Freeholders transfer management to company and charge for own time.

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    Freeholders transfer management to company and charge for own time.

    I share the freehold with one other flat. The third flat is leasehold only. There is no management company and things are ad hoc - there is no right for the freeholders to charge any management fees or recover expenses for their time. When everyone is friendly, fair and responsive it's great but not when there are differences. Our new leaseholder is difficult and time consuming to deal with. Although to be fair, it may time to put things on a more formal footing

    I would like the freeholders to form two companies. One as "landlord" and the other to act as the Landlord's agent and manage the property and be able to collect a reasonable annual management fee from all leaseholders.

    The lease states " The landlord shall be entitled to make reasonable provision in any demand for future costs and expenses and shall be entitled to include in such costs and expenses the management fees of his Agents (if any)."

    I think this allows for it. Is there any other reason why we can't? A solicitor who we used to enfranchise years ago (and wasn't very good), was dismissive about it (all she said was "The Landlord can't charge" not sure she understood the structure) and so it was left.

    Many thanks in advance

    You describe a poor relationship with a leaseholder but you do not appear to have tackled the problem, indeed you seem to be stoking the flames. Why do you not try to improve the relationship by inviting the leaseholder for a chat over a drink?

    Why is the leaseholder a problem when you can outvote the leaseholder at any time?

    Why do you wish to form a Company to own the freehold, what benefits do you envisage?

    The creation of a management company which you describe is one of the largest scams which exist with leasehold properties, albeit on a larger scale and the connection with the freeholder is not always obvious. You are only one step away from appointing your own contractors and inflating the costs for your own benefit.

    You appear to have overlooked that there will be costs of forming and running both companies and those costs will not be valid service charge expenditure.

    Your scheme is likely to result in the leaseholder complaining that the charges are unreasonable and endless trips to court or tribunals. The leaseholder would have grounds for claiming that in reality you are changing the allocation of costs as set out in the lease.


      Could the root of the problem be that the new lessee feels an outsider, is it possible for them to buy a share of the freehold from you and the other flat


        Hi, we have the same situation but our lease doesn't allow for the agent.

        ​​​​​Our leaseholder is very difficult, so we are in courts

        I would suggest to have a chat with the leaseholder - and point out that the place is generally run in a friendly manner in your free time. Obviously, if it is not sufficient, you may start thinking of introducing the management agent. Does he/she have any recommendations?

        ​​​​​​​and I would not recommend sharing your freehold without iron clad trust agreement


          1. To clarify there is only one freehold title and one freeholder. In your case, the freehold is held jointly by two individuals: the freeholder.
          2. To achieve your objective, you do not need to set up a company to transfer the freehold to. You only need to set up one company i.e. the managing agent. This will not enable the directors (presumably you and the other lessee that hold the freehold title) to charge lessees for their time. The company will be instructed by the freeholder (contract entered into) and following will be able to charge a management fee which, depending upon location of the property, may be as little as £150 per unit per annum. All three lessees would be required to pay this sum (the lease clause allows for this) via service charges. However, the down side is the company will need to comply with significant legislation (and more on the horizon) and incur the costs/risks of same in respect of ‘managing agents’ as well as the Companies Act 2006. These costs will be borne by the company that will need funds from its shareholders and will not enable additional sums to be charged to leaseholders.
          3. Further, the company could decide to pay its directors, employees of the company, a salary but where will the funds to pay salaries arise since the company will only be managing a single building. A building comprising just 3 flats typically not of interest to professional managing agents as it is not profitable.
          4. Additionally, should you decide to transfer the freehold to a company there may be other implications. However, we need to know more such as the type of property: is it a purpose built block for instance to comment.
          5. It may be preferable to continue managing the building within the current structure aiming to resolve issues with the leaseholder concerned. What is the nature of the issues with the leaseholder? What type of court action is in hand?
          6. Another option might be to find a professional managing agent willing to take on the management of the building. If you decide on this path, make sure you check s.20 consultation requirements regarding Qualifying Long Term Agreements. You will find information within this forum and on the LEASE website.
          7. Finally, if challenged, the FTT might not like the arrangement (para. 2 above) and decide the management fees are not payable by the lessee anyway.


            Creating a pseudo arm of the freeholder with an intent to create a fee generating entity is basically a type of fraud. You have the right to enforce the lease, and collect ground rent, but not to make any money out of the freehold at all (apart from on reversion/lease extension).

            Yes I know fraud in the sector is common.


              Thank you to everyone for your comments. Particularly regarding the other potential costs. The point of considering this is not to inflate fees nor is it fraud. It's to deal with the administration in actually a fairer way. It is unlikely to be cost efficient for the freeholder - lessees to pay an agent for work and decision-making. Quotes so far from managing agents have been way above £150.


                Your difficulty is that you are supposed to act in an open and transparent manner. Your first difficulty is who is going to be invited to be a member of the management company? You should invite all leaseholders whereas you seem to be excluding the 3rd leaseholder. The leaseholder could reasonably object if you do not have any qualifications or experience to manage the building. You should then disclose the income which you are receiving via the management company and again the leaseholder could reasonably object.

                You are giving the leaseholder grounds to complain to a Tribunal that his/her service charges are unreasonable and I suspect that a Tribunal would not award you anything other than a nominal amount for any management functions which you undertake, It really is not worthwhile taking legal action amongst yourselves, there is only one winner, the legal representatives. It is much better and indeed you are obliged to seek alternative ways of resolving differences hence my suggestion that you meet and discuss them, If you have difficulty communicating with each other invite a neutral person to spell out that you should all act responsibly and the consequences of failing to do just that.


                  Just engage a decent agent to manage it.
                  Dad's army freeholder / RTMs Don't work unless one person can do a skilled professional's job for nothing and leaseholders co-operate.
                  This is only going one way....


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