FAQs

Out of Control Director

The managing company in charge of the block I live in recently appointed 4 resident directors. One of the first things they did was to introduce a "no pets" ban over the whole site. Unfortunately neither they, nor the management company, consulted the lease which says that pets are allowed with permission.

A couple of months ago we put our property on the market and received an offer from a couple with a dog. Initially we thought that a pet was not allowed until we checked the lease and also discovered the OFT ruling regarding blanket ban on pets. Having contacted the management company we received permission in writing that the dog was acceptable, solicitors informed and we start selling process.

Shortly after we had word from our solicitor that the permission had been revoked citing that the dog was not old or infirm, no mention of this "clause" beforehand. This retraction came about after the management company were contacted by the director in question without consultation with the other three.

Since that time we have had a continual battle with the company and one particular director who seems to be hell bent on getting the permission denied. There was total apathy amongst the owners for the last AGM and appointment of directors so any volunteer was accepted.

My main question is how do we deal with a director who has his own agenda but has sufficient friends in the block to counter a vote of no confidence?

Advice from Ian Hollins, Clear Building Management
Sadly, it’s not uncommon to hear of leaseholders being on the receiving end of, at best, an overzealous neighbour and, at worst, a mini tyrant who controls a block like it's his or her own personal fiefdom.

Leasehold ownership is pretty much unique to the UK and it's where two conflicting pieces of law – leasehold law and company law - can collide, to the detriment of residents.

You are correct to highlight that the lease is the important document here, as it’s effectively the contract between you and your management company; I should point out here that I haven’t had sight of your lease or your company articles of association nor is it clear where in the UK you are located as different laws apply in Scotland for example, compared to in England and Wales.

At the end of the day, your managing agent really should be doing a better job of standing up for you and the other leaseholders against this rogue Director. Unless “old or infirm” dogs are referenced in the lease then this is wholly unenforceable (I know this is a hot topic for some Directors and have also heard of Directors who would grant permission to “indoor” cats but not “outdoor” cats, and to “small dogs” but not “big dogs”).
Fortunately, no such definitions appear in the lease so pet consent is just that – consent to keeping a pet.

Where the lease allows you to keep pets without restriction then you are within your rights to do so; the only caveat being that there is likely to also be a clause within your lease which prevents you from being a “nuisance” to your neighbours or interfering with their “peaceful enjoyment” of their homes. As such if the pet was to be found to become a nuisance – e.g.: a dog that barked incessantly – then this clause could be used against you.

In your case, you require the consent of your management company but, as you correctly point out, a blanket ban on pets, or a clause requiring consent which doesn’t indicate that such consent would not be unreasonably withheld, was found by the OFT in 2005 to be potentially an unfair contract term. You can therefore assume that your application for consent to a pet will not be unreasonably withheld.

All of the above relates to Leasehold Law, the behaviour of this Director and your understandable desire to see them removed now moves us on to Company Law.

Directors often volunteer with the best of intentions or occasionally with an axe to grind and, as you have mentioned, volunteers for this unpaid role can be thin on the ground.
Leaseholders are usually also shareholders of the management company, typically each leaseholder also owns one share in the management company, or in the case of Right to Manage is entitled to become a member of the company in return for a guarantee of £1.

Directors have a legal duty to act in the best interests of the shareholders, and with leasehold properties this is usually achieved by ensuring that a competent agent is appointed, Directors & Officers Insurance cover is put in place, and the lease is fairly and consistently applied.

As Directors owe their duties to the company, it is complicated and often prohibitive to make a claim against a Director as a sole shareholder.

I would suggest you initially make your complaint to the Company Secretary (usually the Managing Agent) and the other Directors and request that they take corrective action to settle your complaint and perhaps suggest some suitable guidance for this Director so they can better understand what they can and can’t do in their role.

If this doesn’t work then you could, with sufficient support from other shareholders, request the board call an EGM. Whether or not you can do this will depend on the articles of association for the company and it would be sensible to take legal advice; this type of meeting typically requires the approval of the board of Directors and your reason for calling the meeting will need to be disclosed beforehand.

If all else fails, then (and again assuming your company articles are suitable) you can get the support of a small number of shareholders (10%) to call a meeting using what’s commonly known as “the requisition method”. This is a meeting requested by shareholders (as opposed to the Directors or Company calling the meeting).

It is described in the Companies Act 2006 and you would disclose the purpose of the meeting and the items to be voted upon. The benefit of this method is that if the company do not call the meeting as you request you can go ahead anyway providing you follow the correct procedure.

This route should only be undertaken after obtaining professional legal advice although you may find that legal expenses cover on your home contents insurance will provide you with cover for the advice and any subsequent actions.

I hope that this has given you some useful pointers as to the options available to you, but as all leases and company articles are different you need specific advice in order to process.

I wish you luck with selling your property and every happiness in your new home.

Noise in a Leasehold Flat

I have lived in my private flat for 27 years where there is a policy in place forbidding any noise between 10pm and 9am.

A couple of years ago a new tenant purchased a flat on the floor below, not immediately below me. She moved here from a rented flat where she constantly complained about noise as she is an Auxiliary in the local Hospital and is required do some nights.

She constantly complains about the slightest noise, I have in fact had her hammering on my door at 12 noon screaming at me to stop hoovering because she was on nights. She did the same to the couple below her, this was at 10am, again because of night shift.

It has gone from bad to worse, complaining about TVs even her next door neighbour's washing machine and he hasn't even got one!

The last straw came this morning when I was in my bedroom (her kitchen is below this room) drying my hair and she was banging on her ceiling because of the noise. Yes it was 7am because I had an early appointment but surely a hairdryer would not come under the noise policy as people must prepare for work.

I believe she has been told by a member of the Committee that she accepted the Lease when she purchased the Flat, she's even tried to have that changed, and she stands on the landing listening for the slightest sound.

I am retired now and consequently spend more time at home and it's honestly like walking on eggshells, I don't know which way to turn.

Advice from Kavita Bharti, LEASE
The committee member is correct when they say that when your neighbour purchased the lease she accepted all the terms that go with it. As your lease specifically states that there shall be no noise between 10pm - 9am, it would make sense to think that the flats can be used in their usual manner throughout the rest of the day and certain degree of noise will be heard.

It may be worth seeing if the lease requires any form of noise deadening material to be laid down as there is a possibility that this may not have been adhered to. This may be the reason she is experiencing such disturbance.

Furthermore, this neighbour may be in breach of her lease by causing a nuisance to you and the other leaseholders. Most leases contain covenants not to cause a nuisance or annoyance. If it is clear the downstairs flat is in breach then I would advise you contact the freeholder to see if they are willing to take action against this flat. Sometimes it can be a problem trying to make the freeholder take action. If this is the case, check the lease to see if there is a clause, which allows you to force the freeholder to take action against a breaching leaseholder. This is known as a mutual enforceability clause. It is possible to force a freeholder to comply with this clause by making an application to the County Court for enforcement. Be aware that it is likely that you would be responsible for any costs associated with such an application under the terms of the lease.

In addition to this I would advise that you contact the local authority to see if there is any way they can intervene in this case. It is also advisable to try to deal with the matter as amicably as possible. Here, at the Leasehold Advisory Service, we have recently started a mediation service. Mediation is a way to bring two parties together to talk in the presence of a neutral person with a view to reaching an agreement. Further information regarding mediation can be found on the LEASE website.

Breaches of Covenant

Please would you help? Long term breaches of Covenant requiring floor covering with carpet was discussed in the past. I have a slightly different covenant which states, "the whole of the floors of all rooms and the entrance and the corridors thereof are suitably covered with carpets or other sound insulating material except while the same shall be removed for cleaning repairing or decorating the flat or for some other temporary purpose".

I purchased the pent house flat in 2013. It has an expensive wooden floor and tiles in the kitchen, en suite and bathroom. The floor was laid, I believe, in 1993 by previous leaseholder. 

 

Because of asthma in the family I have always been keen to avoid carpet and the very reason I purchased it. Since the wooden floor was laid I am the third leaseholder. After three years of occupancy, I received a letter from the solicitor representing our management company asking me "what steps will I take to adhere to that (lease) requirement".

I am not sure what "other sound insulating material" means above.
I am not sure if the floor laid many years ago had director's permission. I do know that every floor in the building is concrete and the wooden floor has a very thin polyethylene underneath.

How do I tackle this problem? I don't want to put down carpet.

 

Advice from Dafydd Jones, JB Leitch

It is important to adhere to any and all covenants in the lease as failure to do so could result in the Landlord and/or Managing agent (as applicable) taking action against the leaseholder for the alleged breach which can, subject to certain requirements being met, include forfeiture proceedings.

Therefore, it is important to make sure that the obligations under the lease are fully understood and complied with. This will depend upon the wording of the covenant in question, the context and for example, whether there are any further relevant provisions in the lease.

 

Covenants requiring carpets or other similar material to be fitted are common in leases of flats in a block. It is thought that the intention behind such covenants is to reduce the sound of footfall on floors that may be a nuisance or inconvenience to other leaseholders and occupiers in the units below and/or above.

 

Based on a simple reading of the covenant cited, it would appear that there is a risk of your flooring being in breach of the requirements under the lease. However, I would recommend that you consider the following:-

  • It is noted that the covenant in question refers to the requirement to cover the whole of the floors of all rooms and the entrance and corridors with carpets or other sound insulating material.
  • What is meant by “other sound insulating material” is open to interpretation and it can be argued that given that there is no express reference to wall-to-wall fitted carpet, the expression can include floor rugs and mats. The reference to the removal of such carpets or other sound insulating material for the purpose of cleaning, repairing or decorating or other temporary purpose can be argued to support this contention.
  • The covenant refers to the requirements of the floors being “covered” and it could be argued that this suggests that such sound insulating material must cover (emphasis added) the floors rather than be fitted underneath the flooring. Therefore, it is difficult to assess whether the thin polyethylene you refer to in your question is sufficient.
  • You state that you are the third leaseholder in the property since the wooden floor was laid and that you believe that the floor (referring to both the wooden floor and tiles) was laid by a previous leaseholder in 1993. This is important for two reasons:-
  • If it can be established that the flooring was in fact laid in 1993, it could be possible for you to argue that any further action for breach of covenant by the management company by way of legal proceedings is out of time. Generally speaking, there is a period of 12 years from the date of breach of the covenant within which a claimant must issue a claim in the Court. The expiry of this period does not prevent a claim being issued but does provide the defendant with the defence that such action is out of time and cannot proceed.
  • It is recommended that you check the date of your lease. If granted on or after 1 January 1996, in the face of any further action for breach of covenant by the management company, it may be possible for you to argue that you are not liable for any alleged breach of covenant by virtue of the Landlord and Tenant (Covenants) Act 1995. Generally speaking, this Act provides that where an assignee becomes bound by a covenant, they will not have any liability under the covenant in relation to any time falling before the assignment. However, this provision would not apply if your lease is dated before 1 January 1996 and was an assignment of the same to you.
  • You refer to being in occupation for three years before receiving the letter from the managing company’s solicitors. If it can be established that the managing company were aware of your flooring and subsequently demanded and/or received any ground rent or service charges under the lease, there is an argument that they have waived the right to forfeit the lease and acquiesced to the alleged breach. It is therefore recommended that you check your ground rent and service charge statements as to when these were last demanded and/or paid.
  • You state that you are unsure whether the permission of the directors was granted for the floor. It is recommended that you contact the solicitors/conveyancers that acted for you in the purchase of the flat in order to ascertain whether they have any information in this respect.

The above are recommendations only and subject to the information provided. In any event it is recommended that you obtain a full copy of your lease from the Land Registry (available online) and seek legal advice accordingly.

Lease variation required?

I intend to make alterations to my flat with the landlord’s consent. Will the lease need to be varied?


A LEASE adviser replies: If you change the physical layout of the flat the original lease plans will not correspond to the actual layout of the flat and so the lease will need to be varied. A deed of variation in this instance would normally take the form of an amended plan which is then registered at the Land Registry. If you do not obtain a deed of variation you may experience problems when you decide to sell the flat.

Do I have to pay for replacement windows?

 

I recently put double glazed windows in my flat with my landlord's consent. I have now received a bill for window replacement in my block. Do I have to pay?


 

A LEASE adviser replies: When consent was granted to replace your windows, the terms of the consent may have contained an exemption from the cost of future window replacement or an agreement that you would pay a reduced contribution. If no such agreement was reached you should take a look at your lease to find out whether you have to pay for window replacement.

 

Which bank account is right for us?

Our management company recently appointed a new treasurer, who is concerned that the bank account we currently use to collect service charges and pay bills may not be appropriate. It is a treasurer’s trust account, which appears to be suitable for charities and clubs. The new treasurer is keen for us to have an account that allows payments to be made electronically and the account to be managed via the Internet. Do you have any guidance or comments on this?

Flat Living replies: The Association of Residential Managing Agents (ARMA) has published a Guidance Note on Service Charge Accounting. Section 5 specifically details the type of account you should use to hold service charge funds. For more information go to www.arma.org.uk and click on the leaseholders section. The guidance can be found in the Leasehold Library.

Should we set up a Resident’s Association?

 

 

We have tried to start a Resident's Association. When we first asked people if they would be interested they said they were but since we have sent out letters to schedule a meeting only three people have acknowledged the letter. Am I right in saying that we need 60% of the residents to form the association? Do we have to include the commercial units in the percentage? It seems there is a lot of apathy, something needs to be done but as one voice is near impossible to get anything sorted which seems very unfair as for most of the year they haven't carried out any of the contracted services.

 

Flat Living replies: Thank you for your question. Unfortunately apathy is something we come across regularly. We approached one of our consultants who provides regular guidance, who provided the following advice.

 

Residents’ Associations can be set up and run informally but a formally recognised Residents’ Association acquires additional legal rights.  

 

A Residents’ Association obtains formal recognition in one of two ways:

 

Write to the landlord and request written recognition. If he sends written confirmation that he has recognised the Residents’ Association then no further action need be taken.

 

If the landlord refuses to recognise the Residents’ Association, then the group can apply for recognition to the nearest Rent Assessment Panel of the Residential Property Tribunal Service. 

 

The secretary of a recognised Association is entitled to:

 

  • Ask the landlord for a summary of service charge costs incurred each year,

 

  • Inspect accounts and receipts for the property in relation to service charge costs,

 

  • Ask to be consulted on the appointment or re-appointment of a managing agent for the building,

 

  • Appoint a surveyor to advise on any matter relating to service charges; The surveyor will have rights to see and copy supporting documents held by the landlord, to inspect common parts, and to appoint assistants,

 

 

  • Nominate contractors and inspect any estimates/specifications

 

In order to be granted formal recognition a landlord/Rent Assessment Panel usually requires, as a minimum, that the group demonstrate the following:

 

  • The rules of the Association should be fair and democratic.

 

  • Membership should be not less than 60% of those qualifying for the scheme.

 

  • Members must be paying a variable service charge to the landlord (i.e. tenants paying fixed rents/service charges will not qualify for membership; although they could be involved informally they are not entitled to vote).

 

  • Only one vote per flat or home should be permitted.

 

  • No more than one association per building/block will be recognised, but more than one per scheme is acceptable for larger schemes with several blocks. 

 

The Association should submit the following documents when applying for recognition:

 

  • a copy of the Association’s rules or constitution and elected members, and

 

  • a list of subscribing members’ names and addresses.

 

A Rent Assessment Panel will usually grant a certificate of recognition for four years.  Landlords granting voluntary recognition will usually have a procedure in place for continuing recognition, such as requiring the association to submit updated documentation annually.

 

Leaseholders have a legal right to establish a recognised Residents’ Association, so it is good practice for landlords/managing agents to encourage and co-operate with them. It demonstrates transparency and accountability in management, and on a practical level, eases communication with leaseholders and reduces the duplication of messages.

 

Once you and your fellow residents have decided that this is something that you feel you would benefit from, it is best to arrange a meeting (or two to allow for residents that were not able to attend the first one) to establish the criteria by which the association will be run.

 

Like all companies or associations, a Resident’s Association must have a constitution drawn up.  This is a document adopted by your association that states the aims and objectives of the organisation and how it will be run. The constitution will detail:

  • The name of the association;

 

  • What the association will do (aims and objectives);

 

  • Who can be members of the association;

 

  • Ending membership;

 

  • Who will be on the committee (numbers and officers);

 

  • Code of conduct (usually a reference to a separate document);

 

  • Number of meetings per year (committee and general);

 

  • Voting rights;

 

  • Subscription levels;

 

  • What the funds raised will be used for;

 

  • Who will open the bank account;

 

  • Who can sign cheques;

 

  • Who will manage the accounts;

 

  • Procedure at Annual General Meetings;
  • Quorum;

 

  • The role of the Secretary;

 

  • Amending the constitution; and

 

  • Dissolution.

 

By law, landlords must recognise and consult with resident’s associations. If a landlord refuses, leaseholders have the right to apply to the First Tier Tribunal to grant them the status of a recognised tenants association.

 

For more information on setting up a Resident’s Association go to the Federation of Private Resident’s Associations website at www.fpra.org.uk

 

Can I resign from my position in our RMC?

Question. I own a flat in a block of six flats, five own a share of freehold and we have created a Ltd management company that we self-manage. For about 10 years, I have taken the responsibility of the accounts and more recently taken on secretarial and administrative duties with service suppliers. I wondered what choice/position I have to resign from all this.

Answer. Presumably you are unpaid and have no contract, in which case you can resign any time you like. If so, one or more other directors will have to take on those responsibilities or employ a managing agent. For small blocks of this size, there has been a trend for employing outside help with company secretarial and bookkeeping services, keeping other aspects of management in house for the reason that a willing person can often be found for that reduced role.

Can we charge admin fees?

There is much contradictory information on the web that suggests that we can't charge admin fees unless they're specified in the lease. I've noted the following on your website."Since the Commonhold and Leasehold Reform Act 2002 came into force it has become possible to levy variable administration charges for breaches of a lease, such as late payment, even if the lease does not specify this." Could you point me to the specific clauses within the 2002 reform act?

Russell O'Connor replies: Schedule 11 of the Commonhold and Leasehold Reform Act 2002 makes a provision for “responsible” administration charges. See http://www.legislation.gov.uk/ukpga/2002/15/schedule/11 for more information. However, unfortunately, this is where arguments can start. Unless a property lease states that an administration fee can be charged for the purpose of late payment fee, then many managing agents will apply the legislation to cover the costs of having to pursue outstanding balances. The lease is very specific about when charges for ground rent and service charge must be paid by and the lessee can find themselves in breach of the lease for non-payment.


Breach of lease fees are specific to the type of breach that has occurred. The question is, if it’s a breach that the landlord is looking to forfeit the lease against due to none compliance, such as making alterations that could be deemed as unfit for purpose or damaging the rest of the building, any costs associated with the breach are recoverable. This can usually be found under the items of Section 146 notices, or if the alterations are subject to an increase in the freeholders/landlords insurance they can recover this from the lessee in question. However, further information on the situation in question would be needed to give you clear advice.

A freehold management company has been formed to manage a small block of six units. The original lease provided for six allocated car parking spaces and six visitors spaces to be used on a first come first served basis. Can the new company now allocate the visitors spaces to residents?

Flat Living replies: The original lease will still form the framework that should be followed, however as the freeholder you now have the ability to alter the lease, as required. We would suggest using a solicitor that has experience with making changes to leases, as the procedure can be quite complex. We have a number of experienced companies in our Directory at http://www.flat-living.co.uk/directory?region=9

If an application is made to the Tribunal can a landlord recover their legal costs through the service charge?

A LEASE adviser replies: You should take a look at your lease to establish whether legal costs can be recovered through the service charge from all the lessees. If you find that legal costs are recoverable as a service charge under the lease, you can make an application to the Tribunal under Section 20C of the Landlord and Tenant Act 1985 requesting an order that the landlord should not be allowed to recover such costs. In some cases a lease also allows the recovery of legal costs from an individual leaseholder. For example, when the costs incurred result from a failure to pay the service charge. In those circumstances the charges sought are technically classed as an Administration Charge. They must be reasonable, amongst other things, in order to be payable; but if they are reasonable and payable they are recouped from an individual leaseholder. This is unlike costs recouped as a service charge which are paid on an apportioned basis by all leaseholders. It follows that the lease should be reviewed to establish if there is an obligation on a leaseholder to pay an Administration Charge. You may require the services of a solicitor. 

My next door neighbour is keeping a dog in their flat and it's causing a nuisance. What can I do?

A LEASE adviser replies: You should take a look at your lease in order to find out whether pets are allowed in the building. Consent may be required to keep pets at the property or there may be an absolute prohibition. In addition to covenants regarding pets there would generally be covenants regarding causing nuisance to other occupiers of the building.

The lease should set out how the covenants can be enforced. Normally the landlord would have the power to enforce covenants within the lease. This means that a leaseholder will generally need to instruct the landlord to enforce the covenants against another leaseholder and if the lease requires it, the leaseholder will have to indemnify the landlord against the costs involved. In some leases certain covenants may be mutually enforceable. This means that a leaseholder could take legal action directly against another leaseholder for breach of covenant. In the first instance it may be advisable to try to resolve the matter amicably, perhaps through mediation.

Our freeholder won’t pay for repairs, what can we do?

We have a freeholder who has let our block of four flats get into disrepair. We are supposed to pay a quarter of repairs and when the freeholder moved in they used this to get their wall fixed but when it came to other parts they stopped caring. As one flat is rented the council got involved. They now have to get things done and they are taking it out on the rest of us. They are suddenly demanding a lot of money for a couple of bulbs and the electric trip for the communal hall which is on push switch, even though electric is not in the lease. We took over a garden seven years ago and planted ornamental trees and put in a little shed, that they agreed with and they now want to flatten the land and charge us for it. 

Bruce Maunder Taylor replies: Your lease is a contract between the freeholder (normally called the landlord) and each of the lessees having their own contract.  These contracts are legally enforceable.  The fundamental point which comes through from your question is that no-one is sitting down talking to each other in an attempt to find workable solutions.  Cooperative management is the only form of management which works.  You use the word “we” and you refer to the freeholder apparently owning one flat and I assume that you and the other two lessees can work together.  Any two of you (representing 50%) can either enfranchise the freehold interest (compulsorily purchase the freehold from the freeholder) under the Leasehold Reform Act 1993, or exercise your Right To Manage under the Landlord and Tenant Act 1987.  You will then have control of the management function and can make it work properly.  Get one other lessee to join you, take control of the situation, and manage the property properly.

What is the requirement for owners to become Directors?

The contract between a solicitor and his client is particular to each of them and the management company cannot claim that the conveyancing solicitor has any duty of care to the company.  A new owner may tell you that his solicitor has said         nothing bout the contents of the deed or lease in regard to these matters, and that may have happened to one or two.  It is most unlikely to have happened in all cases and most solicitors are quite diligent in telling their clients about such matters.  If the present arrangements work with two directors, why do you want more?  It was Winston Churchill who said that the best committees were those of two people, one of whom was permanently absent.  If you want to oblige somebody to become a director because of an obligation in a deed or lease, the company will have to take enforcement action which costs money, time and effort.  If successful you gain a reluctant and possibly rebellious director.  If your concern is that some people are not contributing their share of the costs, then you take straightforward recovery action, usually through the company’s solicitors.  It is not uncommon for residential management companies to fail to make their annual or accountancy returns, or to be unable to fill the offices of directors and secretary, resulting in fines from Companies House and eventual striking off of the company.  That can have severe consequences in that there is no one responsible for maintaining the common parts and common services, and no one with the power to charge service charge funds for doing so. In such circumstances, it is not uncommon for properties to lose marketability and market value, and opportunities for speculative investors to buy at discounted prices with a view to turning a profit.  For so long as you own one of the flats I advise that it is in your best interest to keep this management going, despite apathy from most other people: once you sell and move away it will no longer be your problem and, yes, those who remain may well find themselves in a difficult position.

Does the Resident's Management company have the right to a copy of the tenancy agreement on a rented flat in our block?

Question: I am Chairperson of the Management of a block of flats. Could you please tell me whether the Residents’ Management Company has the right to a copy of the tenancy agreement on a rented flat in our block? And should we know the name of the people living in the rented flat for fire reasons?

Answer: Some leases provide that a license or landlord’s consent is required before a flat can be sub-let. If so, the landlord can incorporate reasonable terms for giving such license or consent and it is generally accepted as reasonable to require a copy of the tenancy agreement and the name/contact details of the occupier. However, most flat leases do not have such a clause and have no control over these matters. Many wish they did! As a matter of general advice, co-operative management is always the best management. Management by enforcement of so called rights can be deeply painful at times – to everyone. Most flat occupiers recognise that there are likely to be times in the future when they will need the help of other people. Whether or not their landlord is willing to share names and contact details, the occupiers are often willing to do so if given the perception that this is driven by a wish for neighbourly co-operation and not by a nosy parker attitude. Even their landlord is more likely to respond favorably if he believes that shared information means that you will let him know, on a co-operative basis, if something starts going on in the flat, or with its occupation, which might be important to him. The old sayings are still the best ones: it’s easier to make enemies, it is best to make friends.

Is our sinking fund safe if we hand control over to a Property Manager?

Question: For the past 10 years the residents of a block of 29 flats have been running a residents management company. Time and age has caught up with us and last December we passed over the running of the building to a property management company with whom we are very satisfied. We need to transfer our large sinking fund money to this Company and this poses three questions, which I hope you can answer. The money will be put into a trust account titled Customer account.

1. What would happen to our money if the company went into liquidation?
2. What could happen to our money if the company was taken over?
3. Can we take out an insurance against theft of our money or similar?

Answer: The bank account in which your sinking fund money is placed should be particular for your block and should have in its title the word “Trust” or “Client”. That is sometimes abbreviated on the cheque book to CPA (Clients Premium Account) and it is a copy of the bank mandate you should look at to establish that the account has been properly named. If the management company then went into liquidation, your sinking fund monies would not be part of the assets with which the liquidator or other insolvency practitioner can use to satisfy the debts of the company. The Sinking Fund monies would have been effectively ring fenced. Incidentally, the same applies to your ordinary service charge monies providing they are placed in a Trust or Client Account. If the management company is taken over then, subject to any contrary agreements you reach with the new management company, your monies are protected and ring fenced in the same way. Recovery after a theft has occurred is problematic, it very rarely happens, your managing agent should be covered by professional indemnity insurance cover against which you would claim, and you should expect to see the terms of his cover shortly after each year’s renewal. Your managing agent ought not to object to provide you with a copy. If your management company belongs to a reputable body (ARMA or RICS) they insist on checking the professional indemnity insurance cover of each of their members every year. The RICS has a bonding scheme but with a financial limit. Far better to protect yourselves before any theft occurs: if for any reason, you are asking these questions because of particular concerns you have, then I question whether you should be with that managing agent in the first place.

 

The gardener in our block was recently replaced, so I contacted him and he told me that he was not prepared to pay the managing agent 10% of his bill. I went to see the new gardener and asked if he pays 10% to the managing agent. He admitted that he does and said that it's the industry norm. Is that true?

 Most definitely not.  The way you describe it, a hidden payment was being demanded by the managing agent for awarding a service contract to be paid for from Trust monies (S.42 – 1987 Act).  A few managing agents have a contract in which their fee is calculated, in whole or in part, by reference to a percentage of costs, but such payment and its calculation is shown on the invoice and separately charged to the service charge account; it is not collected direct from the service supplier.  As of 1 July 2011, the Bribery Act came into effect.  What you describe seems to fit within the statutory definition of bribery.  You need to establish how your managing agent calculates his fees, confirm in writing to the gardeners what they told you about their 10% payment and, in the first instance, take the matter up with the senior person at the firm of the managing agent.  Depending on their reply, assuming you receive one, you may wish to take the matter further.

 

What is Section 20?

Section 20 is the consultation process for works which:

  • Will cost any one leaseholder more than £250. This includes repairs, maintenance and improvements to your building and estate.
  • Enter into a long-term agreement (for more than 12 months) with outside contractors for work, supplies or services which will cost any one leaseholder more than £100 a year. Examples include cleaning, grounds      maintenance and surveying.
  • Carry out work under a long-term agreement where the work will cost any one leaseholder more than £250.

The Section 20 consultation process generally has three stages:

  • A notice of intention - what you are planning to do.
  • Notification  of estimates - prices that you have obtained.
  • Notification of award of contract - who has been chosen.

More advice can be located on the Leasehold Advisory website http://www.lease-advice.org/information/faqs/faq.asp?item=173 or via the RICS Service Charge Residential Management Code which is available http://79.170.44.136/flat-living.co.uk/information/category/service-charge-residential-management-code/

I am a director of a RMCo. We had a spate of security and break-in problems and installed a CCTV system. The security problems appear to have been solved but a group of residents are now complaining of loss of privacy, What is the Company's legal position?

The service chargeable items in most modern leases contain a clause to the effect that additional services can be installed from time to time and it is probably such a clause on which you relied to install this CCTV system at a service charge cost.  Having done so, it is one of the common services and the Company now has an obligation to maintain it just like all the other common services.  Before you installed it, the Company carried out the statutory S.20 consultation and it was at that time that those concerned with privacy should have raised their objections.  I assume that they did not, probably because, at that time, it did not occur to them that there might be a privacy problem.  However, it is not only burglars who are deterred by CCTV security systems: the risk of immoral or illegal use of flats tends to be eliminated when this sort of security arrangement is installed and unsuitable sub-tenants tend to look elsewhere for accommodation.  My point is that CCTV camera systems do have much wider effects than just deterring burglars.  The Upper Chamber (the appeal body from the LVT) has made it clear in more than one decision that many management problems have more than one solution which is within the brackets of reasonableness and, merely because one answer is reasonable, does not mean that there is no other reasonable answer.  It was reasonable to have given lessees a monitoring facility and, if lessees had objected at the consultation stage, it would probably have been reasonable not to have given lessees an individual monitoring facility.  Either decision could have been reasonable.  If the Company now wishes to reverse its decision and remove the individual monitoring facility, some lessees may challenge the original cost and subsequent removal costs, effectively seeking repayment.  There is a further risk of those lessees who welcome the additional security possibly taking legal action to prevent any removal.  Legal action is always expensive and risky.  The Directors may wish to carefully consider the full impact of the CCTV system on the block, write out a short report to all lessees setting out the experience of advantages and disadvantages so far, put the two points of view, and ask for consultation replies.  Not only should such an exercise assist in establishing a majority view and strength of feeling, it would also help to stop any risk of spreading misinformation and reduce the risk of anybody instructing lawyers and commencing speculative but potentially expensive litigation.

 

I own a flat in a block of six flats, five own a share of freehold. For about 10 years,I have taken the responsibility of the accounts and more. I wondered what choiceI have to resign from all this.

Presumably you are unpaid and have no contract, in which case you can resign any time you like.  If so, one or more other directors will have to take on those responsibilities or employ a managing agent.  For small blocks of this size, there has been a trend for employing outside help with company secretarial and bookkeeping services, keeping other aspects of management in house for the reason that a willing person can often be found for that reduced role.

Do gas companies really have the right to by pass planning consent?

Question: We are a small block of eight private flats, post-war bomb damage, in an otherwise 19th century square, designated a conservation area. Recently a gas leak was traced to an underground pipe in the road outside. The utility company said that the pipe-work both in the road and leading to the flats would have to be replaced, and that it was no longer their policy to replace pipes inside multiple occupancy buildings. We had no consultation on the possible sitting of such pipes. Internally the supply pipe that ran upwards through the kitchen of each flat was cut off, and the gas meters were relocated near the front wall. We now have vertical and horizontal pipe-work running across the façade.

We appreciate that the leak had to be made safe and the gas supply restored. But do gas companies really have the right to bypass planning consent, ignore aesthetic considerations, and possibly reduce the value of our property? Even to put us in the position where the Conservation Section of the local Planning Department may ask us to relocate the pipes at our expense? Can you suggest, please, any possible redress? Have there been any other instances of this?

Answer: There have been many occasions over the years when gas companies have refused to reconnect to internal gas pipes, insisted on the external location of gas meters and then individual pipe from each meter to each flat. Indeed, there are many blocks with other cables pipes and wires on the outside, often introduced when communal supplies have been replaced with individual supplies. It is a widespread problem. Some blocks of flats accept external pipes and conduits and nothing further develops. Other blocks take great exception to this multiplicity of individual external surfaces (individual satellite dishes are possibly the most notorious) and great difficulties are created.

Most leases provide that the individual supply pipe or cable is part of the demise as it supplies only that individual flat. Few leases provide that the lessee (or anybody else working for the lessee) can unilaterally put the pipe on the outside of the building where it is technically trespassing. That is often the route by which managing agents or landlords oblige individual lessees to reroute external pipes, cables satellite dishes etc.

Your complaint is against the gas company, but you represent the directors of the RMC and not the individual lessee. It is each individual lessee who is in the contractual position of being able to take issue with the gas company, and the RMC is in the contractual position of being able to take action against the individual lessee. As no steps were taken at the time to stop them whilst the workmen were on site, you now have a situation of acceptance or rectification. It is probably unlikely that the gas company will willingly rectify what they have done. Situations like this often come down to managing peoples expectations: if you expect rectification, you are likely to have to engage in time effort and expense in pursuing remedial works or, arranging for the lessee to remedy the matter, quantify the cost, and attempt recovery action.

A lawyer will tell you that neither party has a cast iron case (nobody has a cast iron case at law) and an assessment will have to be made of your chances of winning and the costs (both money and emotional) of fighting. A gambler will tell you that you have better odds in a bookmaker’s office where it is certain that you will not loose more than your stake before the
race is run!

 

Please could you tell me what to underlet a flat means?

In most cases, a lease of a flat is held direct from the freeholder who owns the whole building.  Some flats are owner-occupied which means that the occupier is the person who owns the lease.  Some flats are underlet, which means that the occupier is somebody who pays a rent to the person who owns the lease of the flat.

We are planning to extend our leases by means of a Deed of Variation

I am a director of a not-for-profit company, which owns the freehold of a block of 27 flats. The company manages the property on behalf of the lessees each of whom own one share in the company. Our property was built in 1967, the leases of each of the flats having commenced in 1967 and with a life of 120 years. Our leases therefore have 77 years of unexpired life.   

We are planning to extend our leases by means of a Deed of Variation. We already have a Deed of Variation which will be superseded by the new deed which will include the clauses of the existing deed.

Each flat owner has his or her own garage. The garages have their own separate leases. One concern is that flat owners could assign their garage leases to a one party and assign their flat leases to another party. This would be a retrograde step. We would be faced with more people and vehicles visiting the property and inevitably the garages would fall into disrepair. How can we ensure that each flat and its associated garage is only assigned to one common owner? Could this be enforced by a one new Deed of Variation which also extends the leases of the flats and associated garages? It would certainly reduce the paperwork burden if we could carry out the operation with just one all encompassing deed of variation.

Katie Cohen, a leasehold enfranchisement solicitor at Jaffe Porter Crossick LLP, replies:

It may be possible for the garage lease and flat lease to be amalgamated so that one lease is put in place and therefore one common owner for both the flat and associated garage.  This would overcome the problem of separate ownership.

 

I am in the process of commissioning a fire risk assessment. What will I get for my money and how much should I expect to pay?

John Johnson of Eljay Risk Management Ltd replies:

You should expect the person carrying out the assessment to look at all of the fire safety features, such as emergency lighting, escape routes etc. and importantly to look at any fire hazards that may be prevalent. The check should include bin areas, cellars and other potentially hazardous areas. Any log books on site should be made available for inspection as well, so that the upkeep of the fire detection and alarm systems, if fitted can be assessed.

A written fire risk assessment report should be provided, signed by the assessor, with an action plan and any remedial measures rcommended. The assessor should also be prepared to provide further advice to the managing agent upon request as well.

As a guide, for a fire risk assessment of the common areas of a block of 15 dwellings with 2 staircases, garden and basement, including a written report we would charge around £110 plus VAT. The fees do tend to increase depending upon the size and complexity of the property. This is because time spent on site is a factor in putting together quotes for assessment work.

What are our assets?

Companies House publish leaflets for management companies such as you describe. Providing you do not collect ground rents or make any capital sales (eg, lease extensions) it is possible that, if you follow the right procedures, you could make dormant company returns.  It is possible that the share capital is the only asset to be shown, subject to you not having had to purchase the freehold interest in the first place by enfranchisement or other process.  You should not therefore have to provide standard company accounts (merely a simplified balance sheet) and for management purposes, need merely provide an income and expenditure statement to the lessees.  It is good practice to include a balance sheet demonstrating that all income, less all expenditure, matches up with the money held at the bank. 

We have different sized flats in our block, why should we pay the same service charges?

Your lease is your contract between yourself, the freeholder, and any other intervening parties.  If that contract effectively states that all 32 flats will pay the same proportion of service charges, then that is the contract which the original lessee accepted when the lease was signed, and which you accepted when you bought the flat.  The natural inference is that, at those two times, all parties considered that the fairest way to apportion the liabilities was on a per unit basis and not a floor area basis.  Many other flat development schemes have followed a similar principle, I accept that there are also many other schemes which have apportioned service charge liabilities according to rateable value, or floor area, or some complicated formula as to usage of particular services.  It is not unusual for the owner of the smallest apartment to feel unfairly treated when service charge proportions are not based on floor area or size.  It is a problem which gives rise to many complaints and disputes.  There are provisions in the Landlord and Tenant Act 1987 (S.35 and S.37) for applications to be made to an LVT for a variation of service charge proportions in certain circumstances.  The LVT has discretion and is not bound to order a variation.  Possibly more important from your point of view is that, if you were successful in challenging your proportion through those statutory provisions, the lessees who would then find themselves having to pay a larger proportion than is contained in their contract (their lease) would also be able to apply to the LVT for compensation based on the financial damage they will suffer in the future for having to pay more than they thought they would have to pay when they bought their flat.  The short answer to your query is that the possibility of mounting a challenge exists, LVTs would be overwhelmed with work if such a challenge was considered to have a strong chance of success, it is likely that a successful challenge would then be followed by applications for compensation, and you would have to have a very good explanation of why you bought this flat in the first place, knowing of the problem, to stand any chance of persuading an LVT to exercise their discretion in your favour.

We have served a Section 13 notice on our landlord and have not received a counter-notice. What can we do?

In the Section 13 notice you must specify a date for response of at least 2 months from the date of service of the notice. If your freeholder does not respond or responds late then you can apply to the County Court to acquire the freehold on the terms of the Section 13 notice within 6 months from the date the counter-notice was supposed to be given.

We are in the process of trying to buy our freehold but we can’t agree the premium or other terms. What can we do?

You can apply to the LVT for them to determine the terms. This application must be made within 6 months from the date of the counter-notice. There is no fee for such an application.

We are buying the freehold of our building collectively. How do we split the costs between us?

The Leasehold Reform, Housing and Urban Development Act 1993 does not address this point and so it is a matter for agreement between the leaseholders. It is important to agree on this point prior to starting the process. You may wish to enter into a Participation Agreement to make sure all of you provide funds in the agreed proportions.

We want to buy the freehold of our building. Are there costs to pay, other than the price of the freehold?

You will be responsible for your landlord’s reasonable costs. This is limited to legal and valuation costs, for example the landlord's valuation, legal costs of transferring the freehold and checking your right to buy the freehold. You do not have to pay the landlord’s costs in connection with any LVT proceedings. If you are privately negotiating to buy the freehold outside the 1993 Act there are no rules regarding costs. It is a matter of agreement between the parties.

What happens if any of the participating residents wish to withdraw after the initial notice has been served on the freeholder to purchase the freehold?

The withdrawal of an individual participating resident does not affect the acquisition and the initial notice will continue to be valid. The remaining participating residents will continue to be liable for all costs incurred in connection with the acquisition. It is therefore advisable that the participation agreement sets out the terms on which participating residents agree to conduct the acquisition of the freehold.

Fire Safety

I have just bought a flat and there is a notice on the board in the common areas that for fire escape purposes, the block has a stay put policy. I have no idea what that means;

There is a complicated technical answer to this question but let me try and put it in

ordinary English language.  In round terms, if your block of flats is built with concrete floors and a

concrete staircase with a proper fire-proof entry door into your flat, and if a fire started somewhere

else in the block, it is assumed that you would probably be safest if you stayed inside your flat

until the fire services arrive and wait for them to get you safely out of the building.  In other words:

stay put.  On the other hand, if you live in a Victorian conversion with wooden floors and a

wooden staircase, and a fire starts somewhere else in the building, then it is probably safest for

you to get out of the building as quickly and as safely as you can.  In other words: do not wait for

the fire services, get out, and get out as quickly and as safely as you can.

Actually, whoever put up the notice in your entrance hall has a responsibility to make sure that

you understand what the policy for your building is and there ought to be a more complete

explanation, either pinned on the notice board or sent to all residents occasionally so that they do

have a good understanding of what to do when they become aware of a fire somewhere in the

building.

Uncooperative agents

We are a small block and appointed new managing agents when we were not happy with the service provided with the previous ones

On the date for handover, the old managing agent passed over the money and a few documents but they have refused to hand over most of the documents saying that they belong to them and not to us. We are investigating some problems with regard to some major works and we need all the files relating to the contracts with the supervising surveyor as well as the builders.  The old managing agents refuse to hand them over and we are increasingly concerned that the answers to what we need to investigate will be found on those files and might reflect badly on the old managing agents.  Can you help us?

ANSWER The outgoing managing agents acted as your agents. The papers and documents

belong to you, even if they were documents created by the managing agents.  If the outgoing

managing agents are members of RICS or ARMA, they are obliged to have a complaints handling

procedure; ask for a copy of it and follow the steps through to a reference to the Ombudsman if

necessary.  If the outgoing managing agents are not members of RICS or ARMA, then it is

possible that they do not have a complaints handling procedure.  I assume that the documents

you are seeking are of substantial importance and that you have already written a carefully

worded letter explaining why you need the documents and that, if necessary, you will instruct

solicitors and seek costs.  If not, do so and address the letter personally to the first named

director on the letter heading or the senior partner of the firm.  Ask for the letter to be

acknowledged and ask for a reply within 14 days.  If that does not achieve success, you will have

done everything you can without spending money and if you need to proceed further, it will be

necessary to instruct a solicitor.  Please make sure that you instruct one who is familiar with

disputes and litigation; their knowledge and skills are very different from a conveyancing solicitor

who acts in buying and selling property.  A well-written letter from a solicitor will normally do the

trick.  If it doesn’t, then you are probably correct in suspecting that there are documents on the file (or missing from the file) which would not reflect favourably on the outgoing managing

agent.  If you do have to start recovery proceedings in the Courts, please do not do so merely out

of principle: be quite certain that the costs of recovery (in so far as those costs might not be

recovered) need to be proportionate to the value of what you are trying to recover.  Are you able

to get the papers you need out of the builder or out of the supervising surveyor?  Sometimes it is

more sensible and pragmatic to swallow hard, put it down as a bad experience which you do not

wish to repeat, and move on.  That really depends on the scale of the problem.