Q re funds in Residents Assoc accnts if someone selling

[GJA]

Q re funds in Residents Association accounts if one Share of Freeholder selling

Scenario:
10 flats in a self contained block, all long leasehold plus Share of Freehold.
Residents Association has cash in it, say £50,000 to keep things simple
One flat owner is looking to sell

Could someone remind me if that owner has a claim over their pro-rata share of the cash in the residents association? (and a new purchasers would have to effectively buy them out of their £5,000 in this case)

I'm the Treasurer and I suppose I should know these things!

Thanks a lot

[Jon39]

It will depend upon what is in writing. I presume that your Association is not connected or referred to, in the freehold or the individual flat leases.

If that is so, your Association would appear to stand as a separate entity.
Is membership of the Association compulsory?
Does the Association have a written constitution, including what happens when leases are sold?
Each leaseholder will have contributed in respect of the period they owned the lease and presumably the payments are roughly equal to what the outgoings require. Doubt whether they would be entitled to have a refund under those curcumstances. If your funds have built up to an excessive level, then maybe a distribution of the excess may be agreed by members.

I was treasurer of a residents association for 10 years, but everything to do with the association was completely voluntary, although we do achieve 100% membership. No rules, no constitution, so whenever a resident sells their home, they leave with none of the funds. Everything works very well and has done for decades. The reason for its existence, is communal maintenance of an unadopted road.

Edited by Jon39 on Sunday 18th August 17:29

[GJA]

Hi - thanks for your reply

It's a limited company that receives the financial commitments obligated by the share of freehold

Yes there are Articles of Association somewhere but I'm pretty sure it doesn't cover this eventuality but I'll check again.....thanks.

It's only small beer in the context of a house purchase but just thought I should have the answer to hand!

[NickCQ]

GJA said:

Could someone remind me if that owner has a claim over their pro-rata share of the cash in the residents association? (and a new purchasers would have to effectively buy them out of their £5,000 in this case)

Ultimately it's all part of the negotiation between the buyer and the seller over the price of the house. If I agreed to buy a place for £x and the seller came back a few weeks later saying 'actually you owe me £x + y because of cash in the sinking fund' I would tell them to bog off.


Similarly I would be very surprised if a residents association would stroke a cheque to a selling property owner for their pro rata share of the sinking fund.

[2 sMoKiN bArReLs]

Surely if a refund were appropriate (and if I were treasurer I'd make sure it wasn't) it would more likely be pro rata to that year's fee only?

[2 sMoKiN bArReLs]

But...as said there should be a written agreement somewhere.

[2 sMoKiN bArReLs]

If it's a limited company are the residents the shareholders? If so what happens to the shares when they sell?

[GJA]

The directors ie (share of) freeholders are shareholders of the limited company ergo in theory these are their assets...was my logic, but don't disagree with other responses!