How can joint freeholders finance major building repairs?

GDB2222

The obvious starting point is to have a meeting at which all ten of the flat owners can have their say. It may be possible to do some cheap temporary work to keep the damp out, even though that may be more expensive in the long run.

DullGreyGuy

eddddy said:

DullGreyGuy said:

Just remember you have a due process (section 20) to follow for works that will cost more than £250 per leaseholder

You only need to do a section 20 consultation if one or more leaseholders are unwilling to pay, and you want to 'force' them to.

If all the leaseholders agree to pay their £12k at the outset (best to get them to confirm that in writing), then no section 20 consultation is required.

We've never been asked if we are willing to pay, it's gone straight to a Section 20 @eddddy. Presumably the freeholder will be by the short and curlies if they believe they have gotten the consent of all the leaseholders and so don't do a Section 20 and then one turns round and claims they never consented. 

Fruitpigeon

To all who have helped/advised on this so far ... I'm overwhelmed by your quick and helpful responses.  Thank you so much.  It does look as if asking everyone to cough up the money is really the most straightforward - or perhaps only - solution but it helps to have reinforcement of that from those responding.

Huge thanks, everyone!

eddddy

DullGreyGuy said:

eddddy said:

DullGreyGuy said:

Just remember you have a due process (section 20) to follow for works that will cost more than £250 per leaseholder

You only need to do a section 20 consultation if one or more leaseholders are unwilling to pay, and you want to 'force' them to.

If all the leaseholders agree to pay their £12k at the outset (best to get them to confirm that in writing), then no section 20 consultation is required.

We've never been asked if we are willing to pay, it's gone straight to a Section 20 @eddddy. Presumably the freeholder will be by the short and curlies if they believe they have gotten the consent of all the leaseholders and so don't do a Section 20 and then one turns round and claims they never consented. 

Maybe it's easiest to demonstrate with an example...

If I was the freeholder (or a responsible joint freeholder), I might send a letter to, let's say, the 5 leaseholders like this...

"As you know the roof is leaking. I have a quote for repairs from ABC Roofing for £5k which I attach. I think they're a good company. If you agree to me instructing ABC Roofing on their quoted terms, please sign and return a copy of this letter confirming your agreement, and transfer £1k into my account, so I can instruct them and eventually pay them."

And I might add to the letter...

"If anyone doesn't feel they can agree to this, I will have to do a section 20 consultation. I will need an adviser/solicitor to assist me with this. This process is likely to take 3 months and might cost £500 to £750 in fees - or £100 to £150 per leaseholder. There is no guarantee that ABC Roofing will re-submit their quote, so the eventual cost might be higher or lower."


The question is whether every leaseholder would agree.

If it's a small group of 5 leaseholders, and we've all talked it through in the pub - they might agree.

If it's a group of 25 leaseholders, some of whom have never met me, and/or might not trust me - it might be different. There may be some leaseholders who think the work isn't required; some who think another roofer would be cheaper; some who are disinterested and don't bother paying; etc, etc - and it might end up with endless debates and no conclusion.


So in order to avoid the risk of "endless debates with no conclusion" and being ignored by disinterested leaseholders, many freeholders decide that a section 20 consultation will probably be quicker and easier overall.

KiKi

Just to add - some people have said it's 10% per leaseholder, but that may not be the case.  Depending on the lease for each flat, the percentages may be different.

You charge the leaseholders (including yourselves as leaseholders who own a share of the freehold) their percentage of the total work.  But definitely get a proper survey by a qualified surveyor before you progress.  One building company's opinion does not an accurate survey make.   

Jonboy_1984

As a relative has found, if a section 20 is carried out correctly and then the leaseholder(share of freeholder) refuses to pay then the freeholders can start lease forfeiture proceedings and any mortgage company involved will likely pay it and add to the outstanding mortgage to protect their security.

This has lead to the the deeds of variation that delays some flat sales, as under older leases there was no provision for the freeholder to have to inform the mortgage company of the forfeiture proceedings and their security being at risk.


Mortgage companies are therefore often happy to extend a mortgage for major works, as it ends in the same place anyway…

HampshireH

Is your property listed/in a conservation area?

If so you're likely to need listed building consent and planning permission especially if you decide to change the appearance by not re-rendering.

Obviously additional costs associated if indeed they are applicable.

I would expect anyone who buys this type of property to do so in the knowledge they are expensive to maintain.

But if you only have £7k in the coffers it doesn't sound like there is a proper management plan in place for major works which is worrying. 

These works as you say have been needed for years and really should have been factored into your sink funds contributions to ensure a bigger pot to pull from.

eddddy

HampshireH said:

These works as you say have been needed for years and really should have been factored into your sink funds contributions to ensure a bigger pot to pull from.

Well... I guess that depends.

You'd be talking about 8 joint freeholders - i.e. 8 random people - controlling a bank account containing up to £120k

(Perhaps with no professional indemnity insurance, and no relevant experience.)

In which case...

• Who do you make signatories? How many signatures are required to withdraw money?

• How much do you know about those 8 people?
•       Are any of them Convicted fraudsters?
•       Do any have gambling addictions / gambling debts?
•       Do any of them not worry too much about 'processes' and 'details' when spending other people's money?

• What if one of the required signatories refuses to sign? e.g. because they disagree with the work being done - or they are in a huff about something unrelated, or they are just 'difficult' or disinterested?

I think a better approach is to keep leaseholders warned about future large expenditure, and encourage them to put money aside in a savings account in their own name.

Or you could have an account that is managed by a reputable management company, or a solicitor, for example. But that would incur fees. And there are still some risks.

Fruitpigeon

eddddy said:

DullGreyGuy said:

eddddy said:

DullGreyGuy said:

Just remember you have a due process (section 20) to follow for works that will cost more than £250 per leaseholder

You only need to do a section 20 consultation if one or more leaseholders are unwilling to pay, and you want to 'force' them to.

If all the leaseholders agree to pay their £12k at the outset (best to get them to confirm that in writing), then no section 20 consultation is required.

We've never been asked if we are willing to pay, it's gone straight to a Section 20 @eddddy. Presumably the freeholder will be by the short and curlies if they believe they have gotten the consent of all the leaseholders and so don't do a Section 20 and then one turns round and claims they never consented. 

Maybe it's easiest to demonstrate with an example...

If I was the freeholder (or a responsible joint freeholder), I might send a letter to, let's say, the 5 leaseholders like this...

"As you know the roof is leaking. I have a quote for repairs from ABC Roofing for £5k which I attach. I think they're a good company. If you agree to me instructing ABC Roofing on their quoted terms, please sign and return a copy of this letter confirming your agreement, and transfer £1k into my account, so I can instruct them and eventually pay them."

And I might add to the letter...

"If anyone doesn't feel they can agree to this, I will have to do a section 20 consultation. I will need an adviser/solicitor to assist me with this. This process is likely to take 3 months and might cost £500 to £750 in fees - or £100 to £150 per leaseholder. There is no guarantee that ABC Roofing will re-submit their quote, so the eventual cost might be higher or lower."


The question is whether every leaseholder would agree.

If it's a small group of 5 leaseholders, and we've all talked it through in the pub - they might agree.

If it's a group of 25 leaseholders, some of whom have never met me, and/or might not trust me - it might be different. There may be some leaseholders who think the work isn't required; some who think another roofer would be cheaper; some who are disinterested and don't bother paying; etc, etc - and it might end up with endless debates and no conclusion.


So in order to avoid the risk of "endless debates with no conclusion" and being ignored by disinterested leaseholders, many freeholders decide that a section 20 consultation will probably be quicker and easier overall.

I really appreciate this specific advice with examples I can 'hang on to' - thanks so much!

Fruitpigeon

Particularly appreciate recent post from Eddddy, 10:51, 6 Jan (one before last) understanding the very real situation of a group of not hugely wealthy people being unable to keep a huge 'sink fund', and for the comment, "I think a better approach is to keep leaseholders warned about future large expenditure, and encourage them to put money aside in a savings account in their own name."  Such a good idea for the future!  It's clear we're pretty much beginners at this and are feeling our way and yes, aren't as prepared as we should be - so all the commonsense advice is brilliant.  I'm very grateful indeed to you and other contributors.  Thank you.  Tonight's our meeting to explain to everyone what's going on and what we have to do about it ... joy!