Shared leasehold - building work invoice from one of the leasholders?

ducklets

I own a flat in a shared leasehold with a few other owners in the same building. We all own one share each in the company that owns the freehold, and we lease from that.

I'm the newest owner (<1 year) but I've taken over from the previous owner of my flat as the manager of the shared building fund. I'm brand new to owning, having rented the entire rest of my life, so I've never had to deal with this kind of situation before:

I've had an invoice for reimbursement of around £2500 from the shared fund for work done by one of the other leaseholders for roof repair which he and a relative of his did themselves.

This guy is a tradesman and clearly can do the work, and it may even be that we're getting good quality work for a cheap price, but I'm not sure how to handle this because: a) I don't know enough about his quality of work to make a judgement, and b) I feel we (the leaseholders) should jointly agree on quotes from professional companies rather than him just doing stuff and invoicing arbitrarily.

Does anyone have any suggestions about how to handle this?

loubel

Are you the company director of the freehold owning company? 

ducklets

loubel said:

Are you the company director of the freehold owning company? 

Yes I've taken over as the company director and the holder of the joint funds that we each pay into.

loubel

As company director you are liable if you don't follow proper procedure. It sounds like the freehold has been treated as if it's owned jointly and decisions made on an ad hoc basis. That's not really appropriate for a freehold owning company. Do you understand your obligations as a director and the company's obligations to the leaseholders? If not, I suggest taking advice before taking any further actions on behalf of the company or you could end up in trouble.

Am I understanding that you didn't ask this leaseholder to carry out work? Did you not query what he was doing when they were taking place? Are there other directors? 
 Was S20 consultation required and did it take place (presumably not if you didn't even know he was doing the work)!

At the least I suspect you'll need to call a shareholder's meeting to obtain authority to pay him from company funds this time and you will need to make clear that future works will be discussed and decided on beforehand following proper procedure. 

It might be worth considering instructing a managing agent, especially if the building is particularly big. How many flats are there?

propertyrental

Given both your new status in the building, and lack of experience, taking over so soon as Director (and Treasurer if you are managing the money?) was perhaps.......rash.

If you've just received an invoice, was the actual work done before or after you purchased? Before or after you became Director?

If before, are there any records of a decision by the the joint freeholders? Approval for the work by the previous Director? A S20 Process having been followed? Any paperwork at all eg emails/letters between previous Director and the leaseholder who did the work?

If the work was done after you took over, did the leaseholder in question really not contact you before starting work? Ask for approval? Notify you of the need for the work? What evidence do you have that any work was actually required? Did you not notice someone climbing around on the roof? Putting up scaffolding/whatever?

My advice would be to try to balance the following:
* not creating a dispute or 'bad blood' between yourself and your fellow leaseholder/joint freeholder, whilst also
* not paying the invoice for work that may or ay not have been needed, at a price that may or may not have been reasonable. Remember - this is not your money. If other joint freeholders later query why you spent their money on this, you need to be able to justify yourself.

I would fall back, quite honestly, on your newness to to the role and your relative niaivity. Explain that you cannot simply pay out without knowing what you are paying for, and ask the leaseholder who sent the invoice to provide the sort of supporting information that I've suggested above, plus any quotes he obtained from other roofers for the job in question.

ducklets

So there are only three flats and three owners in total, in a 3 storey end of terrace converted house. I was renting my flat from the previous owner (and previous director). I bought the flat, and took over his responsibilities which included treasurer and director. I was reassured by him (perhaps incorrectly) that there's very little to do other than jointly deciding what work to do and pay for, and submitting minimal accounts to companies house each year.

I get the impression that everything was done extremely informally prior to this between the three of them, due to the way that they expected to have payments out without even an invoice, and lack of paperwork about other things done. For example the other owner wants reimbursment for a TV aerial repair without any paperwork at all. It seems that even the idea of submitting invoices and keeping records of the decisions, payments into the shared fund, and receipts for payments out, are new things which I have been trying to introduce since I took over this role.

I did notice the other owner doing work on the roof, but it was done before I completed on the purchase while I was still a tenant. It's part of the roof that only covers some of his own flat, and at the time I assumed that it was within his remit to do that to his own property. Although now it seems I'm learning that all roofs on the building should be considered part of the shared responsibilty. At the time I had no idea that it would get claimed out of the shared fund. I don't think there's any record of an agreement between the three owners at the time for the work to be done.

Having come into this new, I feel as though I am trying to sort out what was previously a very informal and ad hoc system.

However - yes I don't want to create bad blood with the fellow leaseholder, and like I said previously, there's every chance that he's done a great job for a cheap price. Perhaps getting an agent to manage it would be good, or is that overkill for a 3-person freehold?

Would it be better if all three of us were company directors?

As you've both pointed out, I may have not realised the complexity of what I was taking on, and while I'd like to make changes to ensure it's done right from here on, I may not have the knowledge or expertise to do it all by myself.

Any advice or guidance about what to do from here onwards would be very much appreciated, thank you!

NameUnavailable

Does the other leaseholder know about the work and have they agreed to the cost? If this was all discussed and decided between them before you bought then it's less of a problem.

Also did your seller tell you about this work/cost when you bought or is there enough in the funds to pay for it anyway?

Most management co's won't take on small 'blocks' because it's just not worth it for them, you would be paying quite a high fee just to have them appointed (their profit).

I think you should invite the other 2 leaseholders to a meeting and discuss how you want to do things more formally going forward and that it's important to keep a proper record of works (quotes/invoices/receipts) etc. By all means ask them if they want to join as Directors also or take over responsibility.

Informal arrangements work well as long as the parties get on. It only takes one person to become difficult and it can become very stressful and personal, however, ultimately you do all still have to adhere to whatever is in the terms of the lease which is the legally overriding document.