Director of a Residential Management Company Issue

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  • eagle2
    replied
    Originally posted by thenunn View Post

    Not all agents behave this way ; and ultimately they do as the directors advise. We asked ours if we could not send out demad letters and to look at payment plans . it has helped those that found things hard
    That is the way that it should be run, good for you. Unfortunately there are many agents who control the directors, some even select the individuals to become directors, The agent then advises the directors to appoint the agent to manage and its contractors to carry out works etc The agent's appointment is never at risk of being terminated. That is how trust monies are not held properly in the first place and then they are wasted and disappear.

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  • thenunn
    replied
    Originally posted by eagle2 View Post
    You can destroy a good relationship in an instant by even threatening legal action and it can take a long time to restore trust. It can also lead to charges being challenged when they may have been accepted otherwise. It pays to know your leaseholders and contact those who normally pay regularly and enquire if there is a problem. There are ways of assisting leaseholders. You may be able to offer monthly payments instead of half yearly payments or you may be able to offer loans and charge interest for the benefit of all leaseholders. Agents will not offer this service, they do not care if you have a good relationship, they prefer to push a button after 14 days and send automatic reminders followed by threats of legal action. Sometimes agents benefit by taking legal action because that gives them the right to charge additional sums. Unless the costs are recovered in full, which rarely happens, especially in these times, all leaseholders will suffer,.
    Not all agents behave this way ; and ultimately they do as the directors advise. We asked ours if we could not send out demad letters and to look at payment plans . it has helped those that found things hard

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  • NewGuy123
    replied
    ThanksEagle, we have a meeting arranged for next week to vote on some big decisions so I guess we will see how it goes!

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  • eagle2
    replied
    It is useful to consider the views of minorities and as long as you can outvote him, it should not be a problem, Good communication with the members is important in these cases. It is often better to keep the director involved so that you can try to understand his views, reason with him and plan your moves..Otherwise. you would simply ask him to resign and explain that if he does not agree, you will ask the members to decide.

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  • NewGuy123
    replied
    Originally posted by eagle2 View Post
    The director should not be removed simply because he has a different opinion but he should be warned that if he acts against the board decisions in future, he may be asked to resign..
    Hey thanks for your reply. I would never think to remove someone for having a different opinion, i think it is necessary to have diversity within the board, it is more their motivations seem personal and not in the interests of the company. If any director isn't making decisions in the interests of the company what is the best way forward? How would you go about asking a director to resign? I am 99% sure they would not do voluntarily in this instance as we have already said to them what we think this decision looks like, so I don't think it is an option. They are tremendously stubborn.



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  • eagle2
    replied
    There is nothing unusual with a director holding a different view to other directors, but his actions were inappropriate, he should represent the board's view and set an example. It is not fraud, he probably considered that he was acting in the interests of a majority or significant number of leaseholders. A director can also change his mind for whatever reason. The board should continue to make decisions based on a majority vote and all directors should be reminded that they should accept decisions. The director should not be removed simply because he has a different opinion but he should be warned that if he acts against the board decisions in future, he may be asked to resign..

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  • NewGuy123
    replied
    Hey all

    Thanks so much for your all your input. It is good to have clarity.

    My other question though, as he is a director, could what he did (rallying other leases to agree with his idea to pause the payments) be classed as fraud due to it being for his personal reasons and not the interests of the company and the repairs that need to happen?

    We have not taken legal action as a payment plan has been agreed. But this director is now not voting yes for the essential works to take place. Even though previously agreed and logged in minutes, they have come back months later and said the minutes lie (no email dispute was made at the time the minutes were sent round). The reason being they don't agree with the spec (we have sought advice on the spec, and it is the minimum work we need for the repair, no further costs can be cut). This too me screams a red flag. The management company concerned about this directors behaviour and is cautious about how to proceed, even though the majority have voted in favour for the works to proceed.

    Has anyone experienced a director like this before, or know how is best to act? If we don't get the works booked in we risk further damage and health and safety risks to the properties.

    Again, any advice welcomed.

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  • eagle2
    replied
    That happens too, in fact it seems to be the freeholders who are the most guilty of abuse who are the first to threaten legal action.
    Much as I am enjoying this debate, I am aware that we are departing from the original question.

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  • AndrewDod
    replied
    Well of course if crooked freeholders add private legal costs to the service charge that will not be a legitimate service charge item and would inevitably be rejected at Tribunal. And if it is happening repeatedly and if the Directors cannot be removed the building will probably end up with a Tribunal appointed manager or completely derelict.

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  • eagle2
    replied
    There is a time to be firm and a time to offer assistance and contacting leaseholders does not do any harm, it can only encourage the ongoing relationship. There are numerous factors involved and it is unreasonable to have one system which fits all. Management nor leases nor legal action nor Tribunals can be defined in black and white terms, there are too many grey areas. It is all very well saying that solicitors; letters will be added to the debt, but 7 times out of 10, they will be added to the service charges and other leaseholders will rightly question why the costs were incurred. How long does it take to collect monies when taking legal action? If you can agree a repayment plan with the leaseholder in a shorter period, it is far better than running the risk of incurring costs for all leaseholders.

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  • AndrewDod
    replied
    Bear in mind eagle2 we are not talking here about renters without any assets, nor are we talking about babies. We are talking about people who own (sometimes via a partial loan) a £500K asset which has to be properly managed according to the law and the contract they have signed, not only in their interest but based on their joint obligation to others. They are not short of cash, albeit it will be highly inconvenient to have to sell in order to make their assets liquid.

    Yes kindness and talking, but also extreme firmness by-the-book.

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  • scot22
    replied
    In the past I believed in flexibility. Now, from experience, I agree with Andrew. Not happened very often. Trying to accommodate everyone is rarely possible. The lease, the lease and nothing but the lease.

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  • AndrewDod
    replied
    Originally posted by eagle2 View Post
    nowhere in the lease does it say that legal action must be taken against a leaseholder who is in arrears and there is a big difference between someone being 1 day in arrears for the first time and being say 2 years permanently in arrears.
    The lease doesn't need to say that. Take a step back -- if there was an external freeholder, and they failed to collect an outstanding debt from a lessee, they would still be obliged to carry out any work and either accept a PERSONAL loss, or to sue for the debt. A RMC doesn't work any differently - the company has no assets at all (apart from the freehold) so if the Directors want to delay recovering a debt, they pay for that personally (there is no other legitimate source of cash apart from ground rents and fees they might receive for things like seller's information packs).

    So no, they don't have to sue, but then they need to explain where the shortfall is going to come from (or accept that the company is going to be sued for not-obeying the lease).

    Yes certainly if we are talking about a quiet chat about a 1 week delay, that is a different story. I don't disagree about that. But after a month the solicitor's letters should have gone out, and the costs of that added to the debt. There is no other way. The accumulating debt will inevitably be recovered when the property is sold, and any mortgage company should also have been informed at a very early stage.

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  • eagle2
    replied
    That is one of the problems, it does encourage leaseholders to dispute charges. It is not a question of making up rules, nowhere in the lease does it say that legal action must be taken against a leaseholder who is in arrears and there is a big difference between someone being 1 day in arrears for the first time and being say 2 years permanently in arrears. Nearly all RMCs would be unable to take any legal action without dipping into reserve funds, the only alternative is to include a large sum within the budget which would receive complaints from leaseholders who pay promptly. Most cases would be transferred to a Tribunal, which would often disallow expenditure and that leads to complaints from leaseholders if the charges are not adjusted for them as well. That in turn leads to a shortfall within the RMC.
    A decision to take legal action needs to be properly thought out and in my experience, the only practical way of managing a building is to encourage cooperation and seek agreement with leaseholders.

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  • AndrewDod
    replied
    They have no choice but to sell up - sorry (or to dispute the charges if they are not according to the lease and the law)

    Good luck with trying to manage by making up your own new rules for some.

    There are many problems with leaseholder managed freeholds - and this is one.

    Many (most) leases operate on a strict in-out basis - there is absolutely no leeway for arrears of any duration. And using sinking funds to make up a shortfall in an uneven way is straightforward theft and will (and should) get those in charged summarily removed.

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