Migrating to managing agent from residents’ management Co?

Migrating to managing agent from residents’ management Co?

9:22 AM, 12th April 2023, About A year ago 34

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Hello, We are a small block of 7 flats with a mix of owner occupiers and owners who let their flat. Approx 22 years ago we set up a Ltd company and jointly purchased the freehold so that each flat owner has 1 share in the company.

Since purchasing the freehold, I have been an owner occupier and director of the management company, together with 1 other director and a company secretary.

The company secretary has recently put her flat on the market and given notice that she has found a buyer and so is resigning her position.

We have always taken the view that a minimum of three active directors are required on the basis that if at any time there are only two, an unexpected change of circumstance could leave one person responsible for all of the duties of the management company. The other flat owners have never been prepared to, or not been capable of, being actively involved in the management company.

Having discussed the situation with the other remaining director, neither of us is keen to become the last man standing and after 22 years of service, both of us have different reasons to want to free ourselves of what is becoming an onerous obligation.

We have therefore decided to start exploring local companies who provide block management services with a view to outsourcing as much of the obligations as is possible. Clearly, there will be a cost to be borne as other owners will likely have little appreciation of how much money our voluntary efforts have saved them over those years.

We have contacted all owners to explain what we are proposing and why, in an effort to open up a discussion and to take views. Disappointingly so far, after a reasonable wait, nobody has responded at all.

The ideal scenario would be for everyone to really understand and support the proposal, and the worst case would be owners objecting in principle but without offering any useful alternative suggestions.

I’m wondering what action we should take if some, or all, of the 5 non-contributing owners won’t support us but won’t or can’t step up to the plate.

Another consideration is what would happen with regard to the freehold if we, as the last two remaining directors of the management company, both resigned closed down the Ltd company, replacing it instead with an informal Resident’s Management Company?

Thank you,

Rich


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Graham Bowcock

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13:38 PM, 13th April 2023, About A year ago

Reply to the comment left by NewYorkie at 13/04/2023 - 13:32
I'm not sure that charging a fee is right, but some recognition of the time and responsibility does not seem unreasonable. It is getting very difficult to get directors - people are busy and disinterested, plus the sharp ones spot a liability (e.g. fire safety).

NewYorkie

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13:52 PM, 13th April 2023, About A year ago

Reply to the comment left by Graham Bowcock at 13/04/2023 - 13:38
We had directors liability insurance back then, and also for a more recent RTM Co Ltd.

Kizzie

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16:58 PM, 13th April 2023, About A year ago

Reply to the comment left by NewYorkie at 13/04/2023 - 13:52
Directors cannot charge a fee as these would not be the immediate cost of maintenance and repair allowable as service charge under provisions of the lease but directors can be recompensed for reasonable expenses in connection with their role

Graham Bowcock

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17:05 PM, 13th April 2023, About A year ago

Reply to the comment left by NewYorkie at 13/04/2023 - 13:52
D&O is common, but may not cover directors for every eventuality. In particular fire risk requries personal responsibility, with prison as the ultimate sanction!

Graham Bowcock

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17:19 PM, 13th April 2023, About A year ago

Reply to the comment left by Kizzie at 13/04/2023 - 16:58
I think this would depend on the wording of the lease. It is usual, of course, to pay managing agents' fees out of service charges, irrespective of lease provisions. Paying something to directors for their work is also likely to be permissible, but the company needs to be transp[arent about it.

As times goes on, directors will need some incentive to do the role.

RichM

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18:38 PM, 13th April 2023, About A year ago

I think it's highly unlikely that a small remuneration would resolve this issue. I think I can speak for both myself and the other Director when I say that after 23 years we'd both like to be freed up from the obligation and I'm fairly certainly it wouldn't incentivise any of the other owners to get on board.
If the Ltd Co. must remain in order to own the freehold then I wonder if the answer is to accept that we have to have one Director whose function is absolutely minimal beyond being the point of contact between the owners and the MA.
This assumes that a Managing Agent would be prepared to do pretty much everything including such as Companies House annual return, annual accounts submission, arranging AGM, distributing agendas and minutes etc.
Next week we have an informal meeting with a local MA and our intention is to take a list of every function we perform and establish what, if anything, is left over after ticking the services which the MA can provide.

Kizzie

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18:58 PM, 13th April 2023, About A year ago

Reply to the comment left by RichM at 13/04/2023 - 18:38
Engage services of accountants who are independent of the MA and don’t forget leaseholders have legal right to be consulted under S 20 LTA for all contracts of over one year duration.
Management co. is a separate legal entity to which Directors owe fiduciary under Articles are nearby liability for the activities of MA and Accountants and all other contracts.
I think you must have more than one director, what do your Memorandum & Articles say.

Kizzie

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21:01 PM, 13th April 2023, About A year ago

Read the warning on Leasehold Knowledge Partnership website today relating to MA contracts agreed by RTMs and RMCs

Crossed_Swords

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8:28 AM, 14th April 2023, About A year ago

If there are no directors the company will be struck off. Since the company owns the freehold that will revert to the "Crown". Never heard of anyone doing this voluntarily but I doubt Companies House would allow it. Once the freehold has been lost to the Crown you will be unable to sell and it's a devil of job to get it back.

NewYorkie

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10:37 AM, 14th April 2023, About A year ago

Reply to the comment left by Crossed_Swords at 14/04/2023 - 08:28
Is the freehold an asset shared by the owners, or the freehold company?

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