Share of freehold repairs - what are our options?

LaVicuna

Hi there, I have a question about repairs to a property with a jointly owned freehold. 

I own (with a mortgage) and live in the basement flat of a converted house, where there are four flats in total. The owners of the four flats each own a quarter share of a management company, the management company in turn owns the property freehold. According to the lease agreement, cost of communal repairs and maintenance should be agreed and shared by shareholders. 

There is currently a leak coming from the roof into the top floor flat (that is rented out), the owner of the top floor flat has said the roof needs replacing and has obtained two quotes for between £7k-10k. This comes only 18 months after the last roof repairs (~£3k). When the last round of repairs to the roof were carried out, we received two quotes for very different repairs 1) ~£7.5k for more extensive repairs; 2) a much cheaper quote for more minor works. At the time, I wanted to get another more comparable quote so we could be more certain of what repairs were needed. However, I was overruled by the two landlords and the previous owner of the other flat, and they decided to go ahead with cheaper 'sticking plaster' repairs. 

The owners of the top floor and 2nd floor flats are both landlords who have owned their flats for between 10 and 20 years. The new owner of the ground floor flat and I both live at the property and we've owned our flats for a much shorter length of time than the two landlords - I bought my flat 2.5 years ago and she bought hers earlier this year.

When discussing the repairs 18 months ago, I received historic emails from the management company showing that the two landlords and previous owners of the other flats had known about issues with the roof for at least 7 years (when a survey was done by a prospective buyer), though this was not disclosed either to me or the other newcomer when we purchased our flats. Very minimal repairs and maintenance to communal areas of the building have been carried out in the last 20 years. I suspect this is partly due to these buy-to-let landlords wanting to keep costs down and maximise their profits.

There is no established reserve or sinking fund held by the management company, so the expectation from the top floor flat owner is that we will all pay for an equal amount of the cost of repairs. Neither the owner of the ground floor flat nor I can afford to pay for these repairs right now. What are our options?

ThisIsWeird

LaVicuna said:

Hi there, I have a question about repairs to a property with a jointly owned freehold.

I own (with a mortgage) and live in the basement flat of a converted house, where there are four flats in total. The owners of the four flats each own a quarter share of a management company, the management company in turn owns the property freehold. According to the lease agreement, cost of communal repairs and maintenance should be agreed and shared by shareholders.

There is currently a leak coming from the roof into the top floor flat (that is rented out), the owner of the top floor flat has said the roof needs replacing and has obtained two quotes for between £7k-10k. This comes only 18 months after the last roof repairs (~£3k). When the last round of repairs to the roof were carried out, we received two quotes for very different repairs 1) ~£7.5k for more extensive repairs; 2) a much cheaper quote for more minor works. At the time, I wanted to get another more comparable quote so we could be more certain of what repairs were needed. However, I was overruled by the two landlords and the previous owner of the other flat, and they decided to go ahead with cheaper 'sticking plaster' repairs.

The owners of the top floor and 2nd floor flats are both landlords who have owned their flats for between 10 and 20 years. The new owner of the ground floor flat and I both live at the property and we've owned our flats for a much shorter length of time than the two landlords - I bought my flat 2.5 years ago and she bought hers earlier this year.
When discussing the repairs 18 months ago, I received historic emails from the management company showing that the two landlords and previous owners of the other flats had known about issues with the roof for at least 7 years (when a survey was done by a prospective buyer), though this was not disclosed either to me or the other newcomer when we purchased our flats. Very minimal repairs and maintenance to communal areas of the building have been carried out in the last 20 years. I suspect this is partly due to these buy-to-let landlords wanting to keep costs down and maximise their profits.

There is no established reserve or sinking fund held by the management company, so the expectation from the top floor flat owner is that we will all pay for an equal amount of the cost of repairs. Neither the owner of the ground floor flat nor I can afford to pay for these repairs right now. What are our options?

Blimey.

A lot of this doesn't matter - eg that 2 flats are rented out, the historic issues with the roof (you had a survey?), speculation whether the LLs are trying to maximise their profit (let's face it - you're saying you will struggle to pay this), and things like that.

The facts would appear to be that the roof needs fixing - ideally replacing - and all 4 are jointly liable. If one person cannot pay, then they need to borrow, by - for example - extending their mortgage a little; most providers would be happy to do this as it's a modest increase, and it'll help secure 'their' asset.

I'm surprised that a 'replaced' roof is only £7-10k - are you sure? If so, it makes far more sense than having ongoing patching and repairs. If you can have a new roof for your <£2.5k contribution, then that's great news.

It would appear that the property has been poorly managed up until now, and I would suggest a monthly contribution to a sink fund is pretty vital to set up. I presume there's nothing about this in the Terms Of Ref for the ManCo? 

I don't think there's anything you can do about all the previous poor decisions, except, perhaps, to cite them as a reason for you all to get your poo together going forwards.

Having a share of the Freehold, like you have, is usually the best option, but it does rely on having sensible fellow managers. And, with an even number, there is always the possibility of stalemate.

eddddy

LaVicuna said:

What are our options?

The best option is that the 4 of you reach an agreement. It will probably get very messy if you can't.

What outcome are you hoping for?


A couple of key questions...

• Do you agree that the lease says the freeholder is responsible for repairing the roof - and each leaseholder is responsible for contributing 25% of the cost? (I know everyone has a share of the freehold - but the leases are still valid)

• What do the articles of association of the management company say about how decisions are made? (And specifically what happens if you have a split vote of 2 versus 2?)

MEM62

The advice give above is sound.  One of the lessons here is that the cheapest quote in the long run often costs you more.  Also remember that you and the other resident owner are 50% of the voting rights so do not let the two landlord/owners railroad you.  I would strongly recommend starting a sinking fund. 

Just as an FYI, the landlords' repair costs would be tax-deductible so, if 40% tax payers, the effective 'out of pocket' price for them of any repairs is only 60% of the invoice value. Worth keeping in the back of your mind when discussing such matters.     

eddddy

FWIW, I would be very much against a communal sink fund in this situation.

I wouldn't want to give my neighbours access to, and control of, thousands of pounds of my money. It could end really badly.

For example...

If you had a sink fund bank account, how would you control access to the bank account? Who would be signatories? 

• Would you allow any one of the 4 people to make payments from the account? Do you trust each of them with access to a bank account with maybe £10k in it?

• Or would you only allow dual authorisation? (So that the 2 landlords can go rogue and pay £10k for the roof repair against the wishes of the other 2 leaseholders.)

• Or would you go old school, and only allow payments by cheque with 4 signatures? So if one person refuses to sign  (or is on holiday, or in hospital) - you're stuck

And while considering the points above...  how well do you know your neighbours? Are any of them...

• Convicted fraudsters
• Gambling addicts
• Heavily indebted to banks, credit card companies, etc
• Owing HMRC thousands in back taxes
• Not 'followers of rules' - who might think "I'll spend it now, and ask permission later"

If they are, you might not want them to be anywhere near your roof repair money.


I think it would be much better to simply open your own personal savings account in your own name, and put £50 or £100 or whatever in it each month. And advise the other flat owners to do the same.

RAS

Basically, all the freeholders need a sinking fund for building repairs, individually or collectively.

You might even discuss and agree an amount you'll each stash each month, so there's an expectation that if you need something requiring scaffold, you've all got £xk, and whilst the scaffold is up you'll check the gutters and soffits?