Management of Leasehold Flats

[LegallyConfused]

hello

I own a leasehold flat, which I bought four years ago. There are twenty in the block, all individually owned and mostly used as holiday lets or second homes.

The flats were converted from a house in 1999. The developer (two brothers) sold them with a share of the freehold, so each owner also owns a share of that.

As most of the owners do not live locally, the day to day running of the building and communal areas needed managing. The developers offered to take this task on, as they both live locally.

Things were fine at first and this arrangement seemed to work well, however the building was newly renovated and therefore I presume not too hard to maintain. There was a handyman who did bits and bobs and a regular Windowcleaner.

fast forward 24 years and the building is falling into disrepair. There’s no handyman anymore. We are paying management charges of £2k per year and no maintenance is carried out. The only regular maintenance is the window cleaner and we do pay insurance.

This year we have been asked for management charges of £4K because the roof needs work. There is one quote for the job, no comparison quote. We asked for further quotes but the brothers said they hadn’t been able to get any. Another owner got one quote easily, and it was almost half the price.

When we ask for maintenance, it can take up to 18 months for even simple tasks. When we take matters into our own hands and employ trades, the brothers get upset and threaten to stop operating the management company.

it’s tuns out that a lot of trades locally won’t work for the brothers, as they have a bad reputation. This means they can’t get quotes when work needs carrying out, or they get one enormous quote that is not competitive and we are forced to accept that. We don’t know if money changes hands between the developers and the tradespeople that they bring in.

The two brothers are still paid to maintain the building. Initially some of the owners were signatories to the bank account , but some of them sold their properties. We pay into this bank account, but the developer brothers are now the only signatories.

We do not see the bank account, we do not see receipts. We do get yearly accounts but they are usually at least six months late.

Roughly half of the owners really dislike the developer brothers. Two have told me they feel intimidated by them. Some of the original twenty owners prefer not to make a fuss, they have a personal relationship with the developer brothers because they’ve known them such a long time, and living remotely, they don’t want the hassle. I have no relationship with them, I just see two guys who are taking vast amounts of money and not properly accounting for it, and possibly employing their mates to carry work out.

Where do we stand legally? Do we need to request an audit of the accounts? What would need to happen for us to dispense with the service of these two brothers?

What if some of the owners are happy to continue with the current arrangement and others are not?

If some of us become signatories on the bank account, are there any implications for being financially linked to these brothers if it turns out that they are dodgy?

Thanks for reading.

Have a look at right to manage. I was in a flat a few years ago and has owners we took over managing our flats. It was about 10 years ago so can't remember too much.

Also I though they had to share accounts to show how your service charge is used? Not sure if this is law but again perhaps google service charge accounts and see what comes up

You really need to be better informed as to your rights as a leaseholder/share of freeholder e.g the Section 20 process for major works. There is a statutory process for this which is clearly not being adhered to. You need to educate yourself.
Are you saying that each owner is being asked for £4000 each just for management fees excluding any actual costs of works needed.
If you join the National Leasehold Campaign Facebook group you fill find lots of advice, help and information!

Thanks for your replies.

each shareholder is being asked for a proportion of costs. The flats are all different sizes, so the management costs are split proportionately. Mine is usually 2k but this year it’s nearer £4K.

There is seemingly no forecasting for future spending, allowing a pot of money to build. So when the roof needed repair, we are expected to find and extra 2k.

i will look at your suggestions now, really helpful thank you

(To be clear, we own the freehold as a group. The manager of the building has no financial interest in the building and they do not hold the freehold - but the owners seem to just let them do as they please).

We had the same in our flat in London with a share of freehold. No sinking fund so residents were going to get stung at some point. As a result, maintenance was neglected as no one wanted to pay while they lived there (quite high turnover) and the block became very tatty.

I recently looked at buying another flat in central London, also with no sinking fund and residents were going to have to fund redecoration of the caretaker's flat and maintenance to the tune of at least £50k each (block of about 10 flats). They weren't even freeholders but had no choice in the matter apparently.

Who are the directors of the freehold company?

Ultimately you are all shareholders in the company who owns the freehold, but if you have a couple of engaged parties then you could take over the FH company by becoming directors and appointing your own managing agent. It will cost in the region of £200-250/unit to have a professional outfit doing it, but I'd suggest it would be worth it to have someone managing it who understands the industry.

It sounds like an exceptionally dodgy set up and I wouldn't pay a penny towards the roof works without the appropriate paperwork being issued. The landlord and tenant act is there to protect you as leaseholders, but you need to know your rights otherwise unscrupulous people will ignore it and you won't be any the wiser.

Thanks for your continued replies.

a few of us are going to tackle this, it’s got to be resolved and quickly. Really appreciate the advice here.

I could have written this myself! We had a meeting this week with our freeholder regarding the roof.

In our case, one person suggested there should have been a 10yr maintenance plan. Also, once we notified of leaks/damage it should have been looked into at the time- not left many more years to degrade further.

Watching with interest what others suggest.

20 shareholders of the company, not one of them a director.

the directors are the two brothers, yet neither of them own shares in the freehold, or any property.

presumably the Ltd company must have a business bank account and the directors must be the signatorories.

I would offer to be a director, but I would not want to be linked to the two brothers in any financial sense.

How are the directors decided?

So, usually the mem and arts of freehold companies say that the directors have to be shareholders unless there is no one willing to be a director.

If your intention is to bring in an independent managing agent, I'd suggest maybe reaching out to them and asking for advice - they should be able to help you interpret the documentation unless it's very ambiguous, and will probably do it on the basis of getting the management after you take control of the FH company, or for a nominal fee.

Thank you

Have a look at lease-advice.org
their website is very helpful, and last time I used them, although it was a few years ago, they had a free advice line. Actually just had a look and seems they still do clients.lease-advice.org/#/

Good shout thanks

If it's a shared freehold, you are all in charge. I don't think LAS can help.

it sounds like whoever has final say on the freeholder group has appointed this company, but why has no one asked for full accounts? Do you have meetings and votes?

There's a group on Facebook called National Leasehold Campaign. Those guys really know their stuff. I'd recommend joining and asking for advice there.

No meetings, no votes.

I bought the property a few years ago, the pandemic came, I thought we didnt have meetings because of that.