Landlord question re:loan legality

marc3

forgive me where i have posted similarly before, albeit things have both changed and moved on and looking for a bit of a refresh.

am landlord with ownership of one of 5 properties in building divided into 5 properties.needs a bit of rectification,at cost circa £10K.
there is a governing management committee of which i am one of 5 members.

to fund the repairs, the chairman of commttee is willing to take on a personal loan-albeit in his wifes name-where funds would be then transferred to the management company-of which the chairman is the sole director to fund the repairs -with her monthly repayments to be made by the management committee from the monthly service charge attrbutable to the property.

i feel increasingly uncomfortable about this-loan company do not know purpose of loan/loan in wifes name/chairman sole director/ service charge funds used to repay loan etc.

again-i have no reason to think it is well intentioned, but i am not sure if it is frankly 'illegal' or simply 'not recommended.

too much could go wrong over 5 year period in my eyes.

i also seem to think there was a big hohah a few years back where directors/directors wives were having personal loans paid for by their companies.
whether you are a director of ICI or the sole director of a miniscule privare company-surely same principle applies.


thus interested in any views on this-and in particular-whether it is actually illegal in todays new financial age.

many thanks

AnnieO1234

If the wife has £10k towards improvements on her own home, she could lend this to the management company and then take out a £10k loan for her own home improvements. As long as it looks kosher on paper there's no fraud.

X

Pixie5740

Isn't this loan being proposed because there is structural work that needs done on the building and there is little or no slush fund? From your previous thread I seem to recall you wanting to hold off paying for the building work because you think it is prudent to let the problem get worse as you don't want to stick your hand in your pocket just now.

If you feel uncomfortable about the loan proposal then you and the other property owners should pay for the work to be done so that the chairman's wife doesn't need to take out a loan.

Jenniefour

OP.

1. Is there anything at all about the responses to your previous thread that you did not understand? If so, feel free to ask for clarification.

2. Did you convey what you learned on your thread last time to all members of the management committee? If not, why? If you did, have you now all read the leases and the Articles? If so, are you all on board with your responsibilities as both leaseholders and members of the management committee? If so:-

3. How come the only persons willing to put their hands in their pockets are the Chairperson and his wife? Are the other leaseholders, including yourself, completely broke? Or are you all hoping the problem of funding necessary repairs will just go away if you continue to ignore it? Are you hoping that the Chairman will just give up in the face of what appears to be wilful and deliberate obstruction?

You have the very good fortune to have an offer of a loan - which is not illegal. Your Chairperson is generous beyond belief and has offered a solution to the problem. He and his wife are the ones putting up with water ingress that should have been dealt with years ago. They must be tearing their hair out with the lack of co-operation and understanding they're getting.

I recommend that you stop trying to shift the focus to the Chairman and his offer - he is not the problem. If you and the others are feeling uncomfortable about accepting this loan - great, it might indicate that you and they have a conscience, although I wouldn't be putting any money on it. The way to not feel uncomfortable is to put your hands in your pockets.

Jenniefour

Just to add, the loan is a big fat red herring that is about the size of an overfed whale. Euthanasia needed, not oxygen.

I'm going to go and have a lie down and a cup of tea now.

G_M

I do not see how the situation has changed since your last thread - so the replies are likely to be the same.

My own thoughts remain:

Your responsibility is to ensure

1) that any repairs done are actually needed
2) that the contractor(s) doing the repairs do good job, at a reasonable cost
3) that the contractor is paid by the Management Company of which you are a member

The Management Company should obtain the funding for the above in the most cost-effective and timely way possible.

If this involves taking out a loan, fine. So long as the loan is on acceptable terms (ie not at 200% interest pa!).
a) Is the Director proposing to charge interest? How much?
b) over what term is the loan repayable?
c) Is a Charge being placed on the property to secure the loan?

The alternative of course, is for the 5 lease owners to each stump up 1/5th of the contractor's costs up front (assuming there is no contingency fund held by the Management Company).

If this would create problems, delays, even legal battles to enforce payment against a reluctant or hard-up leaseholder, then a loan seems a pragmatic way to get the work done.

Whether it comes from the Director, his wife, a bank or where ever does not matter, though clearly the terms of the loan need to be understood and agreed.

One further thought: what happens if one leaseholder sells their lease before the loan is repaid? Would the Management Company expect that leaseholder to pay off their share of the loan, or would the new lease-holder 'inherit' the loan???

AdrianC

marc3 wrote: »

i also seem to think there was a big hohah a few years back where directors/directors wives were having personal loans paid for by their companies.
whether you are a director of ICI or the sole director of a miniscule privare company-surely same principle applies.

The difference was that they were loans for personal use, being repaid by the organisations.
This is a loan for the organisation's use, being repaid by the organisation.

The only risk being taken here is by the chairman's wife's credit rating, if the organisation cannot or will not repay the loan.

Jenniefour

G_M wrote: »

1) that any repairs done are actually needed

G_M, I imagine you wanted to say "that any repairs needed are actually done".

Feel free to smack my wrist if I've misunderstood.

G_M

Jenniefour wrote: »

G_M, I imagine you wanted to say "that any repairs needed are actually done".

Feel free to smack my wrist if I've misunderstood.

Just the wrist?......

No - I meant what I said (on this occassion).

No point replacing the roof if replacing half a dozen tiles will solve the problem.

My 2nd point covered your poit I think. Anyway, it was meant to!

Jenniefour

G_M wrote: »

Just the wrist?......

:rotfl::rotfl::rotfl:

I'm making allowances here for you to be wearing your Elvis Presley costume! Is that not enough?!!

No - I meant what I said (on this occassion).

No point replacing the roof if replacing half a dozen tiles will solve the problem.

My 2nd point covered your poit I think. Anyway, it was meant to!

Thanks for clarification.