Don't get personal


05/11/2012
by: Mary-Anne Bowring

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Issues related to leaseholders Companies 

A Management Company that is made up of leaseholders can cause issues, particularly when block politics rule business decisions to give leaseholders better rights and greater transparency over the running of their block, leaseholders were given the right to buy the freehold in 1993. Provided 2/3rds of the flats have long leases and 51% of the qualifying losses participate the block can force the Freeholder to sell his title. Buying a share in the freehold has many benefits. For example, the leaseholder will have more security, increase the value of their property and it will give them more control of the management of the block. However, buying a share of the freehold doesn't always eliminate problems with fellow leaseholders on the block, especially if your problem is with the directors of the Management Company. Blocks of flats that have bought their freehold have two options. They either employ the services of a Managing Agent to run their block, or they manage it themselves. This means two or more people in the block who are directors of the Management Company are responsible for the day to day running of the block, setting budgets and collecting service charge.

Although self managing a block gives total independence and saves the cost of an agent, it can put enormous strain on the unpaid volunteers who typically have full-time jobs and also on the relationships between fellow leaseholders. Unless the Management Company can remain unbiased and emotionally detached from their neighbours, managing the block without any outside professional support can cause mutiny. Unfortunately for Michael Broad x of x, this is exactly what happened. Hillcrest is a block of 15 luxury flats in St Albans. The leaseholders had formed a Management Company and successfully bought the freehold. The only requirement from the lease was that a surveyor had to supervise the Management Company, certify that the service charge is reasonable and quantify a proportion of insurance for each leaseholder.

Like many other blocks, Hillcrest decided its they would self-manage, i.e., the Directors of the Management Company would be responsible for the running of the building, therefore when Mr Broad could smell cigarette smoke in this flat he contacted the directors. I could smell cigarettes in my flat which had to be coming from the flat below, explains Mr Broad. Upon investigation, I found that the cause of the smell was a defective ventilation duct, which I reported immediately.

When Mr Broad spoke to the Management Company, they flatly refused to repair the ventilation duct. The flat where the smoke was traveling up from belonged to one director of the Management Company who refused to believe his daughter smoking was the cause of the problem. As the Management Company had failed to comply with the lease by enlisting the services of a surveyor to oversee the running of the block, Mr Broad decided that his only course of action was either through the County Court, or the Leasehold Valuation Tribunal (LVT). Mr Broad opted for the LVT as a less formal way of dealing with the problem that would hopefully maintain relations with his fellow leaseholders.

What Mr Broad wanted to achieve was a Court Appointed Manager to oversee the service charge and ensure that the Management Company was doing its job correctly, he says: To ensure the Management Company abided by the lease I suggested using The Ringley Group, a property management company who are surveyors, to become a Court Appointed Manager. Their product www.leaseholder support would enable the Management Company to remain in control but with the assistance of an intermediate management system.

The Ringley Groups www.Leaseholder support online product provides all the necessary tools for DIY management, but also provides the legal support and expertise associated with a managing agent. The system was ideal for Hillcrest as it still has allowed the Management Company to control the every day running of the block, but with the added advantage of professional assistance when dealing with legal issues and solving disputes between leaseholders. Due to the non-threatening approach of www.leaseholder support, the LVT panel agreed to use the system as a solution for Hillcrest. This in turn minimised friction between Mr Broad and the other leaseholders as it provided a middle ground that was agreeable to all parties. Leaseholder support is a low- level management product that keeps the Management Company in check without imposing on their independence.

However, the whole experience has really bought to light the problems which can be encountered when the Management Companies are made up of the leaseholders as they are sometimes too close to the problem and let emotions rule decisions, says Mr Broad. Providing outside support to Management Companies means they have access to the necessary expertise in order to run the company professionally. Mary Anne Bowring, creator of www.leaseholder support, explains: The situation at Hillcrest is typical of what can happen if emotions and personal issues get in the way of making business decisions. It often needs a third party who is removed from the situation to manage the issue professionally. Providing a system, whereby the Management Company can still operate independently but is overseen by the experts, is an ideal solution. This means the leaseholders can gain more confidence in the Management Company which also prevents conflict. If your Management Company letting personal issues get in the way and is forgetting that they are running a business contact.


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Lease Extension, FH and Right to Manage