Serious problem with management company, involving law breaking, now won't respond to us.

john600602

Hello.

I live in a block of 14 apartments (I own my home) and we seem to have a major problem with the management company.

We received a letter in 2018 to say they were changing name, and were becoming "*new name*, a division of *old name*".

Since then the service rapidly deteriorated.  I initially contacted them to say services such as cleaners/gardeners were not attending and they fully agreed (problems with contractors) and said a refund would be issued on the next service charge.  That was fine.

When it came, there was no refund, in fact it had increased to the highest ever amount (almost £900 per flat for six months).  

Multiple residents complained and a representative from the management company attended a meeting where plans for the next 6 months were discussed to get the place back in shape.  No mention of why we were not refunded, frankly we all felt a load of waffle & excuses were spoken, but at least with the guarantee it would be reimbursed on the next one and things would be getting better.

Unfortunately, the reverse happened, services got worse, some ceasing altogether (alleged to be as contractor had not been paid).  Other residents began to have unanswered questions.  Alarm bells started ringing.

A neighbour wrote to the freeholder (who we pay ground rent to via the management company) and the letter was returned by Royal Mail "address doesn't exist".  I googled it, and no it doesn't,  this is the address that has been on the service charge for 7 years.  

The management did not reply when asked about this.

The next service charge came. Still no refund, but now the address removed, so we now don't know how to contact the freeholder or even have certainty who they are. Previous demands always stated in the small print that this address was required by law.

I made a formal complaint.  I specifically asked to see receipts for work done, I asked to see the statement for the sinking fund (as other residents had asked without success). I asked to see the insurance certificate. I asked for the address of the freeholder and I asked for the refunds owed (or show receipts to show actual expenditure).  

This formal complaint was ignored.  I sent a chaser to them after 6 weeks and they said my complaint was "complex" and they were still looking into it. 3 months later they are still "looking into it" i.e. never heard back from them again and other neighbours have had their calls not returned.  LEASEHOLD ADVISORY SERVICE told me they have broken the law by not showing documents (insurance) on request and they are legally obliged to show accounts on request.

As it stands many flats have not paid the current charge because LEASEHOLD ADVISORY SERVICE stated the demand was void as it did not contain the landlord/freeholder address.  Although, this is not purely why we haven't paid, we simply have requested the corrected charge with the refunds we are owed and were promised (witnessed by the town councillor at the meeting, and which we also have in writing from the management company confirmation they would be issued on this latest charge).  Oddly, 3 months now since the service charge was due, no one has received a reminder to pay and we are all worried the firm is corrupt (and has been sussed) or has collapsed.

My solicitor (and LEASE)  said it all sounded extremely dicey but advised first to go to the property omnbudsman.  I sent a comprehensive report to them following my initial submission and they came back with quote "Unfortunately, we are unable to consider Service Charges complaints as they are outside of our Terms of Reference because we are not empowered to determine whether service charges are fair and reasonable". 

That has little if anything to do with what I actually asked them! They said they can look into sinking fund but nothing else?

I am concerned, as are other residents, that going down the solicitor route is going to be expensive.  Does anyone have any advice please?  As it stands I do not even know if my home is insured! 

Collectively, they get almost £25,000 per year from this block of flats, with their fee being almost £5,000.  The flats are valued at between £80,000 and £100,000 each.  We are in Shropshire, in a not particularly expensive market town. Thank you for any advice.

Mr.Generous

Sell up quick before the management company goes broke (Runs off with the money) and it becomes impossible to sell.

Tiglet2

Could you check on Companies House for the name of the management company, plus any associated documents.  It should say on there if the company has been dissolved/struck off, which at least would give you the information regarding whether the company is still in existence.

john600602

We have looked on the gov.uk site, I will be honest, we are finding it hard to understand a lot of it, some of the residents are very old (two flats have ladies in their 90s) but what I did discover which I thought was odd was the man in charge is the director of approx 45 different management companies, all registered at the same address.  As we went from the main name which is well known, to "a division of" that name, I wondered if this had happened to all the blocks, and a different name had been given to each block in a bid to cover up tracks, or not tarnish the original name.  I could not understand why a 'reputable' management company would use a different name for each block they manage.  The block is listed as active on companies house but at a different address (same city) to the current address (which I know is correct as it's where I sent my formal complaint too).

thegreenone

Mr.Generous said:

Sell up quick before the management company goes broke (Runs off with the money) and it becomes impossible to sell.

A.  The OP may not want to sell.
B.  Buyers would probably run a mile once the situation is discovered by their solicitor.

As above, I can only think of Companies House.  Search for not only the management company but you may find the freeholder as well.  Find them and you can apply for the Right to Manage.

My other thoughts:
If no-one pays their maintenance fees, would the Freeholder come out the woodwork? 
If it's possible, can you find a buildings insurer yourselves.  You might be double insuring but at least you would have peace of mind. 
Ask a solicitor to do a Letter Before Action firstly and see if that brings anything.

Good luck.

eddddy

Maybe you should look at options for getting rid of the management company:

Right to Manage
Set up a "Right to Manage" company which is controlled by the leaseholders. Then the RTM company can hire their own choice of management company, and the management company would take their instructions from the RTM company (i.e. the leaseholders).
See: https://www.lease-advice.org/advice-guide/right-manage/


Appoint a Manager
Apply to the tribunal to have a manager appointed. You will need to show grounds for this (i.e. evidence of wrong doing by the management company.
See: https://www.lease-advice.org/advice-guide/what-does-appointing-a-manager-mean/


Buy the Freehold (Collective Enfranchisement)
The leaseholders jointly buy the freehold - that usually means they take over management responsibilities as well.
See: https://www.lease-advice.org/advice-guide/ce-getting-started/

Racky_Roo

Do you have a sinkage fund in place? Any ideas how much is in it? The Management co are probably using money from there to cover the missing payments so really you all need to stop paying or some residents are benefiting and others losing out.

100% recommend doing the RTM route but someone needs to action it as most residents probably cba to get involved and are waiting for someone else to do it. I did it in my last place as I was sick of how rubbish the m/mnt co was organising work despite having a huge sinkage fund. I basically did a walk around of local blocks of flats which looked in good order and found out who managed them and whether they would recommend their co.  Got some quotes, organised a building meeting to discuss changing m/mnt co, got agreement then served notice to the old company.

It's not a 5 min job but once we got the sinkage fund back and the new m/mnt co got going, it was worth the effort.

john600602

Thanks everyone for your replies, certainly given me a lot to think about, Racky_Roo, yes we pay £5.5k per year into the sinking fund, so about £400 per flat, so this is a grave concern.  No idea how much should be in it, and they won't show it. The building was repainted about 5 years ago but it should have built back up since then.  Thegreenone: Yes, I am surprised that as nearly half the flats have not paid the current charge that the freeholder has not asked where the ground rent is.  Eddddy, RTM sounds interesting , I will look into this. Thankyou also thegreenone for advising of the letter before action, something I hadn't heard of.

pinkshoes

I lived in a block of 16 flats and we took over the management ourselves with the "right to manage" option. I think 7 out the 16 of us opted in. We were all directors of this company. 

We fired the management company who seemed to be squandering money (poor service, cleaning not done, charging HUGE amounts for admin etc...). We then had a yearly AGM to go through the accounts with the new management company that we hired. It worked really well, the yearly service charge went down, and work got done for a reasonable price and quickly when it needed doing. 

[Deleted User]

Get legal advice. You might have it on your home insurance or though your union.

john600602

An update on this for anyone who wondered how it progressed.  My complaint was escalated to the ombudsman who got a totally inadequate response back from the management company.  Firstly they asked for extra time, which was pointless as they then admitted they had no accounts for the past 3 years, could not provide proof of sinking fund, did not know who the landlord details as these had changed and could not provide the receipts I'd requested.  I replied back I was not satisfied, I have been asking for the sinking fund for 13 months now, they just keep saying everything is with the accountant who is running behind (3 years behind?!) nevertheless we received another service charge demand for another £800 (for 6 months).  The ombudsman have said they need time to investigate and have indicated a timescale of up to 5 months.  I understand it is illegal to not be able to provide the documents as stated above so I don't know how the ombudsman is planning to proceed.