What happens if the management company goes bankrupt?

charoniv

Sounds like there are a few options - but they all mean the directors doing their job which might be a problem.

Getting the delinquent landlord to pay his dues - maybe by legal action.
Increase the service charge to cover those owners that don't pay the service charge.
Request a lump sum from flat owners to maintain a contingency balance.
Reduce the costs e.g. don't carry out maintenance.

It sounds like those all might be needed.
At the moment there doesn't seem to be any financial reason for this landlord to pay.

You could sell the company but would probably end up paying more per flat and still end up covering the costs of this landlord.

Sunshine_Man

That might not be possible - most leases state that "a certain proportion of " and then what can qualify. By increasing the service charge to cover a missing (or unpaid) proportion requires each paying leaseholder to pay more than their lease permits and of course that is in breech of the terms of the lease.

This happened to Sun Court (Worthing) Management Co Ltd when the chairman who was also a leaseholder reduced his apportionment leaving an overall shortfall. Legal action was taken against the company by another leaseholder to recover the overpayment that had been charged. At one point the directors stated that the company was heading for insolvency. I think this could possibly still happen because of the action the directors took in trying to resolve the issue but I am not sure.

In a similar manner reducing the maintenance might not help as this will also reduce the amount that can be recovered from the leaseholders.

Also remember that any reserve fund is held in trust for the benefit of the leaseholders - and thus would not be lost should the company go into administration.