Management co. for flats; how to change directors?

[telly098]

Hi,

Would be very grateful for some information about how to change directors of the leasehold management company.

Current directors are the freeholder and his wife who don't live in our building even though they own two flats, which they rent out. They have appointed themselves before they sold two other flats in the building about 10 months ago but are not very good at doing their job.

There are 4 flats in the block with one share in the management company for each flat. There is also an office downstairs, the owner of which has two votes.

Also how much does being a director involve? Is it time-consuming/difficult?

Thank you.

[ram]

I have answered this post at
LandlordZONE Forums > Long Leasehold Questions
Management Company shareholder - duties

http://www.landlordzone.co.uk/forums/showthread.php?t=13240

Which you ask about the same management company, and the directors, and suggest, as your problems are all related, you keep to the other post.
http://www.landlordzone.co.uk/forums/showthread.php?t=13240

[FMcC]

Freehold Buyers Beware until Mr Pilling looks at the small business law.
We bought our freehold back in 1999, forming a freehold Ltd company with equal shares for the 155 flats on the estate. Alas, there wasn't a clause in the companies articles that said the directors had to be re-elected by the shareholders. So we have been stuck with the same useless bunch who use the rest of us like cash-cows via service charges of almost £ 3,000 a year plus vast charges for “maintainance” by their own builders/plumbers.

Moreover, the change in the law for "small businesses" applies so last Monday at a "meeting" the five director buddies, their running dog managing agent, "professional" Company Secretary and their bent lawyer announced there would be no more AGMS, shareholders would no longer be given the opportunity to vote, the same directors would be kept in place and the service charge accounts would not have to be audited.

Also, this new small company law means that we cannot trace all the thousands of pounds that these directors have helped themselves to through money for lease extentions they sold and the sale of a flat belonging to the company/shareholders. When we attempted to put questions to the board at the meeting last Monday we were shouted down by the chairman and laughed at by the lawyer. Those few who turned up – about 22 residents out of 155 flats – sat silently, as if frightened of the board of bullies.

We have spent thousands of pounds in legal fees trying to find out where the company money is credited (various bank accounts) but even our lawyer says that the change in small business law makes it impossible for him to get into the company accounts. We even withheld our service charges (paid it into our solicitor's) so they would take us to Court. They did: the judge ordered both sides to go to official mediators - we turned up, the directors didn't.

ARMA is just a cloak to give managing agents an air of respectibility when they are a bunch of greedy commission-grabbing shysters

The only light in the tunnel, is that David Pilling of RICS is seeking to have the small companies law altered so that shareholders in Freehold companies who have bought their flat do not continue to suffer at the hands of greedy bullies.

Contact Mr Pilling urgently if you, too, are being used as a directors’/ managing agent's cash cow. He is putting together a policy doc for the govt. and has asked us to give evidence to his tribual/meeting.

David Pilling. Regulation Policy Project Manager. RiCS ... Registered office: 12 Great George Street, Parliament Square, London SW1P 3 AD .
Telephone: +44 (0)20 7334 3781
Fax: +44 (0)20 7334 3871

[animal]

It is my understanding of the L&T act that the lessees have the right to inspect the accounts and the right to an annual summary. This applies regardless if the lessees are also shareholders...

[jeffrey]

It is my understanding of the L&T act that the lessees have the right to inspect the accounts and the right to an annual summary. This applies regardless if the lessees are also shareholders...
Yes. See s.18-s.30 of LTA 1985.
A. In particular, read s.21 ["Request for summary of relevant costs"].
B. It was amended in 1986/1987/1996.
C. However, the 2002 Act's reworded s.21/new s.21A have not come into force- and never will.

[FMcC]

Thank you for your reply/advice.

Sorry if I didn't make my position quite clear.

It is true that Lessees are entitled to all details in respect of Service Charge accounts, which are produced separately to the financial accounts of our Freehold Company. It is these unaudited Company accounts that shareholders in the Freehold Company have no right to investigate the totals just summerised.

The unaudited accounts are produced by our directors/managing agent/Secretary and we have no way of knowing they are true and accurate.
That would not be the case if they had to be properly audited, as was the case in the past for small companies until the law was rescently changed to
"help" small companies.

Thus small company shareholders like us, and the thousands of shareholders in Freehold Companies, are severly disadvantaged as we do not have any right to inspect the Freehold Company books

[animal]

s21.3 L&T 1985 says



(3) Where the landlord supplies a statement of account to a tenant he must also supply to him—
(a) a certificate of a qualified accountant that, in the accountant’s opinion, the statement of account deals fairly with the matters with which it is required to deal and is sufficiently supported by accounts, receipts and other documents which have been produced to him, and


This seems to me to be a requirement for verified 'true and accurate' accounts...

s22 also gives the lessee rights to inspect the accounts.



(2) The tenant, or the secretary with the consent of the tenant, may within six months of obtaining the summary require the landlord in writing to afford him reasonable facilities—
(a) for inspecting the accounts, receipts and other documents supporting the summary, and
(b) for taking copies or extracts from them.

[animal]

Then again, maybe those are what Jeffrey was referring to in his post...

[thevaliant]

Your remedies are actually vast. If you have taken your own legal advice, and they have not suggested anything useful, then I suggest changing them.

You can:
1. Force General Meetings to be held with 10% of shareholders agreeing (if all 22 flats you mentioned are on your side then you have 14%, more than enough to cause them trouble).
2. *IF* they refuse to conviene one, the members may do so! Do so, invite all (you have to be fair) and propose existing directors removal. Knock on people's doors to make sure you get the 50% required (of attending members) to get them out of office.
3. As Jeffrey has said, demand to inspect the accounts, books and records. You are entitled to, and they may not charge a fee.

Set out a plan and stick to it. You'll make there life so much hell they'll be glad to be rid of you.

[jeffrey]

s21.3 L&T 1985 says



This seems to me to be a requirement for verified 'true and accurate' accounts...

s22 also gives the lessee rights to inspect the accounts.
Animal's reference to s.21(3) is wrong; it cites the not-in-force 2002 version! The current, real s.21 relates only to T's right to obtain a summary of costs. However, s.21(6) does require an Accountant's certiificate of the summary (if there are five or more flats). Also, the current, real s.22 alows T to inspect supprting accounts etc. (but only within six months of obtaining that summary).

[FMcC]

Thank you for all the advice/help.

Further to my original post regarding the meeting called by the Directors
of our Freehold Company, the Managing Agent (ARMA member) the "professional" Secretary, and the solicitor who is charging the Freehold Company/us plenty to support the Directors but not the shareholders of the Freehold company as he should be.

Last Thursday (four days after that meeting) we all received a document delivered by hand to all shareholders' flats, which included a copy of the statement read by the Secretary regarding the accounts/admitting "sums had accidently been omitted from accounts" read out at the last AGM a year ago - and with the same directors and solicitor present - but which was vehemently denied at the meeting (last Mon) held "instead of an agm" (as recently passed small business law no longer requires Freehold companies to do so). Rather proving that they were all lying to cover up the discrepencies in the accounts, which still exist.

We were told last Monday that we could get the accounts from Companies House - but a check on that web showed no accounts have been filed since 2006.

Although other residents/shareholders present at last Monday's meeting were also present at the final AGM (Dec 2007) that the Directors say will ever be held, they said nothing. Until a few contacted us over the next couple of days
to confirm that a statement as we described (only to be shouted down as lyiers) HAD, indeed, been read last year by the Secretary.

I cannot think that we are the only shareholders who have purchased their Freehold and who are now being taken to the cleaners by greedy, lying, self-appointed directors and their greedy lying managing agents and solicitors.

Unfortunately, such boards of self-appointed directors and their running dogs can only be got rid of if we can get the support of other shareholders and can organise an EGM. We are 155 flats but we are the only residents prepared to speak up - all the other residents claim they are "too busy" when they just want to avoid unpleasant confrontation and bullying (like we suffered last Monday's meeting).

I apologise for running on. I am not the youngest on this estate and not very
IT able. It is a nightmare. Thanks again.

[jeffrey]

Your position is very difficult. You- or any other lessee dissentient- may need to consider proceedings against the people who are ripping you off- but that would inevitably involve expenditure and delay (so try to avoid it if at all possible).

[thevaliant]

It is difficult. I was under the impression 22 flats out of 155 would be willing to stand up to the bullies. This would have 14% of votes and be able to cause significant problems for them, at least legally.

They are right that they don't have to hold AGMs, BUT if 10% of shareholders demand one, one must be convened with 21 days of a formal request.

You need to sound out your fellow lessees and see if anyone, either you, or someone else, will champion your cause. If you can get 16 together (10%) they will be in trouble, especially as you then force a general meeting, proposing they get voted out. If they don't organise one, *you* do, send out the notices and then vote them out (just file the 288b for them and appoint yourself as directors via 288a).

Best I can offer. If you cannot get the required 16 (if not more) your position is very weak and I can only suggest a solicitor VERY conversant in leasehold law and company law is the only way forward.

[FMcC]

Many thanks for that info. Very helpful. I thing we can get the necessary numbers - especially as the MA has charged one of our now supporters £20,00 to install individual gas central heating in his flat - in a conservation
area, no planning applied for, or grants, and the lease states that the heating is communal. Also, the mug who paid £20,000 says that the MA reckonsw we are all going to have individual heating sytems within 18 months. Shareholders suddenly want them all out.

Thanks, again.

[frosty]

Have you considered approaching the other shareholders and soliciting their proxy votes.?

Whereas they might themselves be loathe to attend any likely acrimonious meeting, you might well find that they are instead happy to empower you to act on their behalf.

It worked for me.

Good luck.