Freehold Management Company

andyroo19

Hi all,

Looking for a bit of advice. I own a property that’s one of five members of a freehold management company (there’s a small patch of shared land in the middle of the houses), of which two residents are directors. There is a managing agent involved running the day-to-day. 

Here’s the situation: the annual bill came around, signed by the managing agent where they are supposed to sign, and then an X in the same pen and handwriting where two directors are supposed to sign. 

As it turns out, one director told us that they did not agree to the budget and have since resigned. We raised all this with the managing agent, only to be told that the matter was confidential and that we were to pay the bill.

Where do I stand here? As an owner and member, what am I entitled to know? I feel like I’m being treated like a tenant in the property I own. Any help would hugely appreciated.

Thanks. 

daveyjp

If there is a company there will be Articles of Association.  You need to refer to them and see what they say about directors, resignation, agreeing to charges etc,

lalna

You can find all of these documents on Companies House.
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greatcrested

'Small patch of land"?

What on earth does the managing agent do? Arrange to mow the lawn 8 times a year? And then send bills round?

If you and the other 4 owners of the management company get together and sack the agent I'm sure you could jointly invest in a lawn mower and take turns to use it.....

What reaction have you resceived when you talked to them?

eddddy

Presumably you've entered into some kind of legal agreement - like a  contract or deed or lease - which makes you liable to pay that for maintenance of that land.

If the bill is correct according that legal agreement, you have to pay it.

The lack of signature, the budget dispute and the director's resignation are probably irrelevant - unless the legal agreement says you don't have to pay the bill if it's not signed, or the budget is disputed, or a director has resigned etc.

OldMusicGuy

I am just about to buy a house with a similar arrangement. I have seen the Articles of Association and have been through them all with my solicitor before exchange of contracts. If you aren't familiar with the Articles of Association, then like davyjp says, get a copy of the to find out exactly what is supposed to happen, and also what your obligations are.

I also agree with Eddddy, you should pay the bill and then dispute it and resolve issues in the management company. Withholding payment could cause you a lot of trouble depending on how your agreement is set up. 

andyroo19

daveyjp said:

If there is a company there will be Articles of Association.  You need to refer to them and see what they say about directors, resignation, agreeing to charges etc,

Thank you. We have a copy, I’ll look through in more detail. 

andyroo19

greatcrested said:

'Small patch of land"?

What on earth does the managing agent do? Arrange to mow the lawn 8 times a year? And then send bills round?

If you and the other 4 owners of the management company get together and sack the agent I'm sure you could jointly invest in a lawn mower and take turns to use it.....

What reaction have you resceived when you talked to them?

Yes, a garden 20x20m and a gravel parking area of similar size. Unfortunately, we have one very overbearing director who refuses to consult with any household about anything and a managing agent that thinks everything needs completely replacing, which is costing money. Doubly unfortunately, no one else wants to stand up to her, despite complaining to us all the time. What I’m most concerned about now is that the managing agent is basically doing what they want and withholding information, so I’m keen to find out what they can withhold from the members, if anything at all. I would have logically thought that the owners are privy to all company information, but i know the law doesn’t always work as expected. 

andyroo19

eddddy said:

Presumably you've entered into some kind of legal agreement - like a  contract or deed or lease - which makes you liable to pay that for maintenance of that land.

If the bill is correct according that legal agreement, you have to pay it.

The lack of signature, the budget dispute and the director's resignation are probably irrelevant - unless the legal agreement says you don't have to pay the bill if it's not signed, or the budget is disputed, or a director has resigned etc.

Thank you, yes, we have paid the bill so we are on the correct side of right. My concern is that the managing agent is acting outside of our agreement (articles association state two directors must agree on everything) and are withholding information that proves it. The biggest problem is that the other residents can’t be bothered to act, so I’m trying to find out what information we would be privy to. 

eddddy

andyroo19 said:

Thank you, yes, we have paid the bill so we are on the correct side of right. My concern is that the managing agent is acting outside of our agreement (articles association state two directors must agree on everything) and are withholding information that proves it. The biggest problem is that the other residents can’t be bothered to act, so I’m trying to find out what information we would be privy to. 

You need to get an understanding of the set up. For example, it sounds like this could be the case

1. 'Company A' owns a piece of land with a garden and parking area
2. You are a shareholder in 'Company A'
3. 'Company A' employs a managing agent
4. As the owner of a property (leaseholder?), you have to pay 'Company A' for maintaining that land 

• Because you are a shareholder of 'Company A' (point 2 above), you might have redress if the Articles of Association are breached - and you suffer a loss.

• But because you own a property (point 4 above), you have to pay a maintenance fee. Legally, the 'breach of articles of association' is none of your business as a property owner.

As an analogy - you might own shares in Tesco, and you might shop in Tesco.

Tesco might 'do something wrong' to you as a shareholder (and you might have cause for claiming damages for that wrong-doing), but you still have to pay for your groceries when you shop in your local Tesco.  Your rights as a shareholder, and your rights as a customer are completely independent of each other.

princeofpounds

OK, let's explain the incentives here. The managing agent is appointed by and paid by the freehold company. They will therefore largely act in the interests of the company, rather than the leaseholders, if there is a conflict. 

They do have some direct legal obligations to you as leaseholders, and in particular the link may be useful to you in terms of examining how things have been run, by obtaining a breakdown of expenditures and auditing receipts/invoices. They do not, however, have to disclose anything beyond their legal obligations, and that includes budgets and arguments between Directors.
https://www.lease-advice.org/faq/how-can-i-find-out-what-my-service-charge-is-being-used-for/

The freehold company is run by the Director(s). Directors have a pretty free hand in terms of running a company day-to-day; their individual power is normally constrained by there being a Board made up of multiple Directors. So this lady can do what she likes now she is alone, as long as she does not break the letter of her legal obligations. That probably includes signing contracts unilaterally. There are ways to challenge her if she is taking the mick, but the root solution is to install better Directors.

So how to Directors get their position? They get elected by shareholders at an AGM or EGM, on the basis of the company charter (and related company law).  So, read the charter, read online about Director elections, and understand the voting position of yourselves and fellow shareholders.

So, are you shareholders? Who has what votes? Sounds like it's 4 vs 1 so you can just get on with booting her out if you aren't happy, but you have to do the work.