Small block of 5 flats, management co advice.

Distressed

Dear All,

Hoping very much that someone will be able to put our minds at ease.

We have bought a ground floor flat at auction. The flat is a shell with no kitchen/heating system etc but this was accounted for in the selling price which we felt was roughly half what it was worth ‘complete’.

The block is an old mansion house converted to 5 flats, in a good area.

What has transpired since we have completed is that the management company referred to in the lease is in the process of being struck off at companies house.

Our solicitor tried to obtain what information he could in between the auction day and completion, but you only have 14 days and so if you don’t get responses you have to complete and take a risk, or lose your deposit.

So as it stands there is no block insurance in place and soon enough no management company will exist.

We also now understand that the freeholder owns one of the flats, and it seems members of his family own possibly 1 or 2 of the others.

Are we totally in the hands of the freeholder if he is letting the block go uninsured and fall into disrepair? Is there any action we can take before or possibly after the management company is struck off?

We have managed to insure the flat on an individual basis with Avia, but the premium we are paying for this im sure would actually cover the whole block if it was setup as standard block insurance!

It terms of the present we have bought the property to downsize to and it will be our final move, so in some ways the issues are not as urgent as they may be for others who may wish to sell the property at some time. However, im thinking more of my kids inheritance and quite frankly a real shame to let a good block fall away when it could be so nice.

Any thoughts or advice greatly appreciated.

P.s I have discussed all of this with my lawyer but it seems this goes beyond his normal comfort zone and he is yet to offer any reasonable advice/solutions.

olias

Have you tried discussing it with the freeholder?

Olias

Fire_Fox

The freeholder should organise buildings insurance in the absence of a managing agents
http://www.lease-advice.org/publications/documents/document.asp?item=14
Has the freeholder sacked the managing agents yet? I assume you have already exchanged, so completion is a must?

The long lease will set out what you are responsible for paying for and what the landlord or his agent are responsible for maintaining: I would suggest you get a copy and go through it. Also read the above link so you have a fuller understanding of the legislation surrounding service charges. The Landlord-Tenant Act 1985 affords leaseholders good protection however if you have a very poor landlord/ managing agent you may be in for a fight (I am three years in dispute!). The initial approaches you can do yourself in writing once you have completed on the lease, if this is unsuccessful you take the landlord/ agent to a Leasehold Valuation Tribunal.

These are also relevant
http://www.rics.org/Practiceareas/Property/Commercial/Management/service_charge_dr0706.htm
http://www.opsi.gov.uk/si/si2007/uksi_20071257_en_1

Richard_Webster

Is it
1. (as other have implied) a managing agent who is being struck off, i.e. a company or individual who does the leg work and admin for the freeholder, collecting rent and organising repairs etc, but is still only the agent for the freeholder;
OR
2. A Management Company that is named in the lease itself and has functions actually set out in the lease?

If it is the former it is no big deal because the freeholder has the legal responsibilities anyway - he simply has to appoint another managing agent. If the lease says it is the freeholder's responsibility to insure the building the managing agent's involvement is irrelevant - you simply tell the freeholder he must insure etc.

If the latter the lease may actually say that the company e.g. 123 Some Road Management Limited is to maintain, repair and insure the building, and the freeholder has no responsibilities at all.I have seen leases like that (drafted so that the freehold can be sold on to people who simply want ground rent and no admin hassles) and if the company goes down you have a major problem because the freeholder probably isn't obliged to do anything and it is only that company with that registered number that has the legal liabilities, so forming another company with the same name doesn't do the trick. The leases have to be altered so that the freeholder takes on the responsibilities and he may not want to do that!!

Finally, I have to say I'm afraid. Don't ever buy at auction, especially not a flat, without getting the legal background thoroughly checked beforehand.

Distressed

Thanks for all the replies.

I have read the lease five or six times but these documents are so lengthy and complicated its hard to know who they are referring to when they state responsibilities.

From what we can tell, the block was set up so that 5 of the flats held 5 shares in XY management company. An agent was not appointed to run the company it appears the freeholder managed day to day accounts and activities by himself. The freeholder also has one share (6 shares in total).

The company has not filed accounts for 2 years and as I say from searching on companies house it appears there is an action underway to strike off the company, presumably for this reason.

We have not had any reply from the management company's registered office.

Basically whether its through inability to pay for the services, lack of willing or deliberately the company is being allowed to be wound up.

The picture is sketchy as the vendors (mortgage co) will not advance any further info than is in the contract, they just adopt a take it or leave it stance.

The price we paid factors in the condition of the flat, plus we also noted that it seemed the main roof would need replacing. It is also in one of the best parts of town. The flat has commanded prices 3 times the selling price back in 2005. All in all I just want to know what rights we have to ask the freeholder to a) action block insurance, b) maintain common parts and c) action required repairs to the block.

Thanks again.

Fire_Fox

In a long lease there should be a loooooong section which states the responsibilities of the freeholder (landlord) and another which states the responsibilities of the leaseholder (tenant). Unless the management company which is being wound up is specifically mentioned in the long lease then it's irrelevant that they are being wound up, the repairs and insurance should fall onto the freeholder.

We know you want an easy answer, but no two situations are identical and you will have to do your own homework on this. I have provided you with a link to the Leasehold Advisory Service (LEASE) website which explains service charges and buildings insurance in leasehold properties. Read this, take notes, read your long lease during an appointment with your solicitor to explain if you don't understand, take more notes.

Then prepare yourself for an extended negotiation process to get the roof repaired. If you had bothered to read the LEASE website you would know that a freeholder/ agent cannot carry out any works that cost over £250 per leaseholder without formal consultation. I have two A4 folders full of letters and accounts relating to my dispute with the (now ex) managing agents of my property: there are no short-cuts if you want a fat profit. Your flat was heavily discounted for good reason!

Richard_Webster

Just seen Fire Fox's response and I largely agree with it.

All in all I just want to know what rights we have to ask the freeholder to a) action block insurance, b) maintain common parts and c) action required repairs to the block.

Depends on what it says in the lease - read it - or get a solicitor to read it and tell you.

As I have said, it may be that the management company is responsible for the maintenance of the common parts, repairs generally, and insurance. In that case if the freeholder doesn't have a "fall-back" covenants to do this if the management company doesn't, then nobody's responsible. All you can do is try to persuade a majority of the lessees to collectively enfranchise (force the freeholder to sell the freeholder to sell the freehold) and then set about rewriting the leases once you collectively own the freehold. This will all cost a lot of money and time - now you know why the flat was so cheap!

freefalling02

FIRE FOX:- I know you are offering advice but give her a break, there is no need to be insulting by saying 'if you had bothered', she is obviously in a panic, and you are making 'classic industry mistakes', by using terminoligy. The advise you have given is fantastic, but there is no need to be superior about it.

Trollfever

We have bought a ground floor flat at auction.

Caveat Emptor.

guppy

Richard_Webster wrote: »

If the latter the lease may actually say that the company e.g. 123 Some Road Management Limited is to maintain, repair and insure the building, and the freeholder has no responsibilities at all.I have seen leases like that (drafted so that the freehold can be sold on to people who simply want ground rent and no admin hassles) and if the company goes down you have a major problem because the freeholder probably isn't obliged to do anything and it is only that company with that registered number that has the legal liabilities, so forming another company with the same name doesn't do the trick. The leases have to be altered so that the freeholder takes on the responsibilities and he may not want to do that!!

So generally speaking...if a lease says this, is it fair to say one should avoid at all cost?

Fire_Fox

freefalling02 wrote: »

FIRE FOX:- I know you are offering advice but give her a break, there is no need to be insulting by saying 'if you had bothered', she is obviously in a panic, and you are making 'classic industry mistakes', by using terminoligy. The advise you have given is fantastic, but there is no need to be superior about it.

I linked in my first post to the most straightforward explanation of all matters leasehold possible. The only terminology I used that is at all contentious is 'long lease' and I'd hope anyone who has already exchanged on a leasehold property knows what that means.

I am not making 'industry mistakes' because I am not in the industry in any way shape or form - I am a healthcare professional. I am also a leaseholder who has spent many hours (and I mean many!) reading my unintelligible long lease, reading the LEASE website, reading the Landlord-Tenant Act 1985. As a result I appear to know the legislation far better than our managing agents which is a rather frightening state of affairs.

The bit below in bold is what made me say "if you had bothered" because it gets my back up when people want to be spoon-fed rather than helped. The answer to those exact questions is on the LEASE website and the long lease.
"The flat has commanded prices 3 times the selling price back in 2005. All in all I just want to know what rights we have to ask the freeholder to a) action block insurance, b) maintain common parts and c) action required repairs to the block."