New Freehold Issue

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  • New Freehold Issue

    Hi All, there are three flats in our building and we have recently have acquired the freehold for our flats. We have also set up a company and of course now each of us has a share of the company.

    When we were setting up the company I was told by one of the freeholders, that the company dose not need multiple directors and he will act as company director and the other flat who is a builder will hold the last director position.

    we will meet to discuss what needs to be done and since its our flat and we all get along well, we just sort issues out.

    However now, these two meet up and decide what needs to be done and just dictate to me what needs to be done and have just issued a section 20 on me.

    I am not sure what to do, as this is putting large amount of pressure on my heavily pregnant wife and myself. We feel a bit lost now, and not sure what to do. I have asked few time for us to meet, which has never happened and now have asked again for last time.

    Any advise is greatly appreciated.

  • #2
    Unless your articles require all members/shareholder to be directors you have given away your right to be a director, as for practical purposes with 2 v 1, they could exclude you, and outvote you.

    Your rights exist under section 20 to be consulted and ultimately to challenge what they propose, but as long as that is correctly done and the proposals are fair and reasonable in scope and cost, permitted under the lease, then you have to accept them.

    The only question I have is you say you bought the freehold and then set up a company.

    If the company did not acquire the freehold, ( which means that you jointly own the freehold) what authority has that company to do anything?
    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

    Comment


    • #3
      Thank you for taking time and replying back. If I remember correctly, the solicitor firm which helped us acquiring the freehold provided the documentation for setting up the company as well. understanding is, that the company will acquire the freehold and each of us, has a share in the company.

      I do apologize if I stated this incorrectly on my original post.

      Can I ask for the article of company to be sent to me, I do not recall if there were any limitation on number of directors, but I do recall, being told as we all get along quite well that it dose not matter who is a director.

      questions are: Can the company issue section 20? are directors chosen for life or can be changed? where can I get a copy of section 20 and see what rights am I entitled to?

      Thank you for your time.

      Comment


      • #4
        The duration of appointment is set out in your Articles but in practice someone has to nominate you and vote on your appointment; as said at 2 v 1 you may not be able to achieve this, if they believe that you are only going to be contentious.

        Articles can be inspected at the registered office or purchased on-line at Companies House.

        yes the freeholder, your company, should issue a section 20 if they want to recover the service charge from you.

        http://www.lease-advice.org/document..._Landlords.pdf
        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

        Comment


        • #5
          Thank you for the information, I have read the document and in process of challanging the section 20, I have also asked to be nominated as a director on grounds of all freeholders should be in same footing and all work related running the company should be shared and not on, one person shoulder.

          Comment


          • #6
            Originally posted by K R Ahmadi View Post
            Thank you for the information, I have read the document and in process of challanging the section 20, I have also asked to be nominated as a director on grounds of all freeholders should be in same footing and all work related running the company should be shared and not on, one person shoulder.
            I wish you luck, but the articles likely don't reflect your contention as to the appointment of directors.
            Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

            Comment


            • #7
              No, I read the article of association for the company and as long as I am nominted by another Director, there should be a vote. However, for reasons I have given, it will be interesting to see if the person in question objects.

              Comment


              • #8
                But even if they make you a director they can still outvote you on decisions. The directorship issue is moot if they are determined to go ahead with the works. Concentrate on the s20 and the terms of your lease.

                Comment


                • #9
                  Agreed, the directorship issue is just to prove a point. I was misinformed, when all of us as lease holders agreed to buy freehold from council.

                  1- The promise was that all three will meet on regular basis to discuss maintenance, and as such there is really irrelevant who is a director or not.

                  2- There can only be two directors, since article of association dose not mentioned this.

                  Both of these points have now proven to be incorrect.

                  Repairs mentioned on S20, has now been challenged on two points:

                  1- Original Agreement for the repairs was set for 2013
                  2- Repairs now suggested will put me and wife into considerable financial difficulty, as we are currently getting the house ready for arrival of new addition to the family.

                  Comment


                  • #10
                    On your challenges, if they can show good reason for bringing them forward they will succeed, oe such reason may be to avoid further deterioration. It's unlikely that any previous agreement is binding on them but check you lease to see whether or not they can make a lump sum demand for the costs. Many leases don't allow it and if so, they will have to include the costs in the next periodic demand or balancing charge (if they fund them themselves) rather than expect you to pay up front.

                    In light of a recent decision (the name of which escapes me)they should have regard to whether it is reasonable to expect you to be able to pay the amount in the near future, although this will be whether or not it is reasonable in general and will not be dependant on your own personal circumstances.

                    Comment


                    • #11
                      There were two decisions last year both somewhat contradictory, but the gist was that the manager in one case should have regard to affordability, largely out of practicality and maintaining the support of residents and the other was that the works were long overdue and "sprung" on the leaseholders.

                      I don't recall either pointed to a clear statutory duty, merely that it was prudent and, in the context of both cases, rather foolish not to have done so.

                      I recall one involved "he of the comedy bow tie" ( london agents know who I mean).
                      Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                      Comment


                      • #12
                        My main problem is how this is being handled. The work is over due, but it was agreed to do the work in manageable chunk. This is now out of the window as the list of work proposed is quite long.

                        I am trying to get on common footing with them, however director A dose not want to respond back to phone calls or emails and Director B, as of today finds it uncomfortable to discuss this matter. This was after he had a meeting with Director A, in his flat.

                        I have asked them for the 2nd time, for us to meet up and discuss this. The only solutions for me now is either roll over or challenge S20 and withhold payments and move to LVT.

                        Can they stop me transferring my share in the company if I decide to sell?

                        Comment


                        • #13
                          That depends on the articles. If properly drafted for common situations it is almost an automatic process when you cease to be a leasehold owner.

                          What you are overlooking is that if you as a leaseholder challenge the costs, any shortfall in service charges and or legal costs have to be met by the freehold company ( to pay the lawyer builder etc).

                          If there is any likelyhood that you will
                          a:not be paying all costs as is often the case, or
                          b:as you suggest a court would order instalments due to your financial position,

                          then the company needs to have in it's articles the ability to ensure that its shareholders( all 3 of you) make up that shortfall to fend off insolvency.

                          While that has ramifications for you it has more so for the two directors.

                          In short there is potential for a bargaining chip on the basis that you can't afford it and can't pay in the time proposed as a leaseholder, nor make up the funds for the company as a shareholder( if you have to under the articles). To avoid "going bust" they need to discuss another solution. Or perhaps worse still the other two loan the company the money!

                          I would urgent you to however take detailed legal advice before taking this route.
                          Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                          Comment


                          • #14
                            As a shareholder / share of the freehold, you can request an EGM
                            (Emergency Gerneral meeting ) and in effect, force the directors to
                            have a meeting.

                            A meeting in which you discuss your greivences.

                            Also, the directors have to retire annualy, and the shareholders
                            vote in directors (read up on this ).

                            see http://ram2.byethost2.com/MEETINGS.htm
                            If problems, go to http://ram2.byethost2.com andclick on
                            Meetings.htm

                            R.a.M.

                            Comment


                            • #15
                              Originally posted by ram View Post
                              As a shareholder / share of the freehold, you can request an EGM
                              (Emergency Gerneral meeting ) and in effect, force the directors to
                              have a meeting.

                              A meeting in which you discuss your greivences.

                              Also, the directors have to retire annualy, and the shareholders
                              vote in directors (read up on this ).

                              see http://ram2.byethost2.com/MEETINGS.htm
                              If problems, go to http://ram2.byethost2.com andclick on
                              Meetings.htm

                              R.a.M.
                              Er that's an Extraordinary General meeting and directors are only required to rotate as and when their articles say.

                              It is dangerous to extrapolate from your own narrow experiences.....
                              Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                              Comment

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