Big Problem with Freehold Company of House

Fraise

Could someone please tell me what the role of Chairman of a Freehold Company does, and what, if any powers they have?

The freehold company consists of just one house divided into 4 flats, which are all owned individually by 4 separate shareholders of the Freehold Company. All 4 shareholders are directors of the company, and all 4 shareholders have their own leaseholds to their own flats, all of which runs for 999 years.

There's a lot of friction and animosity, and the 'chairman' is trying to get one of the director's removed from their directorship as he simply doesn't like them. The 'chairman' is taking liberties and is also going against the terms of the lease, and is not complying with it, either. Two of the other directors are disinterested but go along with what the chairman says (he is a bully), whilst the other director wants to follow the terms of the lease.

What can be done in this situation?

Can the director who wants to stick to the terms of the lease be removed from the board simply because the others wish to flout the law?

Doozergirl

You're the other director, then?

If the other two are disinterested, then you either need to make them interested or accept that you're outnumbered...

From my own experience, doing the right thing is rarely the motivating factor for the majority of leaseholders.

propertyman

Unless the articles of association define the role and powers the position the role is restricted to an adminstrative one as the articles are the document that grant scope of authority. They are therefore in a sense a non executive chariman

If the director is failing to abide by the terms of the lease then they could be in breach of their duties under the Articles and the Companies Act. In some cases therir (in)action can be unlawful and illegal.

In a case of 1 vs 1 then there is little that either can do without the support of the others or resort to the court.

Where the company is in breach of the lease or fail to follow the current approved code of practice, the FTT-PC(nee LVT), can appoint a manger or receiver to take over management of the building stripping away most or all of the companies powers.

A well reasoned case for your plans ,or objections ,with a request for a EGM ( with special notice if you want the other person removed) or the threat of the appointment of an external manager, should wake the others up.

Fraise

Thank you Propertyman, great advice.

Out of interest if, say, 3 out of the 4 directors vote for something that is not in the lease, or is in breach of the lease, for example: voting to postpone exterior decorating for longer than the lease states it must be done (every 5 years), and despite it being in need of decoration, does that mean the one director who wants it decorated according to the lease rules has no legal say-so?

Also, if the 'chairman' suggests we employ a management agency to arrange maintenance of the property at a cost of, say, £3000 a year on top of the maintenance fund, and 2 of the directors agree, does the 4th remaining director have to go along with it, even though there is nothing in the lease to say we must use a management agency to arrange maintenance and repairs?

ValHaller

Fraise wrote: »

Thank you Propertyman, great advice.

1. Out of interest if, say, 3 out of the 4 directors vote for something that is not in the lease, or is in breach of the lease, for example: voting to postpone exterior decorating for longer than the lease states it must be done (every 5 years), and despite it being in need of decoration, does that mean the one director who wants it decorated according to the lease rules has no legal say-so?
2. Also, if the 'chairman' suggests we employ a management agency to arrange maintenance of the property at a cost of, say, £3000 a year on top of the maintenance fund, and 2 of the directors agree, does the 4th remaining director have to go along with it, even though there is nothing in the lease to say we must use a management agency to arrange maintenance and repairs?

On 1) the 4th director must accept the result with his directors hat on. Any leaseholder, who may be the same person with a different hat could take the matter forward through legal channels and in due course say 'I told you so'.

The reasoning is that the lease does not govern the conduct and choices which the directors make. It does not create a precedent which overrides the rules of conduct of the company. The lease does however govern the obligations of the company to the leaseholders.

On 2), the lease is silent about a management company, so this is I think a one straightforward for the Freehold company to decide

Fraise

ValHaller wrote: »

On 1) the 4th director must accept the result with his directors hat on. Any leaseholder, who may be the same person with a different hat could take the matter forward through legal channels and in due course say 'I told you so'.

The reasoning is that the lease does not govern the conduct and choices which the directors make. It does not create a precedent which overrides the rules of conduct of the company. The lease does however govern the obligations of the company to the leaseholders.

On 2), the lease is silent about a management company, so this is I think a one straightforward for the Freehold company to decide

Thanks for you reply but all the directors are also leaseholders, and I was led to believe that the lease has to be adhered to. Just because we have formed a freehold management company and are all directors, Propertyman said (I think?) that the lease is more 'important' than what the directors want, and they can't just make up new rules or go against the terms of the lease. Also, the management company (which consists of all shareholders who are also directors) each have a share in the company, so they can't really fight themselves, if that makes sense? The company is ours and it should be managed according to the lease, and if 1, 2, or even 3 of the shareholders/directors are difficult people, or just stupid, the 4th one has a right to defend his corner and want to comply with the lease.

The management company is totally different to a management agency. The agency is employed by the company to send round plumbers, builders etc as and when required. But it is a waste of money to use an agency when it can be self-managed as the house is so small and there are no communal areas. It's only the gutters and drains and exterior decorating that needs maintaining.


Also, the lease states that the leaseholders are all responsible for the maintenance of the property, and even though we have formed a freehold company with 4 equal shares, we are still 4 leaseholders. So even though we decided to form a company, I was told the company cannot make up new rules that go against the lease i.e. instruct a management AGENCY to arrange maintenance work. That is unnecessary and costly, and doesn't make sense in any shape or form

ValHaller

Fraise wrote: »

Thanks for you reply but all the directors are also leaseholders, and I was led to believe that the lease has to be adhered to. Just because we have formed a freehold management company and are all directors, Propertyman said (I think?) that the lease is more 'important' than what the directors want, and they can't just make up new rules or go against the terms of the lease. Also, the management company (which consists of all shareholders who are also directors) each have a share in the company, so they can't really fight themselves, if that makes sense? The company is ours and it should be managed according to the lease, and if 1, 2, or even 3 of the shareholders/directors are difficult people, or just stupid, the 4th one has a right to defend his corner and want to comply with the lease.

You really did not get the point. You need to look at yourself as wearing 2 hats while this goes on. One as director and one as leaseholder.

There is not a darn thing you can do about this as director if you are outvoted, apart from tell your fellow directors that it may result in leaseholders acting to defend their leases. Accept it. As director you are out voted. Walk out of your directors meeting, go into your own apartment, put on your hat as leaseholder and sue the hide off the company you are director of - ie take them to the FTT-PC as propertyman suggests.

On this problem, be clear when you do anything whether you are acting as leaseholder or director.

bouicca21

Is this really worth fighting with all the attendant risks of ruining relationships with the other lease holders/directors? So the painting gets postponed for a year or two. Is it going to damage the fabric? Is it worth accepting and maybe running a little campaign for getting the painting done next year by just pointing out from time to time that the shabby exterior is devaluing all your flats?

As for using a management company, if that £3,000 is to be divided between 4, it means you will be paying £750 for being relieved of hassle and having some expertise at your service. Why not agree but ask for it to be subject to review within a specified period of time? That way there will be evidence to judge performance and cost effectiveness.

Fraise

ValHaller wrote: »

You really did not get the point. You need to look at yourself as wearing 2 hats while this goes on. One as director and one as leaseholder.

There is not a darn thing you can do about this as director if you are outvoted, apart from tell your fellow directors that it may result in leaseholders acting to defend their leases. Accept it. As director you are out voted. Walk out of your directors meeting, go into your own apartment, put on your hat as leaseholder and sue the hide off the company you are director of - ie take them to the FTT-PC as propertyman suggests.

On this problem, be clear when you do anything whether you are acting as leaseholder or director.

Thanks Valhaller, I see your point now, I was a bit confused last night. Many thanks again...good advice

Prothet_of_Doom

Whilst we are think out of the box, the other directors are worried about the cost of painting, so you could suggest a cheaper alternative.

i.e. You rent scafolding, and each put in so many man hours at the top of a ladder.
Or if one person is say an accountant, they might offer a painter, a free audit of his books.

Think about why they want to delay.

Fraise

bouicca21 wrote: »

Is this really worth fighting with all the attendant risks of ruining relationships with the other lease holders/directors? So the painting gets postponed for a year or two. Is it going to damage the fabric? Is it worth accepting and maybe running a little campaign for getting the painting done next year by just pointing out from time to time that the shabby exterior is devaluing all your flats?

As for using a management company, if that £3,000 is to be divided between 4, it means you will be paying £750 for being relieved of hassle and having some expertise at your service. Why not agree but ask for it to be subject to review within a specified period of time? That way there will be evidence to judge performance and cost effectiveness.

The relationships are already soured unfortunately, mainly due too 2 of them who have done sweet fanny adams in way of maintenance for the last 5 years (and the fund bank account was blocked by previous leaseholder who I purchased from, and when it was just share of freehold and not a freehold company)

The 3rd one who craves to be chairman is just as inept, is only interested in having a title (what a joke) and is also deceptive and cunning and wants to order everyone about. He's even told me to stop using my parking space on the driveway (which belongs to me and is registered as mine with the LR) and to stop using it as 'my own personal space!" He can't see by his lease that I own that part of the drive, and so doesn't believe I own it. The parking space once belonged to another flat in the house and the person I bought this flat from bought the parking space off the other flat-owner in 2002. It's all registered through solicitors and the Land Registry with its number etc, and maybe it was never added to his own personal lease ? I have no idea, but I do know I own the space.

The painting is indeed necessary, as the rendering is falling off due to the leaking gutters, and there's dirt marks all along the walls. It should have been done about 4 years ago and the lease states it must be done no later than every 7 years, but this bunch are making up their own new rules since the company was formed. The 'chairman' seems to think that now we have a company, and he has forced himself upon us as chairman (the other 2 are weak and lackadaisical) he can dictate and lay down new laws, irrespective of what is in the lease.

Regarding the management company, we ARE the company. I am a director and shareholder as are the 3 others. What the new one wants to do is employ a management AGENT, and that is money down the drain. Some agents are worse than useless, and charge exorbitant admin fees, and I'm not prepared to pay for something we do not need. Besides, a management agency cannot force us to maintain the property - we would be employing THEM and they would be working for us - not ruling us!

If we were a large estate then yes an agency would be necessary, but we are just one house divided into 4 flats with NO communal areas except for a large driveway that only one other person uses to get to his garage. We have our own private gardens (front and back), and own front doors . The only part of the property that we are all responsible for is the roof (which is relatively new), the gutters, the drains, maintaining the driveway i.e. weeding and cutting back shrubs/bushes, and redecorating every 7 years. It is very easy to arrange a drain man, roofer and decorator and get 3 separate quotes and then make a joint decision on who to employ to carry out the job. Why should we pay £3000 a year for an AGENCY to phone a plumber etc on our behalf? It is total waste of money and would be far better spent on the maintenance costs.