annual leaseholders meeting

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    annual leaseholders meeting

    In a block of flats owned by a limited company of which the leaseholders each have a share of the freehold, a meeting with key agenda items of 'major works/future planning' and 'service charge forecast' is to be held as an 'annual leaseholders meeting' rather than an AGM. The reasons given are that: -

    The limited company does not receive any income apart from in the form of lease extensions and ground rents if demanded.

    Service charges are not company income and therefore are not matters to be discussed at an AGM or EGM. If service charges were classed as company income they would be reported in the annual accounts filed with companies house and any surplus would be subject to tax.

    It seems to me that it's the company that owns the income and the meeting should be an AGM, but I don't have the expertise to judge and should be grateful for opinions.

    #2
    It's a bit like a freeholder and tenants. The freeholder does not receive any income apart from lease extensions etc. The managing agents organise the work and the tenants pay for it in their service charges. As you own the company, the money from lease extension should be divided equally.

    However, the service charges run on a money in, money out basis and at your meeting you will be able to have a say in how much work is carried out and how much you want to pay and what you want done.

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      #3
      Strictly AGMs should only deal with Company affairs eg appointment of directors, Company Secretary etc and meetings of leaseholders should deal with matters arising from the lease eg budgets, proposed works etc

      In practice, the members and leaseholders are the same people and there is usually one meeting which deals with all matters.

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        #4
        Originally posted by milosz View Post
        It seems to me that it's the company that owns the income and the meeting should be an AGM, but I don't have the expertise to judge and should be grateful for opinions.
        The Company does not actually own the service charge income, it simply collects monies on trust and (should) utilises the monies in accordance with the lease.

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          #5
          The "unspent money" held in the service charge bank account, legally belongs to the leaseholders.

          Leaseholders are entitle to attend the "annual leaseholders meeting" for discussing matters paid by the service charge contributions.
          If leaseholders control the Management Company, the AGM may be combined with the annual leaseholders meeting .

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            #6
            Unspent monies do not belong to the leaseholders, they must be held in trust and utilised for the purposes stated in the lease,

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              #7
              Sometimes AGMs are immediately followed by leaseholders meetings.

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                #8
                That's exactly what we do. It is correct to separate shareholders meetings

                Comment


                  #9
                  Originally posted by eagle2 View Post
                  Unspent monies do not belong to the leaseholders, they must be held in trust and utilised for the purposes stated in the lease,
                  My lease states that any surplus (unspent monies if payments made in advance) is to be credited to the leaseholders service charge, payable the following year.

                  It is not for the managing agent or the directors to decide what should happen to the surplus.

                  Comment


                    #10
                    I agree that the freeholder should act in accordance with the lease, If a surplus is to be credited to the leaseholders and deducted from future charges that is what should happen. Some leases state that a surplus may be added to the reserve fund.

                    That of course is a different matter to the question of who owns the service charge monies. My comment was in response to #5, surplus service charge funds do not belong to the leaseholders (or to the freeholder) they are monies which must be held in trust and utilised only for the stated purpose in the lease, They cannot belong to the leaseholders otherwise the leaseholder could request repayment at any time.

                    Comment


                      #11
                      Originally posted by eagle2 View Post

                      They cannot belong to the leaseholders otherwise the leaseholder could request repayment at any time.
                      I still see that the post by Gordon999 has some merit "The "unspent money" held in the service charge bank account, legally belongs to the leaseholders.", especially with regards to our lease.

                      Our lease actually permits that if the leaseholder requests in writing that any surplus is returned to them, it will be paid back to them within 14 days. Of course the trigger to allow this is the summary of costs and certificate that should be issued 6 months after the accounting period.

                      Neither the managing agent or the directors have ensured that this has occurred for accounting periods 2019 and 2020.


                      Comment


                        #12
                        Unspent money should not be confused with a surplus eg a reserve fund would consist of unspent money. Your lease is unusual, it is rare for the lease to allow leaseholders to request an actual payment. I am not surprised that the freeholder waits until other charges are due before issuing the year end certificate.

                        The RICS management code 7.6 states that "service charge monies ... must only be used to meet the expenses for which they have been collected".

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