Share of Freeholder that won't pay

BeverleyJuly

We have a share of freehold (4 flats). It's set up as a company and we each own equal shares.

One of the shareholders is now severely in arrears (they owed a block of money from old repairs, but for over a year now have not even paid their standard annual charge of £1200).

They claim that they simply have no money as their business has gone belly up and an account frozen (this has been the story for the last 8-9 months).

What can we do to make this person pay up? They owe our sinking fund money! We are facing some larger ticket items next year such as exterior repainting (not cheap because it is a listed building).

We need him to start contributing.:mad:

Any advice greatly appreciated.

Taradiamond

I am following this thread with interest too!!!

princeofpounds

The freehold company needs to sue him basically (or at least threaten to)

lease-advice.org

G_M

May be pedantic, but my guess is it is not a freeholder who is not paying, but a leaseholder.

Most likely, each flat owner owns a lease AND a share in the company that owns the freehold.

The leases will probobly make the leaseholder liable for these charges.

The Company should (eventually, when other approaches have failed) take legal action against the leaseholder for the debt. If, following successful legal action, payment is still not forthcoming, a Charge could be placed on the lease such that it cannot be sold till the debt is paid.

AnnieO1234

You need to dig out the original formation documents of the freehold company. Does any action have to be unanimous? If so your fellow director isn't likely to agree to sue himself.

X

xylophone

http://www.flat-living.co.uk/advice/483-what-to-do-if-a-leaseholder-does-not-pay-their-service-charges

http://www.lease-advice.org/publications/documents/document.asp?item=7

chris_aaaaa

Have a chat with him, if he has no cash and has a mortgage on the flat he may actually welcome being sued.


Once the CCJ is granted the mortgage company pay up and put it and charges on the mortgage. Then I believe the CCJ can be cleared since the debt is cleared.


If going this way it is a simple uncontested MCOL case.


This is a variation on what some less scrupulous BTL flat owners do quite deliberately.

Fraise

BeverleyJuly wrote: »

We have a share of freehold (4 flats). It's set up as a company and we each own equal shares.

One of the shareholders is now severely in arrears (they owed a block of money from old repairs, but for over a year now have not even paid their standard annual charge of £1200).

They claim that they simply have no money as their business has gone belly up and an account frozen (this has been the story for the last 8-9 months).

What can we do to make this person pay up? They owe our sinking fund money! We are facing some larger ticket items next year such as exterior repainting (not cheap because it is a listed building).

We need him to start contributing.:mad:

Any advice greatly appreciated.

If he is one of the freeholders, he will effectively be suing himself as he owns part of the company. I think that's right, but I'm sure someone will correct me if I'm wrong.

Is it a limited company? If so, I have a feeling it complicates matters further, but again I'm not sure.

I do know that solicitors will usually advise you to avoid legal action as it can cost thousands in legal fees, and if you all own the company the money will be coming out of your own pockets. The money in 'the company' is all the freeholders money, so you'll be throwing good after bad. Worse than that is you will all have a dispute that's not just any old dispute but a fully fledged legal one, and that could make your flats unsellable in the future, or at best, wipe thousands off its value. And I mean thousands!

Your best bet is to try and compromise somehow. His circumstances may change soon and he will then pay up, which means you'll have !!!! yourselves in the foot by taking him to court. Besides, taking him to court will only cost you if he has no money. Courts can't make someone pay what they haven't got. And if he never raised the money you'd have to wait until he eventually sold his flat....which could be years away. You are kind of stuck. I know this as I have had big problems with SOF and am actually taking legal action even though it's the last thing I wanted to do, but my story is different to yours.

Out of interest what does the £1200 per annum cover? That seems a rather high maintenance charge for just four flats. Are you in London? It's just that I know of luxury apartment blocks that have 24 hour concierge, parking facilities, gymnasium, pool, lovely gardens that are kept manicured and perfect, lift maintenance, cleaners for the entrance lobby and corridors, window cleaning AND all maintenance work to the building (roof, gutters, decorating outside etc), and for all of that it's just £85 a month each flat. Of course, there are a lot of flats in the building, but it's a luxury complex, so £1200 per flat annually just for outside decorating seems quite steep for a 4-flat house. How often do you have it decorated? Are you sure the decorators aren't giving you inflated quotes? Some unscrupulous builders put in ludicrously high quotes when they know it's a company.......

G_M

Fraise wrote: »

If he is one of the freeholders, he will effectively be suing himself as he owns part of the company. I think that's right, but I'm sure someone will correct me if I'm wrong.

.

I doubt he is one of the freeholders. He will probobly be one of the shareholders, or directors, of a company that is the freeholder.

As asked above, it depends on the company structure. If a majority of shareholders (ie the other 3) can instigate legal action, the the company will be suing him.

ChumpusRex

I once had a similar issue. In this case, it was a large block of nearly 200 flats, and 1 leaseholder couldn't pay.

The decision of the management company was to demand the money regularly, but not take any action. The advice that they had received was that they could block any sale of the property until the arrears (+ interest) were paid, and therefore any legal action was likely to represent an unnecessary expense (unless there was a proximate cashflow issue - but in a 200 flat block, the impact on cashflow was relatively modest and could be tolerated).

They ended up waiting about 5 years, but they were able to recover the entire arrears + interest at base rate + 8 %.

I don't know how much risk they were taking in doing this. For example, what would happen if the leaseholder went bankrupt, or was in negative equity?

Fraise

G_M wrote: »

I doubt he is one of the freeholders. He will probobly be one of the shareholders, or directors, of a company that is the freeholder.

As asked above, it depends on the company structure. If a majority of shareholders (ie the other 3) can instigate legal action, the the company will be suing him.

I know what you mean, but it's kind of pedantic. The man is a freeholder in as much as he owns one share of the freehold company. So although he is technically a shareholder, he's still effectively one of the freeholders.

As he owns a one quarter share of the company, it's a grey area for the others to sue him as the company itself will be suing him; that's what I've been told by a solicitor, though I may have misunderstood....

What I do know for sure though, is that it costs thousands to take legal action, and there's no guarantee of getting of recouping the money. It's all very complicated.mon top of that everyone loses as they gave to declare a dispute when selling.

The man himself could have a good defence if it went to court too, and when small freehold companies such as this start going down the legal route over disputes, .they risk having the freehold taken over by the Crown who will then run the company and charge the shareholders for the privelage. That too wipes thousands off the value of your home. :eek: