Section 20

cathy57

I am a shareholder of a flat in a small block. There are 8 blocks with in total 50 flats. We received a section 20 notice a week ago. The management of these blocks have invited the shareholders  to make all their enquiries, nominations and observations in writing to one of the 5 directors managing 
the 8 blocks.
As we have no way of knowing what questions or observations other shareholders may be asking, my next door neighbour asked the director responsible for the organisation of the coming work if she could organise some form of platform like padlet which shareholders and directors could upload in order to see comments, questions and answers.
Unfortunately, the directors response was negative as they say they cannot share their personal data with the shareholders. It just does not make sense as private emails, phone numbers wouldn’t need to be displayed. We have in fact realised we all have shareholders and directors email addresses from last year group emails sent to all of us.

Therefore, could we legally email all shareholders and ask them if they would be happy to receive and send comments, queries etc…by mail, as group emails will be the only way to communicate ?

eddddy

You're completely free to send out group emails, set up padlet, set up whatsapp groups, get together for meetings - to discuss this or anything else you want to.

You can invite / include anyone you choose - e.g. all the leaseholders, or all the shareholders, or only the shareholders you get on with, and you can either include or exclude the directors.


Based on my experience, perhaps the main comment I would make about groups like that is you can end up with a few very 'loud', militant people in the group - who don't understand leases, or Landlord and Tenant legislation, or section 20 consultations - but they still end-up dominating the discussion with their plans and ideas that won't work.

cathy57

Thank you for your reply.
i have another question. Back in September, the interior common parts of the blocks were repainted. In our opinions, there was no need for that.
Should the shareholders have been consulted and informed of the cost ? With major works coming up shortly, including fire alarms, fire doors etc… we have been told there is insufficient funds in the maintenance reserve to cover the cost of the coming work, therefore we will be charged a portion of the cost. Surely, knowing major works were urgent, the painting and decorating should have been delayed and the maintenance money not wasted  ?

eddddy

cathy57 said:

i have another question. Back in September, the interior common parts of the blocks were repainted. In our opinions, there was no need for that.
Should the shareholders have been consulted and informed of the cost ? With major works coming up shortly, including fire alarms, fire doors etc… we have been told there is insufficient funds in the maintenance reserve to cover the cost of the coming work, therefore we will be charged a portion of the cost. Surely, knowing major works were urgent, the painting and decorating should have been delayed and the maintenance money not wasted  ?

To answer that, you'll probably need to explain a bit more...

It sounds like you have what Estate Agents describe as a "Share of Freehold" flat.  That generally means the following:

1. A company owns the freehold building
2. So that company is responsible for maintaining and repairing the building
3. You own a share(s) in that company (i.e. you are a shareholder)
4. You also own a leasehold flat in that building

Is that your set-up?


If so, how are the payments being demanded from you? If a "section 20 consultation" is being discussed, it sounds like the payments are "leasehold service charges". (What is the title / description on the bills you receive?)

HampshireH

cathy57 said:

Thank you for your reply.
i have another question. Back in September, the interior common parts of the blocks were repainted. In our opinions, there was no need for that.
Should the shareholders have been consulted and informed of the cost ? With major works coming up shortly, including fire alarms, fire doors etc… we have been told there is insufficient funds in the maintenance reserve to cover the cost of the coming work, therefore we will be charged a portion of the cost. Surely, knowing major works were urgent, the painting and decorating should have been delayed and the maintenance money not wasted  ?

Section 20 is only required if LH are being charged more than £250 per job per year each.

So your answer will depend on a few things. Including how much it cost. Anything not consulted on recovery will have to be capped at £250 per leaseholder

Or £100 if delivered within a QLTA in any 1 accounting year.


Your lease probably states how frequently internal decoration should take place.

eddddy

HampshireH said:

So your answer will depend on a few things. Including how much it cost. Anything not consulted on recovery will have to be capped at £250 per leaseholder

It's probably not that simple. 



It sounds like the OP might have a "share of freehold" setup.

• If the freehold company fails to do a section 20 consultation, or does it wrong - and therefore the bill is capped at £250 per leaseholder...

• ....where will the rest of the money come from?

Option 1

• Maybe the freehold company's shareholders have to stump up the shortfall?

• But those shareholders are the leaseholders. So the leaseholders end up paying the full amount anyway. Getting the service charge capped hasn't solved anything.

Option 2

• Maybe the freehold company's shareholders refuse to bail out the freehold company.

• So the freehold company is now insolvent (bankrupt). An administrator has to be brought in to liquidate the company's assets - i.e. sell the freehold of the building - to help cover the shortfall

• So the leaseholders have lost their ownership of the freehold - and they have a new freeholder

cathy57

Thank you for your replies. 

Yes ,this  is the set up, but I am not sure who is the freeholder. We have 5 directors (only one is getting paid for her work and the other 4 live in some of the blocks) .
We haven’t received any bills yet. We have so far just paid our monthly service charge. The decorating was paid out of the maintenance reserve, but we were not consulted about the work and its cost, so I guess the cost was under £250 per leaseholder. 

eddddy

cathy57 said:

Thank you for your replies. 

Yes ,this  is the set up, but I am not sure who is the freeholder. We have 5 directors (only one is getting paid for her work and the other 4 live in some of the blocks) .
We haven’t received any bills yet. We have so far just paid our monthly service charge. The decorating was paid out of the maintenance reserve, but we were not consulted about the work and its cost, so I guess the cost was under £250 per leaseholder. 

So it sounds like the work is funded by service charges. And I'll assume you have a share of freehold set-up.

cathy57 said:

Surely, knowing major works were urgent, the painting and decorating should have been delayed and the maintenance money not wasted  ?

So you think the money was wasted - or to put it in legal terms, it was not 'reasonable' to do the painting and decorating, so it was not 'reasonable' that your service charge funds were used to pay for it.

If you didn't have a 'share of freehold' you could challenge that at a tribunal, and potentially get some of your money back. But that won't work, because you have a 'share of freehold'.


So realistically, your best bet is probably to investigate the rules for replacing the directors - and try to get new directors appointed who won't waste everyone's money.

The company's articles of association might tell you how to do that.


Or you can just try to lobby (or hassle) the current directors, and try to persuade them to make better decisions.

cathy57

Thank you again for your replies. 

In relation  to the major work being planned, we have been invited to propose the name of a person from whom the directors should try to obtain an estimate for carrying out the proposed works. 

Aren’t  the directors actually obliged to obtain a quote from someone nominated by the shareholders ?

Also ,we know the directors have already obtained 2 quotes, but have yet to make them available to us. Shouldn’t they make the current quotes available to all shareholders ?

What rights have we got as shareholders ?

eddddy

cathy57 said:

In relation  to the major work being planned, we have been invited to propose the name of a person from whom the directors should try to obtain an estimate for carrying out the proposed works. 

Aren’t  the directors actually obliged to obtain a quote from someone nominated by the shareholders leaseholders ?

Also ,we know the directors have already obtained 2 quotes, but have yet to make them available to us. Shouldn’t they make the current quotes available to all shareholders leaseholders ?

What rights have we got as shareholders leaseholders?

I think you're talking about leaseholder rights in a section 20 consultation, rather than shareholder rights.

Here's a more detailed description of those rights: https://www.lease-advice.org/advice-guide/section-20-consultation-private-landlords-resident-management-companies-agents/

In theory, as a leaseholder, you more-or-less have the rights described - but in your situation, you can't really do anything to enforce those rights.

You have a very complicated situation. It would almost mean writing a book to explain it all.




So maybe it's better to start from a different place...

You are 2 different things...

1. The leaseholder of a flat
2. Either a) a shareholder in a RTM Management company, or b) a shareholder in a company that owns the freehold of your building

[For point 2, it seems you are not sure if you are a) or b)]

The law gave you lots of rights and protections because you are a leaseholder - point 1 above. But realistically, many of those protections will be difficult or impossible to enforce - because of point 2 above.

Your best bet is to hope that the directors behave fairly.


However, you have a different set of rights resulting from point 2 above - being a company shareholder. Those rights will be described in a company document called a "Memorandum and Articles of Association". So you need to read that document to see what your rights are as a company shareholder.

So maybe you should concentrate on using those rights - for example, the right to vote off unfair directors.