Disputes over communal areas

[Zaika]

We live in a purpose-built private block of 8 flats, 4 of which are owned by residents on a freehold basis. We have 2 registered companies: all 8 owners are directors of a leaseholders' RTM company and all 4 owners with a share of a freehold are directors of a freeholders' Landlord company. 3 of the freeholders live in the block, one owns a buy-to-let flat.

After several years, the owners have changed and most of the original residents are now leaseholders. There is an ongoing dispute between old and new residents over the rights and privileges of freeholders vs leaseholders. The original residents do not like the idea of new residents-freeholders having as much or even more rights than they do themselves and insist on imposing their own rules on the basis that they have been here the longest, they are directors of the RTM company and that they also pay service charges.

This goes as far as the leaseholders making a big fuss over a freeholder putting up a trellis for a climber on a garden shed claiming that it was put up without their permission and 'damaged' the brickwork (it did not!). The trellis was put up with the other freeholders’ permission on the basis that they own the grounds and the buildings and to improve public amenities. Do the freeholders have to get the leaseholders’ permission as well to do this? The leaseholders use this exact word – ‘permission’, not ‘agreement’ or 'consultation'.

Do the freeholders as a landlord have the block management rights and responsibilities, make decisions about how the block is run and maintained, make house rules and enforce them OR do all 8 flats/leaseholders have equal rights to make those decisions and freeholders have no any additional powers?

[AndrewDod]

You are getting tangled up in terminology.

No one here is "A freeholder". There are no freeholders, only people who happen to own a share in the company that is the "freeholder" - not at all the same thing.

There are different relationship types here.

a) Between each of the 8 of you and the RTM Company

b) Between the RTM Company and the Company owning the freehold

Forget about the status of each lessee as "old or new resident" or as "freeholder versus leaseholder" - you all have the same status and the same rights and obligations which are laid out in the lease. The only extra power the so called "freeholders" have is to tell the RTM what they can do (but they may not even be able to do that - you need to look at the documents) and to vote on matters to do with the freehold company (whatever power that company has over the RTM which may be zero).

[siva]

We live in a purpose-built private block of 8 flats, 4 of which are owned by residents on a freehold basis. We have 2 registered companies: all 8 owners are directors of a leaseholders' RTM company and all 4 owners with a share of a freehold are directors of a freeholders' Landlord company.

So are you saying that there are 8 flats but just 4 are leasehold?

If that is the case then I wouldn't have thought formation of a RTM company was possible. I'm not an expert but I thought that two thirds of the flats had to be let to qualifying tenants and only leaseholders can be qualifying tenants.

[AndrewDod]

Why is it the case that " only leaseholders can be qualifying tenant" - I think that is not correct. *Everyone* is a leaseholder, including anyone who has a share of the freeholder company. No lessee is a freeholder (except insofar as they happen to own a share in a company that is a freeholder). The whole thing is recursive. If everyone owned a share of the freehold, it is probably still possible for a set of lesses to set up RTM away from their own company (ad infinitim).

In fact that is probably exactly what happened here -- 4 lessees who thought they were freeholders with special rights that screwed everyone else around. So 2/3 of the 8 lessees (including one or more of the dictators) served the various RTM Notices required on the company (exactly as they would on any freeholder). No problem.

Perhaps the OP will let us know and not disappear.

[siva]

The whole thing is recursive. If everyone owned a share of the freehold, it is probably still possible for a set of lesses to set up RTM away from their own company (ad infinitim).

In fact that is probably exactly what happened here

You could be right. The OP needs to clarify.

I was thinking that possibly the freehold is owned by a limited company (4 shareholders) and the building is 8 flats with just 4 on a long term lease. In that case it would not be possible to set up an RTM from my understanding which is admittedly pretty superficial.

[Zaika]

Thank you for taking you time. Just to explain this complicated situation further.

Originally both the Landlord and the Management companies were owned by the developer who after selling all flats went bust. The developer then passed the Management company to all 8 flats who became directors in it. Straight after passing over his Management company, the developer (Landlord) had also sold the freehold. 4 of the leaseholders pulled together to buy it for a hefty 35,000 GBP and formed a freehold limited Landlord company.

The Lease lists both of these companies, and is between 3 parties: the tenants, the Landlord company and the Management company.

It is not called RTM, it is called a 'Management company'. This company did not have any functions other than they employed an estate management company X to manage the block. However, they elected one resident Mr XYZ to be in charge of the block who was making sole decisions on how to run the block, never called AGMs of residents. He was also a Director of the freehold company, which never had meetings of all members - until recently, when new owners with a share of a freehold purchased and all 4 became directors. 3 of them are the new owners who have not had a chance and time to became 'dictators' and 'screw everyone around' as has been suggested here. If anything, you can attribute this to the old residents and certainly to the Mr XYZ who is pushing the rules in favour of the old residents and their visiting families who used to live in the block - but no longer.

I am really looking for an answer to my question "who owns the grounds and makes decisions' about not maintaining (the estate agent X deals with it) but altering them such as just adding a plant to the flower border or cutting back an overgrown tree? The argument is that if the freehold company owns the grounds, should they not make such decisions? Same question goes for painting the fence.

Having both of these companies makes things so complicated that the question arises about whether one of them should be suspended/closed? You can't close the Landlord company - it needs to be there for legal purposes when a resident with a share of a freehold decides to sell their flat. Closing this company also nils the freehold.

By the same token, if there is a Landlord company who employs an estate agent to manage the block, do you need the Management company at all if it is so disfunctional that you can't get members to attend the annual meeting?

Thanks again for taking your time

[scot22]

I like to keep things as simple as possible. It seems to that the crucial fact is that what is done in the property should managed in accordance with the lease. Use rather than ownership is what matters, in my opinion.
Things can only be done in accordance with the lease. I hope the lease gives guidance in what can, and cannot be done, in communal areas.
The leasehold company technically does own the grounds but cannot just do what it wants.
I don't think I've heard of such a complicated situation but the lease is paramount.

[Zaika]

The lease states that the Landlord has the right to alter and reconstruct the property as he thinks fit and that the Management company does routine maintenance. It looks like a standard lease to me... Anybody came across this co-existence of the two companies?

[siva]

The lease states that the Landlord has the right to alter and reconstruct the property as he thinks fit and that the Management company does routine maintenance. It looks like a standard lease to me... Anybody came across this co-existence of the two companies?

I haven't personally come across it but I don't think it's uncommon. I have certainly seen discussions of leases in the past where a specific management company is referred to.

But whether it occurs in other leases is irrelevant. As scot22 says, it's what it says in your lease that counts.