Freeholder conflict of interest when setting up a Right to Manage company

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Freeholder conflict of interest when setting up a Right to Manage company

    Thanks to all those in advance for helping me out on this - really need some good advice:

    I am one of six leaseholders in a converted house. One of the leaseholders is also the freeholder and she has proposed, and has her solicitor working on, the formation of a "management company, which would convey a share of the freehold title to the leaseholders of the property" - in her own words, however, she is both freeholder and leaseholder and to date, none of the other leaseholders have been involved in choosing the solicitor or how the company is going to be formed.

    There seems to be a very obvious conflict of interest here - as far as I am aware, most RTM companies are instigated with the leaseholders nominating one person to represent them when dealing with their solicitor, whilst the freeholder has their own solicitor and the two solicitors between them set up the company, but ensure that they are dealing with their own respective party's interests.

    Should our freeholder, who also owns one of the leases, be in charge of both with the whole process being carried out with just her appointed solicitor - this seems crazy to me - what are the potential pitfalls of this and how can I turn this around with the other leaseholders to ensure someone other than her is representing the leaseholders - and we choose our own solicitor.

    I hope this makes sense. Thanks for any input. Mack

    #2
    If it is a true rtm then its worthless as without the qualifying majority joining the company it has no statutory authority or power, she is stuck with her obligations.
    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
      Thanks for that - and that makes sense to me, however, the other leaseholders for some obvious reasons are very keen to go along with her - they are new to all this - first time buyers - have only just bought their leases - newly created at the beginning of this year. Am I being paranoid, or should I be convincing them that there are pitfalls in her being the sole contact with her solicitor to set this up this company - which sees says will give us all an equal share in the management company which I understand will own the freehold.

      Comment


        #4
        Then its not an rtm. Its simply a company that will own and manage the freehold.

        its up to individuals to decide and i would suggest that they do take advice, but of course the freeholder will still have to offer the freehold to everyone under right to first refusal.
        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
          Then its not an rtm. Its simply a company that will own and manage the freehold.

          its up to individuals to decide and i would suggest that they do take advice, but of course the freeholder will still have to offer the freehold to everyone under right to first refusal.
          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


            #6
            Thank you - that is most useful - she is a new freeholder - her mother and step father owned it up until just a few months ago, but as i was suing them through the County Court, they have transferred the tile solely to her to avoid court action - am I right in thinking that if what you have said above is true, then they should have offered the freehold to each and every one of us leaseholders instead of just transfering over to their daughter without any consultation at all - and probably without any price being paid for it?
            I will certainly tell my fellow leaseholders that they should take legal advice on this

            Comment


              #7
              If your proceedings were against them for their actions then it can continue. If it was against them as freeholder then the court only need grant leave to allow the new freeholder to be included.

              If the freehold was in their names then a right of first refusal existed, however what is the point of issuing proceedings on that if they are going to transfer the freehold to you.


              The only exception is that if for example there is considerable disrepair and a chance that your service charge contributions would be reduced at a Tribunal to reflect their earlier failure to repair, then taking on the freehold closes that door.

              I would certainly be looking very closely at them and their declaring any liabilities and outstanding contracts or bills to ensure that they pay them or you at least know about them for future service charges. If for example they have a pile of bills to be paid or paid that they have yet to recharge to you all, time limitations and capping of qualifying works of more than £250 for any one flat might be to your advantage, and should be resolved before taking it on.


              That said if you are getting the valuable freehold for free…..why upset the applecart?


              I would recommend that the freehold is transferred to a limited company as that is far easier to run from the point of view of your future ownership and management. I would also check lease lengths and ground rents as arguments over lease extensions and premiums can be resolved by the participants agreeing this before hand.
              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


                #8
                Thank you Leaseholdanswers - again, all very good advice. The freehold isn't worth so much - the ground rents are just £10 - £25, all the leases are 950+ years to run - I get the impression that the new freeholder/landlady who has had this transferred to her from her mum and step dad (which gives an exception to offers of first refusal) just doesn't want the work of managing the property - certainly my lease has no clause to charge management fees - so it is just and has been a burden to the freeholders - this is why the old guy (the step dad and retired North Yorks County Councillor) has just tried to be as dishonest as possible to try and make some money out of me - up until recently I was the only leaseholder in a converted house of five flats - so was stuck with no ability for enfranchisement or RTM - and when I tried to sell up, he just put a spanner in the works each time - applying to a tribunal for a trivial variation in the lease - or small claims court for items of expenditure not in my lease!
                For all the extra hassle of becoming a shareholder and probably director in a management company and the fact that currently I just have to pay my share as and when maintenance and insurance costs occur, whereas a new company would require us all to pay in much more every month to create a substantial sink fund, I'm thinking I should just duck out and let the rest of them get on with it - and then sell up in a year or so's time - In my circumstances, I can't see much of an advantage - there is only one potential leaseholder other than me who might have the capability to run the company well and manage the maintenance etc - the others are eastern europeans and I reckon they just don't know what they have got themselves into - it looks like a lot of work for no remuneration!!

                Comment


                  #9
                  whereas a new company would require us all to pay in much more every month to create a substantial sink fund
                  Er no. The lease will still be in force, if it does not allow a sinking fund to be raised then they cant force you to contribute.

                  the downside is that if you are not involved then when you come to sell and the management is absent or awful, then your buyer is not gong to be too impressed.

                  Inter family transfers only have limited exemption thats why the Act empowers leaseholders to inquire of the terms. For example if its transferred for a sum then it should not be exempt as a gift.
                  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

                  Latest Activity

                  Collapse

                  Working...
                  X