Freeholder Issues

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    Freeholder Issues


    I am having trouble with a freeholder and the way things are being run in my building. It's all very complicated so I will try and stick to the bare bones.

    My block has 7 flats with one guy who is the majority sharer of freehold (not over 50%). I have one share.

    This guy has been in charge of the upkeep for a long time now and it appears he's quite obviously on the fiddle. A couple of years ago we were sent notification of works, by our (neutral) managing agent, for the 5 yearly major external work. All well and good, we were given three quotes from building contractors. We didn't contest as they are established builders and we got reassurance from the managing agent they would only use contractors they recommend. Lo and behold when the work begins it's this Freeholder guy who has become the contractor and the company we were told that was going to be doing the work now cannot do it. I was told this was because one of the leaseholders in the building hadn't paid his significant share of service charges. He did get a company in to do part of the work but then a lot of it was done by his cronies (this isn't his day job) and less than six months on the work is already looking shabby. I had to chase down the surveyor to do a walk around with a couple of other residents so that it wasn't just signed off and forgotten about. To be fair, the surveyor has made a snag list and has put it to the 'freeholder/building contractor'.

    A few of many questions I am looking for help with are:

    1.We have never had an AGM, despite request. Surely this is a legal requirement and he's breaking the law?
    2.We want to see receipts for the work undertaken but our request has fallen on deaf ears. Do the Managing Agents have a responsibility to declare them to us?
    3.He has set up a Freehold Ltd company in which he and his ex wife(who does not have a share of freehold) are the only directors bar an elderly resident who has lived in the building for about 40 years. Are we entitled to be on this board as we have a share of freehold? If so, how? I have looked in the Articles of Association but I must say I am not strong with those kind of documents so cannot work it out. Looking at Companies House, there have been random people (non freeholders) who have come and gone from the board of directors.
    4.Should the managing agent be taking more responsibility with the quality of work undertaken?
    5. There are only 7 flatsin the building but 8 on the service charge sheet. The mysterious flat doesn't pay ground rent and the aforementioned freeholder owns it (I checked on Land Registry), giving him another share of freehold. When I asked the Managing Agent, they said it doesn't pay ground rent because it must be 'a small dwelling out the back of the building'. This isn't the case, so how can I find out the situation here? He won't answer our emails.

    Anyway, I do apologise it is a long post but I've tried to keep it as succinct as possible.

    Many thanks

    Welcome to the shady world of freehold management.
    On the face of it your only options I can see are put up, sell up, or apply to the FTT to appoint a manager, which would likely increase your costs....


      0 Using a contractor who didn't quote is a breach of the section 20 process, but not a criminal offence. If they charged more than the lowest quote, I don't think you would have any trouble getting the service charge capped at the lowest quote. You may well be able to get a declaration from the FTT that the service charge was not reasonable for the work actually done, but that is far from certain.

      Not being able to start work because someone has failed to pay up is a very common situation. It would be wrong for the freeholder to use money from the other leaseholders to make up the shortfall, although if the work is definitely needed, some would argue that the freeholder must make up the shortfall to avoid breaching their repairing covenants.

      AGM's haven't been a legal requirement since 2006. The company articles may require them but hat is only a contractual requirement. I believe the company would basically have to sue its directors.

      Using sections 303 through 305 of the Companies Act, people holding 5% of the shares can force the calling of an EGM, and hold it themselves if the company defaults. However getting someone to enforce against the directors if they don't honour the decisions may be difficult. In any case, in the situation you describe, it would never be possible to pass a special resolution, so you would never be able to make a decision that the directors couldn't undo.

      As the problem person has less than 50% of the voting rights, if everyone else acts to together, they can remove him as a director, but getting anyone to enforce that might be difficult. I could only think of trying to get the Companies House breaches team involved, but not sure if they would do more than writing a sharp letter.

      You have to go through a specific process to see the receipts, and do so before the end of the following financial year. First you have to request a summary of the service charge accounts, and, once you have that, you need to request to see the original documents. The summary need not be provided within the first six months of the next financial year, and after that a month is allowed. Failure to comply is a criminal offence, prosecuted by the local council housing authority, but they never actually prosecute, as they have no money.

      I don't understand the setting up of the freehold ltd company. Share of freehold is either implemented as tenants in common or a limited company. In the latter case the company would exist from before you had a share of the freehold.

      The managing agent is responsible to the directors of the company, not to the leaseholders.

      Some people here actually advise enfranchising and getting share of the freehold, but, as you've seen, it is open to as many abuses big company freeholders.


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