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Share of Freeholder that won't pay
Comments
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ChumpusRex wrote: »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?
I'm not sure what would happen if they went bankrupt or were in negative equity, but they certainly wouldn't get any money off him if he was penniless.
But this case is a bit different in that it's just four flats and they're all equal shareholders of the freehold company, they're basically co-freeholders that gave formed a company.
Unfortunately, if he wanted to sell his flat, as he is a shareholder of the company he doesn't need the others approval. Had it been just SOF without a company, then he would need all the other freeholders signatures in order to sell. But one of the reasons for forming a company is you do away with that, and each shareholder signs over their own share to the new buyer without needing the other shareholders signatures.
Worse still, I believe this man could, if he so wanted, sell just the lease to his flat and still keep his share of the freehold company. I'm not 100% certain about that! but I'm sure I read it somewhere
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Well its not pedantic as by properly understanding the relationship of a leaseholder with the freehold company, even one in which they hod a share, eliminates the doubt and confusion of "suing oneself" which the muddled thinking of share of freehold creates.
The flat owner has a contract with the company, a lease, and services are provided under that, and in turn, they pay their service charge.
:money:As soon as owners stop thinking about a non-existent thing share freeholder" the confusion and uncertainty vanishes.:)Stop! Think. Read the small print. Trust nothing and assume that it is your responsibility. That way it rarely goes wrong.
Actively hunting down the person who invented the imaginary tenure, "share freehold"; if you can show me one I will produce my daughter's unicorn0 -
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:
Fraise I have to correct this mishmash
He is not "technically" anything, he is a shareholder in a company that owns the freehold, thats it and no more. The directors are the ones that drive the freehold company not shareholders and it sues him under their contract, the lease.
If you read through the LVT/FTT decisions you will see it is not an issue. it only raises concerns with freeholds owned by people without a trust deed or agreement on how decisions are made re the individuals.
The Crown takes over nothing, except companies that have been struck off for non compliance, and they do nothing and charge nothing until someone asks them to sell it to them.Stop! Think. Read the small print. Trust nothing and assume that it is your responsibility. That way it rarely goes wrong.
Actively hunting down the person who invented the imaginary tenure, "share freehold"; if you can show me one I will produce my daughter's unicorn0 -
It is not a grey area, and actually not pedantic (even though I used the term initially.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....
Look at it this way. I own a few shares in British Airways (true). But that would not stop BA suing me if a failed to fully pay for an airline ticket!
In your case, the 'leaseholder' living in the flat is a different entity to the 'shareholder' of the company which owns the freehold (even though they may be the same person). And similarly the 'shareholder' is a different legal entity to the 'company'.
Any one of these 3 can sue any one of the others.
The company can sue this guy just as easily as BA can (and would) sue me.0 -
propertyman wrote: »Fraise I have to correct this mishmash
He is not "technically" anything, he is a shareholder in a company that owns the freehold, thats it and no more. The directors are the ones that drive the freehold company not shareholders and it sues him under their contract, the lease.
If you read through the LVT/FTT decisions you will see it is not an issue. it only raises concerns with freeholds owned by people without a trust deed or agreement on how decisions are made re the individuals.
The Crown takes over nothing, except companies that have been struck off for non compliance, and they do nothing and charge nothing until someone asks them to sell it to them.
My solicitor has told me wrong then.
According to him, the directors of a freehold company work for the shareholders and must report to them before making any changes. If a shareholder of that company is not happy with the directors decisions, they have every right as a shareholder and leaseholder to contest it , even if it means going to court. ANYONE can be elected as a director of a company, it needs no skills or experience, and if one - or all - directors are not acting in accordance with the lease, the court will strip them of their title.
So the Crown will take over a freehold company if it isn't being run properly......
That's what I was told by my solicitor, but maybe I have it wrong...0 -
It is not a grey area, and actually not pedantic (even though I used the term initially.
Look at it this way. I own a few shares in British Airways (true). But that would not stop BA suing me if a failed to fully pay for an airline ticket!
In your case, the 'leaseholder' living in the flat is a different entity to the 'shareholder' of the company which owns the freehold (even though they may be the same person). And similarly the 'shareholder' is a different legal entity to the 'company'.
Any one of these 3 can sue any one of the others.
The company can sue this guy just as easily as BA can (and would) sue me.
There's a bit of a difference between owning a few shares in a massive company like BA, and having a one quarter share in a freehold company which is non profit making.
This shareholder, who also happens to be a leaseholder, owner, and owns a quarter share of the company would effectively be suing himself. It's part his. Any individual can sue another individual but in this case I think it's more complicated than you realise.
I think the OP should speak to a solicitor.0 -
The shareholder could, of course, go to a shareholders meeting and ask for a decision for the company not to sue.There's a bit of a difference between owning a few shares in a massive company like BA, and having a one quarter share in a freehold company which is non profit making.
The only difference is one of scale.
Legally, there is no difference at all.
This shareholder, who also happens to be a leaseholder, owner, and owns a quarter share of the company would effectively be suing himself.
How many times? No. The company would be suing him.
It's part his.
True. And BA is part mine.
Any individual can sue another individual but in this case I think it's more complicated than you realise.
I disagree.
I think the OP should speak to a solicitor.
Depending on the company's constitution, it is likely a majority decision would be needed.
But if the other 3 shareholders all wanted to sue, in order to get the defaulting leaseholder (who happens to also be a 25% shareholder) to pay, they could pass a majority motion and ..... the company could sue.
Note - it would not be one of the other shareholders suing him. And it would not be the other 3 shareholders suing him. Nor would it be himself suing himself.
It would be the company suing him, in accordance with a decision by the majority of the shareholders.
that is how freeholders enforce the terms of a lease on a leaseholder and it is for exactly this reason that the freehold of flats in England are separate legal entities to leaseholds.0 -
According to him, the directors of a freehold company work for the shareholders and must report to them before making any changes.
Directors run the company according to its mission and for the benefit of all the shareholders in aggregate. That does not mean they cannot upset a single shareholder however!
They have reporting obligations and there are certain high-level matters which require shareholder approval under law, but they are certainly not required to consult shareholders before any changes unless specified in the company charter or other rules.
In fact, the basic powers directors have are very powerful, as a group.If a shareholder of that company is not happy with the directors decisions, they have every right as a shareholder and leaseholder to contest it , even if it means going to court.
The way freehold companies are challenged is very different depending on if you are a shareholder or a leaseholder. It's as different as if you sued a shop for selling you a duff computer or you sued a shop company director as a part-owner of that company.
Of course there are ways to contest these things in court, but apart from the hassle and expense (which to be fair is not a factor to be ignored), so what? Having legal avenues to dispute a the direction of a company doesn't mean the case has any merit.ANYONE can be elected as a director of a company, it needs no skills or experience, and if one - or all - directors are not acting in accordance with the lease, the court will strip them of their title.
Again, a bit so what? Directors are the representatives shareholders elect to run a company. They aren't doctors required to have medical degrees.
Directors are not actually bound by the leases. They are bound by the company's charter and bylaws. The company the directors run might be bound by the leases on a contractual basis, but this is totally different. Directors cannot be removed even if the company breaks a contract. It requires more than that.
Disqualification of directors is actually very hard to achieve unless they have done something seriously wrong (in the eyes of the law or the majority of shareholders), because their powers offer them a lot of freedom to act as they see fit.So the Crown will take over a freehold company if it isn't being run properly......
Finally, pursuing someone who just happens to be a minority shareholder for an unpaid bill that is contractually owed is a million miles from a company not being run properly.0 -
This is why I didn't want to buy a flat - you end up having to pay for stuff when you're not able to, for things you'd choose to put off longer (or not do).
If the guy's got no income then he's got no income.... nagging, threatening, etc etc won't change the facts. Give the guy some slack, be his friend, make his home a haven during these tough times and not a prison where he even fears his neighbours....
Would it really be the end of the world if the painting were put off for another year....?0 -
If the guy's got no income then he's got no income.... nagging, threatening, etc etc won't change the facts. Give the guy some slack, be his friend, make his home a haven during these tough times and not a prison where he even fears his neighbours....
I admit I have no knowledge of the guy in question, but you'd be surprised how many chancers there are out there who will plead poverty to push back on anything they owe, even if they could easily pay.0
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