Get rid of your Freeholder - It's all in the management
Mary-Anne Bowring, creator of www.leaseholdersupport.co.uk explains how to get your properties management company to change the managing agent.
Last time we talked about claiming your right to manage, this being the way to oust the Freeholders current managing agent. This may seem like a difficult arrangement but it couldn't be simpler. Before exploring how your own management company can change the managing agent, it is necessary to understand what a management company is.
During the mid 1980s in England and Wales, the way developers built and sold flats began to change. Developers realised that with legislation granting lessees more rights to consultation and carry out management audits, the power balance was likely to continue to shift towards the lessee and being a Freeholder was not as attractive as it was, say one hundred years ago.
These changes led to many developers setting up management companies and selling flats on tri-party leases. A tri-party lease quite simply is a lease with three parties: the freeholder, the management company and the lesses. By creating a management company one view is that the lessees were put in charge of their estate. Another is that the Freeholder was able to off-load the unprofitable loss making obligations such as collecting service charges, litigating bad debts, dealing with the noisy dog, the party every Friday night at number 30, or the fact that number 12 only has 1 car parking space but continues to bring 2 cars onto the estate, causing havoc. In a tri-party lease the freeholders role reduces to collecting their investment income (ground rent) and placing insurance and taking a commission (often 15 to 30 percent of premium).
Furthermore, few lessees realise that a residents management company is a properly constituted company that has to be run in compliance with the Companies Act. Therefore, not only do the lessees need to volunteer to stand as officers of the company (Directors or company secretary), but they need to either procure an agent to carry out the day to day running of the company or take this on themselves. By virtue of being a lessee at the block, the lessee has a share or membership of the residents management company and democratic rights in the way that the management company is run.
In the traditional freeholders and leaseholder, lease scenario, to claim your right to manage 50 per cent of the lessees in the block need to be willing to participate and set up a right to manage company. If you already have the right to manage and are a management company, all you need to do is go through the correct democratic process. In recognition of the shortfall between lessees understanding the operation of management companies and the role a resident Director should play, the Association of Residential Managing Agents (ARMA) is finally bringing out a video which its members and lessee Directors can buy to really get to grips with the complexities.
If your block has a management company, the board of Directors already have the right to change the managing agent. If you want to push such a movement forwards the best way you can do this is to get yourself on the Board and start an initiative to competitively tender for the management duties.
Getting elected as a Director of your own residential management company takes an ordinary resolution approved at an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM). Such a resolution would be passed by simple majority vote of those present or voting by proxy. It would be wise to meet up with the current Directors to find out whether your changing managing agent initiative is likely to receive their support. There are several ways to find out who the current Directors are:
(a) From the last set of service charge accounts, this will give you a name but not an address.
(b) From Companies House on line www.companieshouse.gov.uk where it costs £1 to do a search of current officers of the company, or
(c) A reputable managing agent should also provide this.
(d) Failing that you could serve an information notice as provided for in the Commonhold and Leasehold Reform Act 2002.
Assuming you have got the consent of the current Directors to offer your services to the management company, to support your proposed election as Director at a company meeting, it would be wise to write a short paragraph detailing your experience and objectives and the benefits this will bring the estate. Regrettably, a waive of apathy often exists at such meetings and you may find that the residents are only too happy for a willing volunteer.
If you can't get the support of the current Directors don't give up. The way forward is for you to exercise your shareholders rights and instruct the Company Secretary to call an Extraordinary General meeting (EGM), with the proposed business being to appoint yourself as Director. Again, the notice of this meeting should be accompanied by your resume and action plan for the site, to elicit maximum support. By law you have to give 14 clear days notice to call an EGM to pass an ordinary resolution and 21 days if calling an AGM.
Once elected, unless you happen to be lucky enough to have a job in public sector procurement, knowing how to select best value and choose a reputable agent may be a minefield in itself but help is at hand, visit www.leaseholdersupport.co.uk and download the Tender pack for changing managing agents. Visit the Association of Managing Agents (the trade body for the industry) which has a list of members at www.arma.org.uk and these can be cross referenced against the Royal Institution of Chartered Surveyors members (RICS) at rics.org.uk. We will focus on this in more in the next article as well as the prospects of self-managing.
About Mary-Anne Bowring
Mary-Anne Bowring, Founding Director of Ringley Chartered Surveyors is a Member of the Royal Institution of Chartered Surveyors and a Member of the Association of Building Engineers. Since the Housing & Urban Development (Leasehold Reform) Act 1993 Mary-Anne has been advising in this specialist field and has presented cases to the Leasehold Valuation Tribunal (LVT). Mary-Anne has extensive detailed knowledge of building law and the Landlord and Tenant Acts. For the last 10 years Mary-Anne has managed the development of Ringley Chartered Surveyors building an Estates Department which manages 5,000 leasehold properties, a Survey and Valuation Department which has provides valuations to over 10 top banks and about 300 leaseholders/potential freehold enfranchises annually. . Frustrated by the mysticism surrounding property and the absence of simple tailor made solutions Mary-Anne's latest development is the launch of two web based products (www.leaseholdguidance.com and www.leaseholdersupport.co.uk) which are dedicated to supporting lessees through both legal and valuation procedures and providing knowledge, and financial administration for small blocks of flats.
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