Advice needed about a letting agent’s full management contract?
3 years ago | 7 comments
Migrating to managing agent from residents’ management Co?
9:22 AM, 12th April 2023, 3 years ago
34
Hello, We are a small block of 7 flats with a mix of owner occupiers and owners who let their flat. Approx 22 years ago we set up a Ltd company and jointly purchased the freehold so that each flat owner has 1 share in the company.
Since purchasing the freehold, I have been an owner occupier and director of the management company, together with 1 other director and a company secretary.
The company secretary has recently put her flat on the market and given notice that she has found a buyer and so is resigning her position.
We have always taken the view that a minimum of three active directors are required on the basis that if at any time there are only two, an unexpected change of circumstance could leave one person responsible for all of the duties of the management company. The other flat owners have never been prepared to, or not been capable of, being actively involved in the management company.
Having discussed the situation with the other remaining director, neither of us is keen to become the last man standing and after 22 years of service, both of us have different reasons to want to free ourselves of what is becoming an onerous obligation.
We have therefore decided to start exploring local companies who provide block management services with a view to outsourcing as much of the obligations as is possible. Clearly, there will be a cost to be borne as other owners will likely have little appreciation of how much money our voluntary efforts have saved them over those years.
We have contacted all owners to explain what we are proposing and why, in an effort to open up a discussion and to take views. Disappointingly so far, after a reasonable wait, nobody has responded at all.
The ideal scenario would be for everyone to really understand and support the proposal, and the worst case would be owners objecting in principle but without offering any useful alternative suggestions.
I’m wondering what action we should take if some, or all, of the 5 non-contributing owners won’t support us but won’t or can’t step up to the plate.
Another consideration is what would happen with regard to the freehold if we, as the last two remaining directors of the management company, both resigned closed down the Ltd company, replacing it instead with an informal Resident’s Management Company?
Thank you,
Rich
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Member Since April 2021 - Comments: 189
2:49 PM, 14th April 2023, About 3 years ago
Reply to the comment left by NewYorkie at 14/04/2023 – 10:37
Probably owned by the company of which the flat owners are shareholders. If it was shared by the owners outside a company structure there would be no need for directors
Member Since April 2023 - Comments: 6
6:37 PM, 14th April 2023, About 3 years ago
Reply to the comment left by Crossed_Swords at 14/04/2023 – 14:49
That’s correct. The Ltd Co. was set up to own the freehold and each flat owner has 1 share.
I only recently became aware of the rather drastic implication for the freehold of having no directors.
TBH I had no idea of the implications of agreeing to be a volunteer director 23 years ago.
Past directors have had the luxury of selling their flat and simply resigning. I’d like to do the same but that would leave the other director last man standing and I wouldn’t want to leave him in that position.
If he were to resign I’d be last man standing and I guess I would then find it very difficult to sell my flat when I disclose to the potential buyer that my departure would leave the Man Co. with no director.
Member Since January 2020 - Comments: 134
6:50 PM, 14th April 2023, About 3 years ago
Reply to the comment left by RichM at 14/04/2023 – 18:37
I would check the Articles of Association to find out the restrictions of who can/can’t be a director.
You might be able to appoint a 3rd party as sole director (though make sure you understand how they can be removed).
Member Since April 2023 - Comments: 6
7:48 PM, 14th April 2023, About 3 years ago
Reply to the comment left by Ian Cognito at 14/04/2023 – 18:50
Hello Ian,
Who might consider being a 3rd party director, assuming it were permissible?
Is it the kind of thing that a managing agent might include in their service?
Member Since October 2022 - Comments: 410
10:17 PM, 14th April 2023, About 3 years ago
It depends on what Company Articles say.
The .company is a separate legal personality to which directors owe legal duty under company law.
Directors do not owe duty to the leaseholders
Member Since January 2020 - Comments: 134
12:55 AM, 15th April 2023, About 3 years ago
Reply to the comment left by RichM at 14/04/2023 – 19:48
Yes, I would have thought the Managing Agent is a possibility.
Also, whoever provides does the company function (even if no appointed CS), such as an accountant.
Member Since October 2013 - Comments: 97
9:10 AM, 15th April 2023, About 3 years ago
Reply to the comment left by RichM at 14/04/2023 – 19:48
Good morning Rich,
As everyone has already advised, you will need to have at least one director.
A good Managing Agent will ensure the sole director will only need to be contacted on rare occasions – once or twice a year to discuss plans for the next year, etc.
I own and operate a block management company, focussing on small blocks. We also provide secretarial (and director roles in rare circumstances such as yours).
If you would like to discuss some options further, please feel free to drop me an email at [email protected]
Member Since July 2013 - Comments: 754
9:22 AM, 15th April 2023, About 3 years ago
Reply to the comment left by RichM at 14/04/2023 – 19:48
Ideally it should be someone independent from the MA so that person will act as client/ oversight.
Member Since April 2021 - Comments: 189
10:59 AM, 15th April 2023, About 3 years ago
The Articles may require more than one but you can check that. They may probably also need to be a shareholder. The directors do owe duty to the leaseholders inasmuch as they are also shareholders of the company and they have obligations under the lease as representatives of the Lessor/Freeholder
@Mervin SX – where are you based?
Member Since August 2021 - Comments: 307 - Articles: 1
4:16 PM, 15th April 2023, About 3 years ago
Looking at your requirement for MA, you may find that your cleaners or other regular service trades will be a useful source of references – after all, they probably work at serval blocks managed by various MA and can tell you which seem to be better managed.
I was a director of the freehold company for a flat we sold. Their M&A had no requirement for directors to be an owner of the properties.