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6:06 AM, 26th May 2018, About 6 years ago 20
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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
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rita chawla
20:48 PM, 28th May 2018, About 6 years ago
Hi Maria - I can feel your pain. I was in similar situation 3 years back (a director looking after everything in a share of freehold, used to do exactly the things you mentioned with respect to license, parking, private vendetta, harassing tenants). I'm surprised to read how similar our cases are.
Everytime i used to question something, i was asked to contact his solicitor who used to bill the freehold for his services lol. Even his personal spy camera was billed to management company.
Though the situation is not resolved now, we are in much better position. Initially I reached out to all the other freeholders to get support but no one wanted to speak against this director. So i took a back step, swallowed my ego, let go of all outstanding issues that mattered to me. Instead i focused my efforts in one area that I knew would land him in serious trouble and win me allies - any financial wrong doings or cooking up the books. He used to manage all the accounts and suppliers, so I knew there is bound to something worth discovering there. So i got all the accounts investigated and questioned by independent experts who found missing receipts, huge amounts being paid to suppliers for minor tasks, suppliers being paid from personal accounts etc.
That kind of woke up the other shareholders, if you understand what I mean. No one can ignore accounting malpractices going into several thousand pounds. Suddenly a few other freeholders started getting in touch with me and question this director more openly. Three years later, I'm glad to say now we are finally taking this guy to court as a management company, not on my own.
I would advise let go of issues like parking, tenant etc that might divide the freeholders. Instead look for something that might appeal to everyone and is more serious in nature, and then plan your next steps from there.
Good luck.
Puzzler
6:53 AM, 29th May 2018, About 6 years ago
Absolutely, if the fees did not get reported in the accounts that is fraud. Have you discussed this with the accountants as they would potentially be at risk for not presenting the accounts correctly.? Directors have to be elected or confirmed at a GM, insist on one and also a management audit. If you have a max of 7 then others can join the board, she can't prevent that as there are insufficient numbers to call a vote.
Is there a minimum number of directors?
Maria Fisher
10:32 AM, 29th May 2018, About 6 years ago
Reply to the comment left by Puzzler at 29/05/2018 - 06:53
As far as I can make out the minimum is just 1 Director and she has the power to appoint whoever she likes. This has all happened since the last set of accounts were issued but the latest set should be issued next month so we shall see.
Maria Fisher
10:36 AM, 29th May 2018, About 6 years ago
Reply to the comment left by rita chawla at 28/05/2018 - 20:48
You are absolutely right Rita. The parking issue is history but I agree that everything else has to be put on hold until we investigate the finances. If we ever get her to agree to an EGM I intend to ask her to bring along the accounts with all the invoices, receipts etc.
Puzzler
13:37 PM, 30th May 2018, About 6 years ago
For everyone else's benefit Maria has sent me a copy of her lease and there is no provision for any fee to be charged (at first glance) for sub-letting: permission must be sought but "not unreasonably withheld". Since the only thing that trumps the lease is the legislation, this director is probably acting ultra vires (outside her authority). However all leases are different and some may provide for additional regulations to be drafted.
terry sullivan
9:10 AM, 2nd June 2018, About 6 years ago
theres something odd about the directors behavior? is she up to no good or is she mad?
Simon Lever - Chartered Accountant helping clients get the best returns from their properties
13:46 PM, 2nd June 2018, About 6 years ago
You say that she has appointed another director.
Unless the articles give her power to do this then the appointment is not valid.
Directors are appointed by the shareholders unless the articles provide otherwise. Speak to your solicitor and if the articles do not provide for her to make a direct appointment then advise Companies House that the appointment is not valid and you wish the name to be removed from the register.
Call for an EGM of the members to discuss this and other matters. The directors must call a general meeting if so requested by the holders of 5% of the voting shares.
Maria Fisher
16:10 PM, 2nd June 2018, About 6 years ago
Reply to the comment left by terry sullivan at 02/06/2018 - 09:10
To be honest, I think it's a bit of both.
bean
0:58 AM, 3rd June 2018, About 6 years ago
What you are going through is quite common and i have been through it myself.
Check what your lease says about subletting.
Familiarise yourself with the Companies Act, particularly s303.
Call a meeting and vote the director out.
You will only require a simple majority of those that actually vote.
Puzzler
8:04 AM, 3rd June 2018, About 6 years ago
From netlawman.co.uk:
When a vacancy arises unexpectedly, the remaining directors may appoint a new director temporarily. His appointment must be confirmed by the shareholders in general meeting as soon as possible. In most circumstances, a proposal for a new director would be a matter for discussion between the shareholders and directors at leisure and not something for an immediate decision. In terms of power and tactics, of course the absence of a director and / or the appointment of a new one changes the balance of management power. Every shareholder should be aware of this.
The process for appointing new directors is usually recorded in the company's articles of association. It is not the same for all companies. The number of directors may be limited by the articles of association, so that a new director may be appointed only if a vacancy arises.
The company must notify Companies House within 14 days after a new director is appointed.
There are 5 vacancies on this board.