Share of freehold – directors acting outside the law?
Discussion
Hoping you might be able to give me some advice. Last year I purchased my first property, a flat in part of an 18-unit purpose built building, as share of freehold. Since then we've had a number of issues with Section 20 notices, a failing management company, and a cabal of directors who are not acting in the interests of the residents.
My main question is this: do the directors of the freehold company have the power to unilaterally appoint a new management company – and sign the contract – without first consulting the rest of the shareholders and putting it to a vote? It seems crazy that for works arising from a Section 20 notice, two viable alternatives need to be put to the shareholders, but directors can appoint a new (and much more expensive) management company without consultation.
Any advice would be much appreciated!
My main question is this: do the directors of the freehold company have the power to unilaterally appoint a new management company – and sign the contract – without first consulting the rest of the shareholders and putting it to a vote? It seems crazy that for works arising from a Section 20 notice, two viable alternatives need to be put to the shareholders, but directors can appoint a new (and much more expensive) management company without consultation.
Any advice would be much appreciated!
freshmicropig said:
My main question is this: do the directors of the freehold company have the power to unilaterally appoint a new management company – and sign the contract – without first consulting the rest of the shareholders and putting it to a vote?
Doesn't seem at all unreasonable... The shareholders own the company, the directors run it.freshmicropig said:
It seems crazy that for works arising from a Section 20 notice, two viable alternatives need to be put to the shareholders
Are you confusing the shareholders in the freehold company with the leaseholders of the flats? There is an overlap, but they're not the same thing at all.You own two hats. One is as the leaseholder of a flat in the building. The other is as a shareholder in the freehold company. As it happens, you got given the "S" hat for free when you bought the "L" hat (and got the lease to a flat with it), but you can only wear one at a time - and it's almost certainly possible to sell one (either) hat to somebody else and keep the other one. Ownership of the "L" hat is inseparable from ownership of the flat's lease, but ownership of the "S" hat is as eminently separable from the "L" hat as actual residence of the flat is.
s20 is a legal requirement for the freeholder (the limited company who your "S" hat shows you own shares in) to consult the leaseholders (that "L" hat). That's a very different thing to what decisions the directors of a company are free to take without reference to the shareholders in the company.
freshmicropig said:
but directors can appoint a new (and much more expensive) management company without consultation.
You need to read the lease to find out whether the freeholder can do that without consulting the leaseholders. But it wouldn't surprise me one bit.freshmicropig said:
Hoping you might be able to give me some advice. Last year I purchased my first property, a flat in part of an 18-unit purpose built building, as share of freehold. Since then we've had a number of issues with Section 20 notices, a failing management company, and a cabal of directors who are not acting in the interests of the residents.
My main question is this: do the directors of the freehold company have the power to unilaterally appoint a new management company – and sign the contract – without first consulting the rest of the shareholders and putting it to a vote? It seems crazy that for works arising from a Section 20 notice, two viable alternatives need to be put to the shareholders, but directors can appoint a new (and much more expensive) management company without consultation.
Any advice would be much appreciated!
What I did in this situation is call an EGM under the rights you have as a shareholder in the companies act, and appoint new directors.My main question is this: do the directors of the freehold company have the power to unilaterally appoint a new management company – and sign the contract – without first consulting the rest of the shareholders and putting it to a vote? It seems crazy that for works arising from a Section 20 notice, two viable alternatives need to be put to the shareholders, but directors can appoint a new (and much more expensive) management company without consultation.
Any advice would be much appreciated!
It hasn't made a jot of difference however, as the whole industry is fundamentally geared towards ripping off leaseholders, so even directors who do try and act in leaseholders best interests basically get f
ked. You can swap one rip off useless managing agent for another of course... but that doesn't really help.TooMany2cvs said:
Are you confusing the shareholders in the freehold company with the leaseholders of the flats? There is an overlap, but they're not the same thing at all.
I do not think this is the case. The OP bought a flat with a share of the freehold, it is therefore NOT a leasehold property.The other suggestion to call an EGM is the way I would go. The directors are appointed by the shareholders and can be removed by the shareholders.
TooMany2cvs said:
KevinCamaroSS said:
The OP bought a flat with a share of the freehold, it is therefore NOT a leasehold property.
Yes, it is.He bought a flat with a lease from the freeholder.
He also has a share in the company that is the freeholder.
Even if you wholly own the freehold for a property there's not reason why you can't grant yourself a lease and also make yourself a leaseholder and then subject yourself to all the arrangements that come along with that!
I own several leasehold flats, the same that being a leaseholder entitles me to being both a shareholder and director of the Property Management Company.
A Section 20 Notice covers additional major works, or qualifying works under the Act. These works will usually be the responsibility of the landlord, but it could also be the Property Management Company (hereafter PMC), or Residents Management Company, if one of these is in place.
If the works are going to be more than £250 per leaseholder, then a Section 20 Notice needs to be issued. Very often to avoid issuing the Notice a Landlord or PMC will attempt to divide the works into two, three or more descriptive works, to reduce the overall cost per leaseholder below £250 per leaseholder.
As an exercise OP, request under Section 21 of the Act. from either your Landlord or the PMC, a copy of the block's property building insurance certificate. Once receive then enquire from your local insurance brokers their renewal premium for the same insurance cover. In my past experiences I have found landlords and PMC marking up premiums by 100% to 300%.
All costs, commission and profits etc. should be clear and transparent.
Lastly, the Government funded Leasehold Advisory Service web site, link below, may offer you some advice, the same also offering a telephone legal advice service.
https://www.lease-advice.org
A Section 20 Notice covers additional major works, or qualifying works under the Act. These works will usually be the responsibility of the landlord, but it could also be the Property Management Company (hereafter PMC), or Residents Management Company, if one of these is in place.
If the works are going to be more than £250 per leaseholder, then a Section 20 Notice needs to be issued. Very often to avoid issuing the Notice a Landlord or PMC will attempt to divide the works into two, three or more descriptive works, to reduce the overall cost per leaseholder below £250 per leaseholder.
As an exercise OP, request under Section 21 of the Act. from either your Landlord or the PMC, a copy of the block's property building insurance certificate. Once receive then enquire from your local insurance brokers their renewal premium for the same insurance cover. In my past experiences I have found landlords and PMC marking up premiums by 100% to 300%.
All costs, commission and profits etc. should be clear and transparent.
Lastly, the Government funded Leasehold Advisory Service web site, link below, may offer you some advice, the same also offering a telephone legal advice service.
https://www.lease-advice.org
Thank you for the advice all, in particular the Lease Advice link. Sounds like I need to dig out the articles of association to see exactly what power the directors have.
Just heard this morning that the directors have appointed the new management company a week in advance of the EGM, despite at last year's AGM promising that a meeting would take place in between the two where different companies would present to the rest of the owners, which never happened.
To top it off, they paid £800 for the removal of a fallen tree branch and one bag of hedge trimmings last week.
Just heard this morning that the directors have appointed the new management company a week in advance of the EGM, despite at last year's AGM promising that a meeting would take place in between the two where different companies would present to the rest of the owners, which never happened.
To top it off, they paid £800 for the removal of a fallen tree branch and one bag of hedge trimmings last week.
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