Responsibilities of being a director of a freehold

textbook

So still considering buying freehold for our leasehold block of flats, still worth it with new legislation?

Regarding directors, we need two.  What are the responsibilities of the role?

eddddy

textbook said:

So still considering buying freehold for our leasehold block of flats, still worth it with new legislation?

Which new legislation are you referring to?

textbook said:
Regarding directors, we need two.  What are the responsibilities of the role?

I'm guessing you mean the leaseholders will form a company that will own the freehold.

So the company will take over all the responsibilities of the freeholder (or landlord or lessor) as documented in the leases (plus relevant legal responsibilities).

Many leases say the freeholder is responsible for things like buildings insurance, plus maintenance of the building and common parts, but some leases say the freeholder isn't really responsible for anything.

The Freehold company's articles of association will say how the company reaches decisions. With 2 directors, I guess both directors would need to agree.


You should think about what should happen if the 2 directors can't agree on things - e.g. one director insists that the window frames need repainting, but the other insists they don't.

Plus how the leaseholders can 'kick out' directors, if they don't agree with the directors decisions (e.g. the 2 directors decide to paint the window frames purple.)

Bookworm105

you want simple facts, have you tried using a search engine?
Right to Manage Services | Take Control of Your Building | Innovus

Right To Manage | Leasehold Advice Centre

5 Right To Manage Company Directors Responsibilities | Scanlans

Block Management & RTM Companies: What Are The Legal Duties?

Understanding Right to Manage Company Directors Responsibilities

What are your responsibilities and duties as a Director of the landlord or management company? – KDL Law

right to manage company directors' responsibilities - Google Search

RTM Company Directorship: Roles, Risks, and Best Practices - Deacon

there are many more answers to your question, why not read them yourself...

gm0

Easy.  Onerous and thankless and unpaid. That's got you briefed.  Successful candidate requires tolerance for whinging, thick skin, commercial skills to handle a managing agent business and getting them to perform to contract and a bit better for retention, a working ability with financials, spreadsheets and accounts.  Background in construction whole lifecycle building maintenance is highly desirable.

Seriously - it can be helpful to have control  - as  a group of leaseholder owners creating a SOF. 

No external freeholder.  No agent appointed by them (or need for RTM process to hire one but still report back to some level to them per their responsibilities).  Your own show.  But you need articles of association which embed "democracy" for stormy weather and conflict - not sunny days of happy consensus.  Even appointing and recontracting your own agent and swapping them out when they become complacent and extractive - is a level of work to do it right.   When a block has a major event.  Failed roof is a classic.  Not an insured event.  Very early EOL but out of warrranty a long way.  Big cost. No easy way to pass it off to others. Leaseholders furious.  And some (who can't really afford to live there - given they have taken this liability on) cannot afford it so the "how" of getting work done includes additional finance and debt and charges on property etc etc.  

You need to force yourselves to have enough directors with day to day delegated authority i.e. min 2-3.  (but ideally not too many) constantly via the formals.  So that it is "normal" that they be relected/elected at AGM and all understand that it is the case.  Far too common is the "chairperson" who has done it for 2-3 years who wants to now stop addressing a meeting where due to general level of apathy 20%-30% turned up.  And NOBODY wants to volunteer to take it on.  Too busy. Too uninterested. Too old. Too abroad (UK base but not around much).

For good or ill. You own the problem of looking after the estate - land, boundaries, buildings disputes.  Saving up for roofs, lifts, gates - or not saving up but making sure people KNOW that and chunky Section20s will arrive sporadically.  You probably (mostly) own all these costs already under the leases but without full and independent control.  This being true does not mean getting agreement or "long term focus" on pennywise poundfoolish from lessees is easy.  People don't want higher charges now.  And the future - well  - I might have sold or be dead. 

So when there is a major issue which is going to cost leaseholders money - the process has to be "by the book".  So they can't wriggle out.  Everyone has two hats.  Lease.  And SOF share.  Not everyone understands that. Nor do they always understand their obligations under the lease. Nor much like the formalities of doing things in a business like manner.  All of which makes being a director dealing with your neighbours challenging diplomaticallly.  In some odd ways - the common enemy (external corporate freeholder) has a benefit in this one aspect.

It is - to be clear usually - for larger sites especially - the company that owns the freehold and the shareholders (ltd by share capital) or members of the company (ltd by guarantee) own the company.  And need to proceed democratically - according to the articles of association of the company.  And then elect and reappoint directors to act on behalf of shareholders - insured for public indemnity while acting.

Landlords and owner occupiers may have differing priorities.  People looking to sell soon will have different priorities on short term maintenance (looking nice) and cost profiles (not going up)

Finding people to act as directors and sustain a larger estate this way is not easy. 

The role invites constant whinging.  Everything is too slow.  Too expensive.  The wrong priority thing.  The wrong trader.  Unsupervised. We should have sued the builder/the neighbour/the former managing agent not avoided legal expense and risk and just absorbed it.  etc. etc., etc.

Not many people want to do it for long.  Lessees tend to forget that the role is unpaid for time spent.  And the director of the RTM or Share of Freehold is not their servant. 

But in general apathy rules.  Until there is an issue.

When there is a crisis and the tide goes out - and you have a big communal bill looking for a home and some real world urgency to act.  That sorts them out.  The companies who are well run.  And the ones that have let it slide and have a big mess to sort before they can make decisions (that will stick) at all.

eddddy

Bookworm105 said:

you want simple facts, have you tried using a search engine?
Right to Manage Services | Take Control of Your Building | Innovus

Right To Manage | Leasehold Advice Centre

5 Right To Manage Company Directors Responsibilities | Scanlans

Block Management & RTM Companies: What Are The Legal Duties?

Understanding Right to Manage Company Directors Responsibilities

What are your responsibilities and duties as a Director of the landlord or management company? – KDL Law

right to manage company directors' responsibilities - Google Search

RTM Company Directorship: Roles, Risks, and Best Practices - Deacon

there are many more answers to your question, why not read them yourself...

The OP is talking about buying the freehold - probably through 'collective enfranchisement'.

Your links all seem to be about 'Right To Manage' (RTM) companies. 

There are some very important differences.

It would be better to search for 'Shared Freehold' or 'collective enfranchisement', rather than 'Right To Manage'.

gwynlas

You can of course still appoint a managing agent paid for from service charges whilst you still have the legal responsibilities of being a dtrector they take on the day to day role and you ontinue to benefit as having a share of freehold.

eddddy

I expect you have checked this out - but just to emphasise (because I've seen a few people caught out by this) ...

Buying the freehold doesn't necessarily mean you take over management of the building.


If you have a tripartite lease, you would become the owners of the freehold, but the existing management company would continue to manage the building - and you probably wouldn't have much control over them.

So the first step is reading the lease, to find out the freeholder's responsibilities. 

textbook

Update. The seller of freehold is messing us around and thinking of going statutory purchase route. We would need to hire a professional for a valuation. I know there's a formula be good to work out before. I tried on chatgpt but got £280,000 however offer price was £61000so mightve hot it way wrong.

Gotta try persuade other people to psy another £100 for valuation. There all tight and paid £200 hor solicitor's fees so dunno if I'll convince enough!

eddddy

textbook said

Gotta try persuade other people to psy another £100 for valuation. There all tight and paid £200 hor solicitor's fees so dunno if I'll convince enough!

Are your neighbours committed to buying the freehold? If they're not, it's probably a bad idea to proceed.

• If you start the statutory process, and you withdraw - either because your neighbours lose interest, or they decide they don't want to pay - you'll be jointly responsible for all the freeholder's costs. That's likely to be thousands of pounds.

• If you buy the freehold and your "tight" neighbours refuse to pay their service charges - for insurance, maintenance and repairs - what will you do?

textbook

https://forums.moneysavingexpert.com/discussion/comment/81942578#Comment_81942578

So isn't it key to a/ know the cost of doing the valuation (obligatory if going statutory route) and the price realised after doing the valuation?

If we pay out a few grand for the valuation the price for the freehold is more than £61,000 and people pull out we've wasted thousands on a valuation we don't need!

Surely there's a formula for working out the price of freehold and we do it ourselves? How complicated can it be? Paying out for rip off surveyors. A ballpark figure. This is vital before proceeding

Regarding them not paying maintenance fees,surely use our maintenance company to deal with the legal aspects of that. We'll still be employing a maintenance company. Tell me if I've got it wrong

gm0

Many managing agents are fairly slow to chase arrears. They know that "apportionment" of service charge at lease resale ultimately provides a "true up" opportunity where the sale can be problematic for seller if arrears are not settled. And they apply the logic - don't spend a couple of thousand chasing a couple of thousand (legal input/processes). It is a process which consumes extra time/cost so delaying it responds to their own incentives on costs to serve within a fixed management fee. Slow walking is endemic. Send a few letters/emails, portal reminders to all. Reluctantly act beyond that. SOF/RTM directors may need to push to run a tighter ship.

As for "formal property charges" attached at LR this is threatened more than it is done. This costs money which agent stakeholders i.e. other service charge payers may also prefer to avoid. They want the arrears payed by the recalcitrant neighbour. Don't want to pay lawyers (even temporarily) to get it (as "admin charges - another contentious topic - can in some cases - be added to chasing receivables).

There is no entirely risk free solution. You can end up with a dead owner, no heirs, arrears outstanding and a "lease" which now needs to be revoked/otherwise sold/sorted to sequence the disposal/intestacy crown reversion and not lose debts against an insolvent estate which had the lease. Letting it get that far with the debt unattached to the property is probably unwise. There was such a thread the other day. I could not say what is optimal having not had that one.

But sometimes the situation and ongoing misbehaviour demands that formal legal routes need to be used. Other times a few nagging emails/letters and some level of escalation/threats and the late payers - pay. Cheap and cheerful if a nuisance to have to do it at all.

This "receivables issue" is something which any freeholder (external, or SOF directors) or an RTM committee - should be keeping an eye on in aggregate. Quarter to quarter or year to year. And the state of this should form part of agent financials and budgets reported in aggregate to leaseholders at AGMs. If a place is run transparently i.e. properly. Sunlight as disenfectant.

As to delayed and reluctant payers. What people think about value for money or fairness or priorities doesn't alter their obligations under the lease. If the process to bill is followed correctly. Most of the bluster of a I won't pay until or unless x,y,z variety is bluster (legally).

There are (correctly) rights to challenge things (leasehold tribunal) which can be exercised and fair enough.

But feet sometimes need to be held to the fire legally. This does not do wonders for neighbour relations in self managed setups. But the rest of the community will turn on the volunteers if freeloading is allowed to get out of hand. A level of tension can be expected on this topic if large arrears accumulate via agent laziness and director inattention.

While full transparency would be lovely to enllist public shaming as an incentive. That falls into difficult territory in terms of personal data protection in these times. The directors and agent have a legitimate business reason to hold and process and see the data about bills and arrears. But sharing all of it - individual billing histories and arrears across the whole community would create difficulties and be open to criticism and challenge. The other leaseholders are not a party to the delinquents service charge contract (lease) and arrears. So these materials are not generally published and circulated. Although mysteriously - in many communities - people still seem to know who the delinquents are.