3 flats: 2 Joint Freeholders, 1 Long-Leaseholder, Request to inspect the Accounts

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    3 flats: 2 Joint Freeholders, 1 Long-Leaseholder, Request to inspect the Accounts

    I am a joint freeholder of 3 flats (converted house).
    The Leaseholder has written to the other joint Freeholder requesting to see the accounts.
    The Leaseholder knows that I hold the accounts, but has not sent me the Section 22 Notice.
    She has my current address.
    I understand there is a hefty fine if the Freeholders do not respond to the formal request within 30 days, but what happens if the request has not been sent to or received by both Freeholders?

    #2
    I can't find rules for serving notices on trustees, but I would have thought that there would be a reasonable expectation that one trustee would inform the others.

    However, in practice, criminal charges are never brought for this offence, as the council is not obliged to prosecute and they end up out of pocket, if they do. The likely impact is that costs may be awarded against you in a subsequent FTT case for unreasonable service charges.

    Why did you not follow best practice and send the accounts without being asked?

    Incidentally, who is named as the landlord on the lease?

    Comment


      #3
      I sent a summary of accounts in September.

      I was not aware of having to send copies of all the receipts and invoices itemised on the accounts summary. I thought these only had to be provided on request.

      I am not sure that any of the leases gives the names of the landlord. I own 50% share of the freehold and the joint freeholder owns a 50% share.

      Both our names are on the Land Registry Freehold Title.

      Comment


        #4
        Both only have to be done on request, unless the lease says otherwise. You didn't make it clear it was the right to inspect the details that was the issue. I would note that some managing agents now have web portals that allow leaseholders to see these in real time. (Obviously you should withhold details of payments received from other leaseholders, as that could reveal debts and personal bank accounts.)

        Comment


          #5
          Apologies for the confusion.

          We do not have a Managing agent. We, the Freeholders, manage the flats ourselves.

          At present, we would be unable to appoint a Managing Agent.

          I have no idea how to set up a web portal, such as you describe. Is this easy to do?

          Or, should we just send an email to the Leaseholder every time we spend money on the property?

          She is kept up to date on works, as we issue Section 20 Notices for Major Works for any works costing more than £750. (£250 per Leasehold property).

          You are correct in saying you would assume that the Freeholders would advise each other. However, what if one of the Freeholders was on holiday or in hospital when the letter arrived? Neither Freeholder would be any the wiser. As it is, we have spoken to each other and will be informing the Leaseholder of her error.

          i asked the question because had we issued a service charge demand without sending her a copy of the Tenants Rights & Obligations, she wouldn't be liable to pay until the demand was issued correctly.

          I wondered if if there were similar conditions on Leaseholders to make requests properly.






          Comment


            #6
            I only mentioned the web portal as an example of how best practice is going. The law basically pre-dates a time when it was easy and cheap to make images of invoices available immediately. As I said, it doesn't even require you to volunteer summaries, although failing to do so may be used to add weight to an application to appoint a manager (which is more drastic than appointing a managing agent).

            As I said, I couldn't find anything that specifically states how to serve formal notices on trusts, but, if it were a company, I would expect any director receiving a notice to inform the other directors, although companies also have registered offices.

            What would happen if you both took five week holidays, at the same time?

            Comment


              #7
              When you send out demands for the service charges, they should contain the names and addresses of the freeholders to whom notices should be served.

              I would consider a notice to have been served properly if it has been served on either of the freeholders.

              Do you mean a s22 request? That only applies if a leaseholder has requested a summary of relevant costs under s21(1) which is a meaningless statement which does not correspond with the service charge accounts.

              If the leaseholder wishes to inspect the supporting records , it is better to agree and allow inspection to take place.

              Comment


                #8
                Please appreciate that his is my first question on here, and as my user name implies, this is all new to me (as well as being completely alien to the joint freeholder).

                Why might we be forced to appoint a Managing Agent? As far as I am aware, we are doing everything correctly, and above board.

                The names and addresses of both Freeholders are put on all formal documents.

                We also send copies of correspondence by email, and copy in the joint freeholder.

                We have already asked the Leaseholder to copy all correspondence to both Freeholders. There is no reason why she could not have sent the notice by email, as well as by post. That way, we would both have received the correspondence, regardless of whether we were both on holiday for 5 weeks.

                Here is the template the Leaseholder has used for the letter.

                https://www.lease-advice.org/files/2...t-Act-1985.doc

                It does say Section 22 of the Landlord and Tenant Act 1985.

                I am happy to provide a place for the accounts to be available for a period of 2 months, and will also ensure that there are facilities for copying any documents.

                Comment


                  #9
                  I said appoint a manager, not appoint a managing agent. A manager will have more powers than a managing agent.

                  You can only be forced to appoint a manager if you are badly mismanaging and fail to correct the failures when notified of them. All I said was that, if you hadn't volunteered a summary of the accounts, that is a factor that could be taken into consideration when deciding whether to appoint a manager. On its own it falls far below the being sufficient cause, but, if it were happening, it would be failing to follow a guideline in the RICS Service Charge Residential Management Code, which as self managing freeholders should already have read and be familiar with, and which is referred to in legislation as being something that, if complied with fully, is a total defence to any claim of mismanagement.

                  On the other hand, if someone is asking to see supporting documents, that generally implies they do think you are mismanaging.

                  Comment


                    #10
                    I do not think that you need to appoint a manager or managing agent if there are only 3 flats and you are confident that you are capable of dealing with the management yourself. It does not appear to be a valid s22 notice at all but you should make available the supporting documents for inspection and allow copying. There are unlikely to be many invoices involved and you may find it easier to just send a copy of all invoices to the leaseholder to put her mind at rest. In the long run, it may save you time and hassle.

                    Comment


                      #11
                      If the template is properly completed and the guidance and irrelevant paragraphs removed, it should be a valid L&T 1985 section 22 notice.

                      Section 22 of a different Act (L&T 1987) is used for notices in connection with appointing a manager, which may have led to the confusion. It also suggests the OP really needs to urgently obtain and read the RICS Code mentioned above.

                      Comment


                        #12
                        In her Notice, the Guidance and irrelevant paragraphs have been removed.

                        I have just downloaded a copy of this document to send to the joint Freeholder and to read myself.

                        https://www.rics.org/globalassets/ri...ition-rics.pdf

                        Is this the correct Code of Practice?

                        Comment


                          #13
                          Yes , and Section 7.12 in the RICS Code applies to your situation .

                          But if the building comprises of only 3 flats , the summary of the annual accounts should be quite simple and auditing by accountant is not a legal requirement.

                          You should call an annual meeting for 3 leaseholders and present the summary of annual accounts, and SHOW the original bills and receipts paid and the end of year balance in the bank statement. And after the meeting write up the minutes of meeting as a record to confirm it was on certain date and the summary accounts was approved by all the leaseholders.

                          If any flat is put up for sale at a future date , the prospective buyer has to get a mortgage loan and all mortgage lenders will ask to see a summary of service charge account for past 3 years plus a summary of the building insurance cover before any loan offer is made to applicant.

                          Comment


                            #14
                            Thank you all, for your helpful advice.

                            Comment


                              #15
                              Above all else, you should comply with the terms of the lease.

                              You should prepare service charge accounts for each accounting period and these should be distributed to all leaseholders. See 7.10 of the RICS code of practice.

                              A summary of relevant costs under s21 LTA 1985 requires different information to be produced to a leaseholder and there is no requirement to reconcile the information with the service charge accounts. As such it is a meaningless exercise. A s22 notice can only be made after the summary of relevant costs has been produced and it relates to information contained within the summary. See 7.12 of the RICS code of practice.

                              I suggest that you ask the leaseholder to clarify what she actually requires. In all probablility, she just wishes to inspect the supporting invoices and she is taking the wrong steps. It is much simpler for everyone if you just agree to let her inspect the documents or send her copies. The legislation sets out the minimum requirements, there is much goodwill to be achieved by going the extra mile and providing the leaseholder with additional information to demonstrate that you have nothing to hide.


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