Repayment of stolen management fees a condition of sale?

Repayment of stolen management fees a condition of sale?

by Readers Question

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0:12 AM, 24th May 2024, About a month ago 11

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There are 6 freehold properties all equally own a shared drive and communal land. Membership of the management company is a condition of purchase of any of the 6 properties.

One property is now for sale and the joint owner of that property got access to the management company bank account and emptied it?

Can repayment of these management funds be made a condition of sale?

We’ve had brief legal advice (with which I agree) that we can’t – that it’s theft by an individual and isn’t a recoverable debt associated with the property and that we should try & recover the money through small claims court.

One or two members still want to make it a condition of sale. I’m concerned if we do that we could cause the sale to fall through and be liable for compensation to the purchaser and/or innocent joint owner of the property for sale.

Any advice would be greatly appreciated.

Becky


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NewYorkie

10:07 AM, 24th May 2024, About a month ago

I was a SoF company secretary, and whenever a flat was to be sold, I had to provide a management pack to the buyer's solicitor which included details of service charges paid and money owed to the service charge account.
Technically, the shared freeholder/leaseholder owes the money to the service charge account. While you can't make the sale dependent on repayment of the [alleged] theft, I would make the buyer's solicitor aware that there is money owed to the service charge account by the seller, which any buyer could be held responsible for paying.

The seller's solicitor will query this with the seller, who will probably say it's not true, but you should hold firm. Cause doubt in the buyer's mind. What's the seller going to say? No I paid my service charge, but I stole the money!

Fed Up Landlord

10:10 AM, 24th May 2024, About a month ago

Get a CCJ against the errant member, and then a charging order against the property in lieu of the debt being paid. Thus when it's sold ( which it won't be as the charging order will pop up on legal searches) then the debt is paid from the proceeds.
The threat of same may be enough.
https://dcblegal.co.uk/register-a-ccj/charging-order/

Julesgflawyer

10:38 AM, 24th May 2024, About a month ago

Reply to the comment left by Fed Up Landlord at 24/05/2024 - 10:10
I think I'm right in saying that in a joint ownership case the charge (effected by the charging order) only binds the individual co-owner's beneficial interest in the sale proceeds, not the legal interest in the property. Might still cause some inconvenience, even so.

Dizzy

12:36 PM, 24th May 2024, About a month ago

Hi,
Is there a Mortgage on the property?
Any question that fees are effectively unpaid and the Management Company may take legal action to recover the Property will send them into a spin and they may well settle up rather than risk loosing their asset.

Kizzie

13:08 PM, 24th May 2024, About a month ago

Two different roles as 1. Shareholders 2. Lessees.
The Man. Co. Is dormant limited liability owned by shareholders.
Under provisions of each lease the lessee contributes apportioned sc. to the lessor landlord. This must be held in statutory s. 42 LTA 85 trust account and is not company money. So arrears pursued only under provisions of the lease and application to FTT determination for service of Section 146 Forfeiture.
Alleged theft of service charge out of the section 42 account be pursued by shareholders consequent on a vote for action under company law pursued as a money claim with the legal fees included in the claim.
As the individual was a director this is embezzlement allegedly criminal offence causing the Man Co to be insolvent and struck off and therefore to be reported to the police for crime reference number.
This may be covered under directors legal insurance.

Julesgflawyer

14:12 PM, 24th May 2024, About a month ago

Reply to the comment left by Kizzie at 24/05/2024 - 13:08
The houses are freehold, not leasehold, see OP

NewYorkie

14:19 PM, 24th May 2024, About a month ago

Reply to the comment left by Julesgflawyer at 24/05/2024 - 14:12
Normally, in a Share of Freehold, you own a share of the freehold [obviously], but are also a leaseholder.

Julesgflawyer

15:27 PM, 24th May 2024, About a month ago

Reply to the comment left by NewYorkie at 24/05/2024 - 14:19
"There are 6 freehold properties all equally own a shared drive and communal land. Membership of the management company is a condition of purchase of any of the 6 properties."

Kizzie

15:44 PM, 24th May 2024, About a month ago

The freehold interest in common area the communal land and shared drive is held by the man co and the 6 leasehold houses own a share of freehold held in the man co as New Yorkie says

WERO

16:25 PM, 24th May 2024, About a month ago

Reply to the comment left by Dizzy at 24/05/2024 - 12:36
Yes there is a mortgage ( a remortgage which the “errant” co owner of the house ( now SSTC) took out , we think without the ex spouse’s knowledge or consent . We think the divorce judge has ordered all remaining assets to go to the “innocent” spouse & also the police may have put a stop on the sale as they are investigating other financial offences. It’s a mess!

None of the money taken from the Management Association!s bank account had been paid in by either of the co owners of that property - they stopped paying their monthly DD last year when the “ innocent” co owner left . That person has been paying the 1/6th of bills as they come in so there is nothing owed with regards to bills associated with the management of the site. The money taken from the account was entirely from the DD’s paid in by the other 5 house owners

The “errant” party phoned the bank and ( as they were at that time Chair & so a signatory on the account ) told them we’d forgotten the password , was given a new one , went into the account & had over 11 transactions had a total of £1245 paid into their personal bank account. We only found out when the treasurer discovered they were locked out of the account & phoned the bank & discovered there was £1,85 in the account & the 11 transactions.

The police have been informed. They think it is unlikely we will get the money back

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