their 'technical' department. many thanks. James

Gary Nock

15:25 PM, 9th February 2017
About 2 years ago

Reply to the comment left by "James Noble" at "09/02/2017 - 13:05":

Hi James. The 18 month rule runs from when they had to pay the bill for the item charged, or when they received the bill whichever is the earliest. If they began billing you 12 months after for stuff that was 7 months old it's a quack quack oops.

And the following link is a gem. Used this lots of times. Summary of Rights and Responsibilities... in not LESS THAN 10 font.

http://www.lease-advice.org/advice-guide/summaries-of-rights-and-obligations-service-charges-england/

A lot of managing agents try and cram it onto one page so its 6 font. Not a legal service charge demand. As soon as you start quoting it freeholders and managing agents go very quiet especially when you offer to put flyers through every other leaseholders door informing them of the fact. And drop in a mention on Right To Manage as well. Not as simple as it was (well it was never simple) but it's been made harder of late by case law. You can have some real fun once you read up on the legislation and start asking for your statutory rights on documentation etc.

James Noble

15:54 PM, 9th February 2017
About 2 years ago

Hello Gary, This gets better and better. Thanks again. Incidentally, you might like to view a few comments concerning the managing agent....

http://www.touchlocal.com/business/r-m-g-residential-management-group/6866202

We're looking at a block of 99 flats, so they do have us over a barrel. But I digress away from the thread. At least I might now be able to sort out this silly historic charge. James

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