Management Company Refurbishment - Cash Call. Loan?

konn1ch1ha

Hello all,

I'm not sure if I'm in the right corner of MSE or not, so please redirect me if there is a more appropriate forum for this question.

So myself and six other shareholders all own the management company of a building in Brighton. The building consists of six flats and a basement flat (my share in the management company, I believe, is 4%), the others have some at 12, 15% etc etc.

There are a lot of works to be done throughout the building, such as exterior rendering, possible removal of fire escape and roofing amongst many other issues to be addressed, as well as the erecting of scaffolding to the front and rear of the building. The total is around the price of £43k (including property management fees VAT etc). I would pay 4% of this, being about £1700.

However, what happens when the cash-call is made? I'm not in a position to pay that share straight up. Would the bank be willing to lend me the money (on top of my already existing overdraft) on the strength I do not have a mortgage and it's an investment? What arrangements could be made?

Any advice or information on the situation would be much appreciated.

Thanks

jonesMUFCforever

Do you have a business account for the management company?
If so approach the bank for a loan although you may have to put up the deeds of the flats as security (and everybody would have to agree to pay).

konn1ch1ha

jonesMUFCforever wrote: »

Do you have a business account for the management company?
If so approach the bank for a loan although you may have to put up the deeds of the flats as security (and everybody would have to agree to pay).

There are directors of the man. co. and there is an account but I have no access to that.

It would only be me that would need a loan, presumable. It would be just to pay my share.

Arleen

That looks like personal loan and a tiny one at short notice so, if eligible at all, it will be at high rate. I kinda wonder what type of contract did you sign, what does it say if you don't pay into a round of "cash call"?

konn1ch1ha

Arleen wrote: »

That looks like personal loan and a tiny one at short notice so, if eligible at all, it will be at high rate. I kinda wonder what type of contract did you sign, what does it say if you don't pay into a round of "cash call"?

Not contributing to the cash call is not really an option. The works are absolutely essential and my property's taking the full brunt of damage that needs to be addressed.

My bank offers a loan but it's such an expensive monthly outgoing if I proceed with it.

Arleen

konn1ch1ha wrote: »

Not contributing to the cash call is not really an option. The works are absolutely essential and my property's taking the full brunt of damage that needs to be addressed.

My bank offers a loan but it's such an expensive monthly outgoing if I proceed with it.

But what your contract says about not responding to cash call? And what are the rules governing them? Because if there are consequences of not being able to foot the bill, what are you going to do in few more months when another cash call may happen? Something you should think about before putting any more money into the business.

As for that it will be expensive, it sure tends to be that way. That is the downside of being a landlord, and why you should have money set aside for works like that.

konn1ch1ha

Arleen wrote: »

But what your contract says about not responding to cash call? And what are the rules governing them? Because if there are consequences of not being able to foot the bill, what are you going to do in few more months when another cash call may happen? Something you should think about before putting any more money into the business.

As for that it will be expensive, it sure tends to be that way. That is the downside of being a landlord, and why you should have money set aside for works like that.

I will have to fish it out. I believe there's no set rule of paying in/not paying in but done on "gentleman's agreement", trust and having the logic and savvy to address these problems.

I've owned the property for two years and this has been on the cards for a long time before I even bought it, and it's unlikely another call will happen in the near future of this extent. Any problems with my flat alone has been successfully paid and dealt for by me. It's just this big hurdle I need to jump.

It will be an investment for all shareholders as it's a full building refurbishment.

AnotherJoe

Do you live in it or let it out?

konn1ch1ha

AnotherJoe wrote: »

Do you live in it or let it out?

It's let out.