Sink fund

Soundgirlrocks

Hi All,

I'm after a bit of advice having scoured the internet I can't find what I'm looking for. So I thought a poll might be a good idea & a bit of fun

I'm director management company for a property in south east london. We have the possibility to raise significant funds from the sale of the garden. There is some debate about how to use the money. The building is old (1853) 3 story, and converted into 7 flats. Some leaseholders would like to see larger dividends paid (out after all the obvious repairs) whilst other would prefer to place the money in a sink fund.

How much do you think should be held in a sink fund for a property of this age (assuming no known major issues)?

G_M

1) presumably all the leaseholders, and the freeholder, are in agreement about sale of the garden?

2) who's paying the legal costs to vary the 7 leases and sell the land?

3) what condition is the property in? What major repairs might come up in the next 5 - 10 years?

4) what might the repairs in 3 above cost?

5) what improvements to the property might be desirable? eg a lift, remote door lock/buzzer system, redecoration of common areas etc?

6) cost of 5 above?

Soundgirlrocks

G_M

Just to try and answer your questions, currently each leaseholder is paying £800 toward varying leases, any legal fees for the sale would come out of the proceeds of the sale. I have no issue paying a small dividend to cover the costs to leaseholders to get the sale through.

The annual service charge would go down significantly and all the leaseholders would have their leases extended as part of the process.

I don't really want to derail the pole by going into detail about all the works that are currently needed would be but we are looking at the region of £50-60K.

The poll is base on all major refurbishment and repairs having been done so its just how much do we give to share holders in dividends v how much we should hold in a sink fund for good governance.

Personally I would like to see a larger portion in a sink fund as I believe we can only sell the family silver once so to speak.

G_M

7) the pole is meaningless. Impossible to give a sensible vote without knowing full details

8) that includes details of the estimated £60K works. You may consider them essential, justifying a £60K spend. I may not, so how can I vote without knowing what the £60 would be needed for?

9) I'd also want to know more about the property. Age, state of repair after the £60K spend, etc etc

11) you did not confirm whether all leaseholders, and freeholder, have agreed to the sale

12) " I have no issue paying a small dividend to cover the costs to leaseholders " Is it your decision? You are simply "director management company", but that in itself does not mean you have the right/resonsibility either to sell the land, or set up a sinking fund, or pay dividends, or anything.

13) Also need to know more about all 7 leaseholders: ages, likely timescale to they sell their leases and move, personality/attitudes to risk, financial status and need for capital, whether they are about to marry and need cash for round-the-worl honeymoon etc etc

Who is the freeholder?

However, as you started by saying this is "a bit of fun", my vote would be for a £13,226 sinking fund. Sorry I can't actually vote as that option is not offerred.

Soundgirlrocks

G_M wrote: »

7) the pole is meaningless. Impossible to give a sensible vote without knowing full details

8) that includes details of the estimated £60K works. You may consider them essential, justifying a £60K spend. I may not, so how can I vote without knowing what the £60 would be needed for?

All the works are things agreed at the AGM that need doing or require to comply with fire regulations.

G_M wrote: »

9) I'd also want to know more about the property. Age, state of repair after the £60K spend, etc etc

Its in the original post property was build in 1853. Currently it is in a state of disrepair although I've made some head way with essentials like fire alarms. After spending the 60k the communal areas (including outside space) will have been completely renovated including repointing where needed, new drive, external & internal redecoration, rewired, new surface drains, new guttering, replacement windows (communal area), new intercom. Roof was replaced 10 years ago, bays roofs where done 3 years ago covered by 25 year guarantee. There would be no outstanding list of things to sort, any expenditure going forward would be routine maintenance.

G_M wrote: »

7)11) you did not confirm whether all leaseholders, and freeholder, have agreed to the sale

Not really relevant but yes everyone has agreed to sell the garden, freehold is owned by the management company of which I am the sole director (each leaseholder has an equal share)

G_M wrote: »

7)12) " I have no issue paying a small dividend to cover the costs to leaseholders " Is it your decision? You are simply "director management company", but that in itself does not mean you have the right/resonsibility either to sell the land, or set up a sinking fund, or pay dividends, or anything.

I have a responsibility to manage the property, & advise all the leaseholders of the best action & am legally liable so no I'm not just a "director" it comes with quite a lot of responsibility (probably why no one else would do it!) Any decisions would need a majority vote but majority are generally guided by what I recommend because I know the most about the building.

G_M wrote: »

7)13) Also need to know more about all 7 leaseholders: ages, likely timescale to they sell their leases and move, personality/attitudes to risk, financial status and need for capital, whether they are about to marry and need cash for round-the-worl honeymoon etc etc

Sorry I don't see the relevance, I'm not asking you to put yourself in the individual leaseholders shoes. I'm asking how much for good governance how much should be in the sink fund.

G_M wrote: »

7)Who is the freeholder?

The residents management company is the freeholder. Sorry I though this would be obvious, we wouldn't be able to sell the land if we didn't own it.

I think you are over thinking the question, obviously each leaseholder has their own circumstances which is why some may desire a dividend payment over and above a sink fund. I'm not concerned with that I'm purely looking at what would be best for the long term management for the building.

eddddy

Soundgirlrocks wrote: »

Any decisions would need a majority vote but majority are generally guided by what I recommend because I know the most about the building.

I guess you mean decisions by the freeholder company need a majority vote.

But you say that the scheme relies on every leaseholder agreeing to a lease variation. The freehold company cannot force any leaseholder to agree to a lease variation. Even if 6 leaseholders out of 7 are in favour of the scheme.

So effectively, just one leaseholder can block the scheme - and/or 'blackmail' the the other leaseholders.

e.g. By saying "I won't agree to my lease being varied, unless the freehold company agrees that all proceeds of the sale are distributed, and none go into a sinking fund."

Or even pushing their luck with "I won't agree to my lease being varied, unless I get more of the proceeds than everyone else."

But it sounds like you believe that your fellow leaseholders are a reasonable bunch, so hopefully, that won't happen.

glasgowdan

What income will be made from the sale of the garden, and is this likely to affect the value of the 7 properties? If you want each of the 7 flats to pay £8-9000 into this repairs pot, are you also suggesting you also want them to pay another, what, £5k into a sink fund?