Ground Rent question

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    Ground Rent question

    I live on a private housing estate which is split into several phases. Each phase has its own management company. My phase of which I am a director is made up of 40 houses and a block of flats which has six separate flats and a communal stairs.
    The building company sold the freehold to a private company several years prior to the completion of the phase. The head lease was also completed at least one year prior to anyone buying the flats. Each house and flat has a signed share in the company. All the houses are freehold. The six flats leasehold.
    The question I have that in the head lease it states that the management company is responsible under a covenant to pay the ground rent to the freeholder. In the past the maintenance management company (appointed by the building company) had always collected and paid the ground rent. Last year we changed the maintenance company due to a large number of reasons. The freehold company requested that the new maintenance company collect the rent as the previous company. The new maintenance company for the following reasons have refused to do this without a management agreement between them and the freeholder. The freeholder has refused.
    The reason for the maintenance management company asked for the agreement is because:
    1. The Phase Management Company do not in anyway own the land or property that makes up the flats. Out of 146 company non profit share holders only six of them are own the flats.
    2. The freehold company seem to think as a result of the covenant within the head lease that the phase management company are responsible for not only collecting the ground rent but also any legal action to recover any non-payment?
    3. None of the Phase Management Company were present or signed the head lease to agree to this covenant?
    The freeholder has not been back in touch with the maintenance company or contacted me as Director of the management company for eight months and the rent was due six mont ago.
    I appreciate this is long winded but the question I am asking is "can the freeholder require our community company collect ground rent from flats that they do not own and also take on the cost of any non payment recovery (which there historically never has been) even though we do not have any financial or physical ownership of said flats?

    Sorry it should say 46 share holders not 146


      I'm getting confused between management and maintenance companies. I don't see how you can, in practice, change the management company. You might change the managing agent. My guess is that the management company has not changed, and by maintenance company you mean managing agents.

      Changes of directors or members don't invalid contracts previously entered into by a company. I presume someone with authority to sign a deed acted for the company at the time the covenant was created.

      Whilst it would be cleaner to pay the ground rent direct to the freeholder, I see no reason that they couldn't enter into an agreement with the management company to act as their agent.

      The only point at which the freeholder might need to get involved is actual court action. That is the same sort of situation as using managing agents for service charges. One of the main reasons for appointing managing agents is that they do do the chasing of unpaid service charges, but they probably cannot be the people who formally bring legal actions against defaulters.


        I think that there is a lot that you need to clarify before anyone can give you any sort of worthwhile answer.

        For instance:
        1. Who holds the 'head lease' that you mention, and what does this include?
        2. What role does the 'phase management company' that you have shares in perform?
        3. What have the new 'maintenance company' been contracted to do?

        Based on what I assume to be the case, if the 'phase management company' holds the 'head lease', and the head lease requires the holder to collect ground rent (regardless of whether or not it is only from the flats?), the freeholder can require that the phase management company collects the ground rent.

        If the phase management company do hold the head lease, the 'new maintenance company' does not need a contract with the freeholder, since the phase management company already has the freeholder's permission to collect this and can therefore instruct the maintenance company to do so.

        If the phase management company does not hold the head lease, they have no obligation to collect ground rent and probably no authority to instruct anyone else to collect it. Collection of ground rent appears to be the responsibility of whoever holds the head lease.


          It is also possible that, regardless of what it says in the lease, whoever holds the head lease may have no legal obligation to pay any ground rent to the freeholder unless the freeholder issues a proper demand for this payment to the head leaseholders.


            Sorry not that fluent in the terms will try to clarify.
            1. I am a resident of the phase and a director we are the Non Profit company.
            2. You are right that the maintenance company I refer to is our management agent.
            3 A company called {Mod - name removed} who are the company who own the freehold seem to hold the head lease?
            4. The management agent are contracted to manage the maintenance on the phase and collect and manage our yearly maintenance payments. This includes the flats and houses. The houses and flats each pay a percentage of the maintenance budget and management agent cost. The flats paying a greater proportion for the cleaning of their communal area and garden.
            5. Up to now I have not received any correspondence from {Mod - name removed} in relation to payments. The only correspondence received was received by the management agent who requested the management agreement to be put in placer prior to any collection of said ground rent. {Mod - name removed} refused to enter into any such agreement and only referred to the covenant in the head lease which they sent a copy of stating:

            The company was {Mod - name removed} on the lease but {Mod - name removed} state that they have now bought the head lease. Part of the lease stated that the phase management company would be able to buy the lease but never provided a copy of the lease and it appears the head lease was sold to {Mod - name removed} prior to any of the houses or flats on the phase being sold or built?
            Hope this helps?


              Sorry tried to paste the head lease details in but is a PDF and this does not seem to be liked by this system. The part that {Mod - name removed} refer to is:
              "To pay to the company (Headlease holder) without reduction set out in the lease and not to exercise or seek to exercise any right or claim without rent"


                The simple answer to your question is that it depends on the wording of all the leases.

                I assume that there is a head lease between the freeholder and the “phase management company”, which is required to pay ground rent to the freeholder.

                I assume that there are sub leases between the “phase management company” and the leaseholders of the 6 flats, who are required to pay ground rent to the “phase management company”.

                I assume that the “maintenance company” is appointed by and collects monies on behalf of the “phase management company”.

                If the assumptions are correct (1) the “maintenance company” (on behalf of the “phase management company”) would demand and collect ground rents from the leaseholders (2) the freeholder would demand and collect ground rent from the “phase management company”.


                  I guess you must be somewhere near to Southend-on-Sea. I guess your local MP will know a lot of complaints about this company.

                  Can you buy a copy of the freehold title and headlease title + title plan from "Land Registry Online" by credit card ( cost about £3 ) and download . Does the title plan show the footprint land under the block of 6 flats ?

                  It will show names of the current title holders and date when they acquired the freehold and headlease.

                  What is the ground rent paid by the 6 leasehold flats to the Headlessee ?

                  What is the ground rent paid by Headlessee to freeholder ?


                    One you have the title numbers, you can also buy copies of the lease from the Land Registry, for a sum in single or low double figures. The other document you may need are the company articles, but, you are legally required to already have those available to provide on demand, to members. (They can be obtained free from Companies House, but you should have the originals.)


                      Please do not mention names otherwise you will be breaking the rules of the forum. We also seem to be drifting from the question but yes if you do not possess a copy of the leases or the Articles, you should obtain copies.


                        The rules on naming and shaming are also a reason why, if you had succeeded in attaching a PDF, it would not have been acceptable. Copies of leases need to be redacted to remove the identity of the property and the parties to the lease.


                          Sorry for breaking forum rules I was even confusing myself with the number of management /freehold companies in this post to try and explain the question I am trying to pose? I have a copy of the head lease but this does not mention said freehold company but just our community company made up of people who own properties on the phase and the estate builder. The Estate is in the North East of the UK.


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