Maintenance and Shared Ownership

by Readers Question

12:44 PM, 22nd August 2016
About 2 years ago

Maintenance and Shared Ownership

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Maintenance and Shared Ownership

There are 4 apartments in the unit. The 4 owners bought the freehold so that they could control maintenance and costs. One of the owners is questioning who has the right to suggest what remedial work is required, and who should be responsible for payment. His view appears to be that no work should be undertaken without consulting him and his agreement. committee

There is no agreement as to voting issues, majorities etc. Currently we do not pay anything into an account for any such future expense. There is no contingency for future repair work and maintenance. You could say it’s an ad hoc arrangement!

Prior to buying the freehold the 4 owners signed a lease agreement with a bank, who owned the property after foreclosing on a builder. Is that lease still valid? Do the terms of services and maintenance still apply?

How do we go about discussing and agreeing what work should be done? Can any work be undertaken, paid for, and then request/enforce payment?

Not ideal I know, but I would think there must be some sort of “joint and several” liability.

Many thanks

Harry



Comments

Neil Patterson

12:47 PM, 22nd August 2016
About 2 years ago

Hi Harry,

I definitely do not know all the answers to your questions as I have not personally owned the Freehold on a block before, but I would have though getting a management company in place would solve most of your problems.

I would also check out the Leasehold advisory service >> http://www.lease-advice.org/

David Price

14:36 PM, 22nd August 2016
About 2 years ago

The lease on your apartment should answer most of your questions. What does it say concerning service charges and who is responsible for what are questions which should be addressed in the lease. As to the necessity for work, that is best addressed by a suitably qualified surveyor, unfortunately the survey may in many cases cost more than the job to be done, but that's life when everybody argues.

Paul Green

16:23 PM, 22nd August 2016
About 2 years ago

Hi Harry 5 of us did the same on a block of 5 flats and own 20% of the freehold each. We set up a limited company under the address of the block. Example name : 1 common road LTD We then all became directors and 1 of you also has to be a secretary. This is stand practice for a LTD. We then decided to build a sinking fund of £5000 per year. The lease will tell you how much each flat has to pay in maintanence. So my share states on the lease 17%. So I pay 17% of £5000 by standing order over 12 months about £71 PCM. Then two further flats pay 17% one 24% and finally one 25% totalling 100% of the £5000 sinking fund. It soon builds up £416.66 per month into a business account we opened with 2 signatories, before any one can cash a cheque or run off with the money. You would have to ask your bank if you could have more, I'm not sure. We have a book keeper that files a company house returns form every year for nil profit. Again this is standard procedure, filing a return for a LTD. The fund pays for the bookkeeper, buildings insurance and any common areas, so we have a gardener. In the lease it will state if the building requires painting to, ours is every 5 years. The fund pays for this to, and because we all pay a monthly standing order it spreads the costs. We also changed the lease, so we did not have to pay ground rent and extended the lease at the same time to 999 years. We then have a residents meeting yearly or when required, however most of it can be done via email and cc every one in. No one can say their not going to pay for maintenance because the lease dictates what is common parts and what is payable by all I.e roof then anything else not in the lease is down to the individual flat owner, like internal decoration. You will need a solicitor but this has been working well for us for the last 5 years. There is a law that if one freeholder withholds money for a repair that is covered in the lease & you can take them to court for not doing what's stated in the lease, we have never had any problems and all runs smooth. it's in all your interest to maintain the building to protect your investments and hold residents meetings. Once all is set up its easy, one lady in the block likes to do everything so we let her, however she does have to ask permission and can't spend without a second signature on the cheque. I was the last person to have £975 worth of work done paid for by the sinking fund. I had a damp problem in one bedroom, we got 3 quotes and picked the cheapest... That's how we do it. Hope this helps, good luck...,

matchmade

17:33 PM, 22nd August 2016
About 2 years ago

I have built a block of four flats and the leases and management company were set up in a similar manner to the way that Harry describes. It's a question of building trust between the leaseholders, once a management company in which you are all joint directors has been set up. Of course your fellow leaseholder has a right to be consulted, but that doesn't mean he can block everything. If he wants input into everything, then perhaps he needs to be asked to do all the organising for small management jobs and see how much he likes doing that.

Never, ever pay for something out of your money and expect to be reimbursed. Far too many people are prone in such situations to sticking their head in the sand, finding sudden reasons why they have a cashflow crisis, etc, and try to avoid paying you back for years if possible. The management company needs to build up a decent sinking fund, both for small issues like fence panels blowing over and for larger jobs like repairing or replacing the roof. The sinking fund remains as a capital asset for each leaseholder, which they can require to be compensated for when they come to sell their flat.

Puzzler

19:40 PM, 24th August 2016
About 2 years ago

I have a similar property with no management company and a share of the freehold. So far we have all agreed. The onus is described in the lease and you may need to consult and enforce it. However, of course he has a right to be consulted, why would he not? He also can input to what is done.

I don't think a management company will help as it will be the same people involved, you try a block agent.

In my case if there are future issues, I can withhold transfer of the freehold share on sale if necessary until money owed is paid during the conveyancing.

There are only four of you, can't you just email each other or discuss it? If necessary get legal advice.

David Aneurin

19:41 PM, 24th August 2016
About 2 years ago

I am not sure about the comment " The sinking fund remains as a capital asset for each leaseholder, which they can require to be compensated for when they come to sell their flat."
The current solicitors questionnaire asks the question of how much of the fund is attributable to a particular flat suggesting that the statement may be correct. in most situations however it is not.
This is a comment from Lease which states "Many leases provide for the landlord to collect sums in advance to create a reserve or ‘sinking’ fund to ensure that sufficient money is available for future scheduled major works, such as external decorations or lift replacement. The lease will set out the arrangements for this and when regular, cyclical, maintenance works are due. Contributions to the reserve fund are not repayable when the flat is sold. If there is insufficient money in the reserve fund to deal with major works the costs will be shared between owners in the proportions set out in the individual leases.
Commercial leases do have different rules however for flats unless a lease specifically states that a proportion is repayable then it is not.
However a sinking fund with a good balance may not increase the selling price of a flat a low balance in the fund may have a tendency to reduce it.

Paul Green

10:43 AM, 25th August 2016
About 2 years ago

I sold a leasehold flat and left my monthly instalments in the sinking fund for the new owner/ freeholders that were left. My solicitor never mentioned a return of any part of the fund , once paid I understand it stays there for repairs and passes over to new owner. Mind you there was only £1000 in the sinking fund of which my share I had paid was 17% or £170 of the £1000 minuscule...,

matchmade

15:20 PM, 25th August 2016
About 2 years ago

Reply to the comment left by "David Aneurin" at "24/08/2016 - 19:41":

David, I did not mean to imply that leaseholders should expect on sale to be compensated pound for pound for the money they have handed over to the sinking fund. More, it is an extra factor for negotiations during the sale process. I agree a large sinking fund could be used to justify a higher or firmer sale value for the lease, as the new owner will effectively be protected against future large expenditures, and vice-versa if the sinking fund is assessed as low compared with the potential liabilities. Nevertheless potential purchasers generally seem to expect something for nothing - just as solar panels seem to add no apparent value to many properties, even when they can generate a considerable income - so it's up to the seller to decide how hard they want to hold out for what they regard as adequate compensation for their contributions to a sinking fund.


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