The Management Company Director who wields absolute power!

by Readers Question

3 months ago

The Management Company Director who wields absolute power!

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The Management Company Director who wields absolute power!

How do you tackle a Management Company Director who wields absolute power?

About 2 years ago my husband and I bought a BTL flat in a development of 30. Each flat owner has a share in the management company that is the Freeholder. The current Director of the Company (A) has been in post for at least 6 years and is not only the sole Director, but also the Company Secretary.

The lease says that any owner must have the consent of the Lessor before they can sublet. For our first tenant we emailed A and she replied in the affirmative within a couple of hours. Last August she wrote to all shareholders saying that all sub-letters must obtain a Formal Licence to let for which she would charge £300 or the Company solicitor (B) would charge £450+VAT.

Around this time our tenant gave notice and we refused to pay for a Licence for him since we already had her consent in an email. We wrote to the other shareholders putting the letter in their letter boxes and since then A has launched a campaign to discredit us, making various accusations about us. Some gullible shareholders have sent her emails of support which she has forwarded to everyone. Many of them have been threatening and aggressive towards us.

Around the same time we discovered that we had a 2nd parking space which, coincidentally, is the one that A habitually used (although she has her own). We sent A copies of the Land Registry documents that confirmed our ownership and asked her to stop parking there, but she continued. She said that she would not respond to us and that we should only contact her through our solicitor, but I responded that we weren’t instructing one.

She then contacted a solicitor we had used in the past. I was also treated to a visit in my home by the police, because she reported me to them for harassment, twice. In the end we had no alternative, but to take her to court and of course, we won.

At the hearing A refused to accept that the parking space was ours and it was only because the judge threatened her with an injunction that she agreed to a consent order. Since then she has encouraged other shareholders to write to the court asking for the case to be reopened and accusing us of having influenced the Land Registry. She has emailed the other shareholders claiming that we have run up thousands of £s in legal fees that they will have pay for in increased maintenance charges which is completely untrue, because we sued her as a private individual.

She has even started up a petition that we should lose our parking space and possible forfeit our property. Clearly it’s not legally binding, but she did manage to get about half of the shareholders to sign it.

Fast forward. At the beginning of December we found another tenant who wanted to move in as soon as possible. Our solicitor wrote to A offering her £50 as a reasonable admin fee. She refused and directed us to a new solicitor (C) who would charge £700+VAT. Our solicitor advised us to pay up and argue about the fee later which we did.

Nevertheless, A dragged her heels with the result that our tenant couldn’t move until 16/01/18 and had to spend Christmas and the New Year sleeping on the floor of her mother’s flat with her 4 year old son.

Having looked at the Licence our solicitor opined that it was a basic document and would not have caused any particular enquiries to be made. She wrote to A to ask for an assurance that for any future tenancies this Licence could be used, simply substituting the name of the incoming tenant for the outgoing tenant. A then forwarded the letter to C, but neither of them would give any such assurance. I have written to A asking her to put the matter to a vote of all the shareholders, but she has ignored me. I have written to her asking her to copy my emails to the other shareholders but again she has ignored me.

In the meantime another shareholder (D) wanted to do some cosmetic building work in his flat. A has always hated him and especially recently since he has made it clear that he sides with us. The lease says that consent for building works must be obtained. In spite of the fact that D sent her a surveyors report showing that the work is non-structural, A has said he must get a Formal Licence from C at a cost of £450+VAT. When challenged with the fact that she has given consent for others to do the same work, A wrote to shareholders advising that a Formal Licence must henceforth be obtained for all building work. It has now become clear that A has dispensed with the services of B and instead instructed C who is considerably more expensive.

I know of at least one sub-letter who is trying to sell because he just can’t take any more. A claimed that he didn’t have consent to let for his tenants of 9 years (he did, but not in writing; it was given to him verbally by the previous Director who has long since moved on). He felt that he had no choice, but to evict his tenants who happened to be happy to move after A reported them to social services and to the police for various (very serious) offences, none of which are true.

This shareholder is struggling to sell because any potential BTL buyers lose interest when they discover the ridiculous fees A wants to make for a Formal Licence to let; he has already lost 1 sale because of this.

In summary, it appears that our development has become a private fiefdom for A and she will fight to the end when crossed. Her main tactic seems to be to force anyone who disagrees with her to spend large amounts of money on legal fees, even for minor matters (one shareholder tells me that she phoned A to ask a simple question and was referred to C). A has a small following of shareholders whom she has duped into believing that she is their savior. We have a small group who are equally incensed by her actions, but I fear that the vast majority are overwhelmed by apathy or even fear, given the power that A wields.

We and our small band of followers feel that A’s position is now untenable. Rather than representing and working on behalf of the shareholders she seems to view them as the enemy, to be beaten into submission at all costs. We now know that she has run up legal fees because at least 2 other shareholders are also in dispute with her but we believe that we are the main enemy because we are the only ones that have gone public and it therefore suits her for the other shareholders to believe that we are the cause of their increased maintenance charges next year. We have thought about insisting on an EGM (she hasn’t had an AGM for about 5 years) but she is resisting. And to be honest, some people think if we attend an EGM it will be a blood bath because of the lies she has managed to get some people to believe.

Has anyone out there experienced anything similar and if so, what did you do about it?

Maria



Comments

Neil Patterson

3 months ago

Hi Maria,

What a sorry scenario of needless conflict.

You have clearly taken quite a lot of legal advice already. The only obvious, but far from easy solution that springs to my mind is you need to get the majority of leaseholders on your side and force the change.

From what you say it will clearly be only a matter of time before she falls out with a sufficient number.

I know you probably have already, but it is worth checking out the Leasehold Advisory Service >> https://www.lease-advice.org/

Puzzler

3 months ago

Hi Maria

I am a bit baffled by this, fees have to be reasonable and thus you can apply to the FTT for a judgement. Are the fees credited to the management company? Does this director get paid? Why are you not using a professional agent? Would be cheaper in the long run. Who looks after the communal funds, are they insured under a client money protection scheme, is the director GDPR compliant (I would say not). Is an AGM required in your articles? Whereabouts in the country are you?

Maria Fisher

3 months ago

Hi Puzzler,
We have talked about going to the FTT but since we are shareholders in the management company we would in effect be suing ourselves (which we don't care about) and also the other shareholders (which we very much care about). If we went ahead and won, any judgment that returned any portion of these outrageous fees would have to be paid by the shareholders.
The fees incurred are solicitor's fees, although initially the director said she would issue any licences for a fee of £300. I think it's the fact that we have frustrated her efforts to make additional money out of us that has incurred her wrath. She pays herself 10% of the annual maintenance charge.
We would prefer to use a professional management agency but the director refuses and has told the other shareholders that it will increase their maintenance charge (which it probably will, but not by much).
Unfortunately she is not only the sole Director, but she is also the company Secretary, so she has control of the funds. The articles don't require an annual AGM. We are pushing for an EGM but given that she persists in claiming that we have cost shareholders thousands of £s in legal fees, I don't hold out much hope that they will support us.

Monty Bodkin

3 months ago

Look into 'right to appoint a manager'.

Puzzler

3 months ago

What does it say in the articles about the number of directors and when was the company formed? If you wish you can email me the name of the company and I can check it out for you. My email is rannd@hotmail.co.uk if you don't want to post it on here. Whereabouts is the property?

Puzzler

3 months ago

Refund of the fees would be from the same fund as paid into presumably so the other shareholders would not be disadvantaged just the original position restored. I have come across people like this in almost every shareholder-owned block. I need a bit more info to help you, so please do email me as above.

Richard Adams

3 months ago

Others have questioned what the articles say about number of directors who should serve. Quite extraordinary that there is no requirement for an AGM. Presumably annual accounts are prepared? These would require approval by shareholders which would normally be given by shareholders at an AGM. As things stand the dragon lady sole director can set whatever annual service charge she likes and it appears nobody can question it? However in any company, director(s) have to be re elected as there is no such thing as a "director for life". If you have some support like you say then an EGM must be forced - you mention other shareholders are apathetic so won't attend - so in the bloodbath that will ensue you can at least get things sorted. Good luck!

Maria Fisher

3 months ago

Reply to the comment left by Richard Adams at 28/05/2018 - 11:15 The articles say a maximum of 7 Directors and as it happens she has just appointed another Director which the articles allow. I am wondering whether this is because we are pushing for an EGM and she fears she might have to resign. The new Director is a great fan of hers and has been at the forefront of the campaign against us. If she has to go she will still wield absolute power through him. Although we want an EGM we are by no means complacent; we have been told that the last few AGMs (years ago) she gathered all the proxy votes and steam-rollered through everything that she wanted so I'm sure she'll try to do the same this time. Many of the other shareholders just want a quiet life and know that to defy her is to incur her wrath so when she goes round knocking on doors (as she did when she got a petition up against us) they give in. Still, if nothing else, we are tenacious and we won't give up without a fight.

Maria Fisher

3 months ago

Reply to the comment left by Puzzler at 28/05/2018 - 08:31
In the end the Director refused to issue the Licence to let herself and instead appointed a solicitor (not the original Company solicitor but another one who is much more expensive, presumably to inflict maximum pain) and we had to pay his fees. Nothing went into the Company accounts. So if a court orders our fees to be refunded, she will have to increase everyone's annual maintenance charge to pay us.

Graham Bowcock

3 months ago

Dear Maria

It sounds like you have been having a torrid time with this difficult individual. In theory matters are straightforward, but in practice it seems that she will strive to make life difficult and it is not clear why.

You need to split out the various issues though, which is the straightforward bit. As shareholders, all the flat owners have a say in the ownership and management of the company. The director has to be accountable to the shareholders - this is quite a basic duty. You are well within your rights to demand an EGM and to see the accounts. I would be very suspicious of anyone who does not want to share the accounts.

The matter of the running of the company is separate to the management of the leases.

It is not clear if the charges she is making are for the management company or herself. In most cases the directors of management companies are unremunerated; they may get some expenses or a modest honorarium, but only if the shareholders agree. If she is personally charging for work then this needs to be looked at carefully. Your contractual relationship is with the management company/freeholder so any payments should be made to them.

In general it is a good idea to use an agent to run the company as they will be very accountable under their terms of business. They will, for example, have a scheme for protecting clients' money. They should also have a service level agreement for dealing with consents and will only have regard to the lease, not to any internal disputes.

There should be a clear annual budget which is followed up by end of year accounts showing actual expenditure. There are parameters for payments whereby above a certain level they have to be agreed by all leaseholders and cannot be charged unilaterally (s20 Landlord and Tenant Act 1985, now amended). I suggest you take a look at this and raise a challenge where service charges are not raised correctly.

I hope this helps.

Graham

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