S20 works and conflict of interest

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    S20 works and conflict of interest

    I have a flat in a large development. I have share of in the freehold company. They want to carry out decoration works. They issued S20 notice. The lowest quote was rejected (apparently they said they had issues with that company). However the second lowest quote was the director's husband. He happens to be a one man builder. Ordinarily, I would not have minded him winning the contract, except the building works are £100k+. The couple do good things together in terms of social stuff e.g. picnics, but have never been happy with the way they spend the money on the estate. The director is too strong, so the other directors just follow her. If there is a problem with the works, there is no come back. The cost is pretty steep. None of the companies who provided quotes appears to be trade bodies of painting firms.

    I am wondering, if they are breaking company law, by not declaring the conflict of interest?

    There is nothing in the S20 decision about a related party, being appointed. It is n't a secret, because they mentioned in the meeting, but most people don't turn up to these residents meeting.





    #2
    Whilst they should declare an interest and not vote, it seems to me that the interest was known and wouldn't have changed the result.

    The rules for who can enforce such breaches seem to be complex, but whilst the directors can always do so, there are many cases where individual members cannot.

    If you are convinced that the reasons given, in the stage 3 consultation, were bogus, you would be better off under L&T law than company law.

    Comment


      #3
      A landlord should obtain at least one quote from a contractor who is “wholly unconnected” with the landlord.

      The landlord should declare any interest in the quotes obtained.

      The s20 LTA 1985 legislation is particularly weak. Even if a landlord does not comply with it, he can seek dispensation and a Tribunal can grant dispensation on such terms as it considers fit. The Tribunal will normally only grant compensation if it considers that there was financial prejudice to the leaseholders.

      Comment


        #4
        If this was my block, I would want to know exactly what the "issues" with the cheapest contractor were - and when these issues were identified (If there were issues before quotes were obtained, I would want to know why that company was asked to quote).

        I would also want to know why the conflict of interest wasn't openly declared from the beginning. Even if the fact that the contractor is the husband of the director is widely known, it should still have been clearly declared.
        Additionally, the director involved should have abstained from voting and had no involvement at all with the choosing or appointment of the contractor.

        I'm not sure why you think there "is no come back" if there is a problem with the works.
        With any contract of this value, the directors should be ensuring that the contractor awarded the contract provides a suitable guarantee that any defective work will be corrected at the contractors cost. Something along these lines should be in the contract that is agreed.

        Comment


          #5
          You should refer to the Company’s Articles of Association and s175 Companies Act 2006 regarding conflicts of interest.

          You may wish to ask the director for details of his public liability insurance. I agree with Macromia, if the director is carrying out works as a sole contractor, he would be personally responsible for any problems with those works.

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