Management refusal to supply information

[animal]

Background:
Our property was built as leasehold property around 1984. The flats were originally sold as leasehold. In 2002, all owners agreed to the purchase of the freehold and a company was formed for that purpose. All owners are now shareholders of the company that owns the freehold. The majority of shareholders are elderly and unwilling or unable to stand up to the few who dominate the management, so it is difficult, if not impossible, to get support from other shareholders.

The managment has had some work done which cost between 500-600 per property without consulting the lessees/shareholders. The work has proved to be substandard and we have had nothing from the management for nearly a year. I wrote asking for a copy of the original specification and copies of the quotes for the work. These quotes were not displayed or given to the lessees before the work commenced. It is my understanding that they should have been under the provisions of the Landlord and Tenant Act.

What are my rights? Do I have a right to demand these documents? I believe the directors have been negligent and did not get more than one quote. What are my options?

[tenant29]

Suggest that you consult LEASE ( Leasehold Advisory Service ) about your problem.

As a leaseholder, you can refuse to pay for any work exceeding 250 pds per flat if there was no prior consultation before work started. But it becomes complicated when the freehold is owned by the leaseholders.

As a leaseholder, you have the right to request an appointment to inspect all documents relating to the service charge and to make a copy of any document subject to a reasonable charge for photocopying.

[jeffrey]

Suggest that you consult LEASE ( Leasehold Advisory Service ) about your problem.

As a leaseholder, you can refuse to pay for any work exceeding 250 pds per flat if there was no prior consultation before work started. But it becomes complicated when the freehold is owned by the leaseholders.

As a leaseholder, you have the right to request an appointment to inspect all documents relating to the service charge and to make a copy of any document subject to a reasonable charge for photocopying.

I agree. Tell the Co. to comply with s.18-s.30 of LTA 1985.

[animal]

Thanks Guys,

I suspect they will simply refuse, so I would like to know if I have the option to take small claims action to get the information or is there a better/more appropriate option?

And is it the LTA 1985 or the Leasehold Reform 2002 that is current? (work was done in 2006).

Regards

[jeffrey]

Thanks Guys,

I suspect they will simply refuse, so I would like to know if I have the option to take small claims action to get the information or is there a better/more appropriate option?

And is it the LTA 1985 or the Leasehold Reform 2002 that is current? (work was done in 2006).

Regards

LTA 1985 was amended subsequently but is still the main reference point for service charge legislation.
T can sue under s.20C to strike-out non-compliant expenditure.

[animal]

T can sue under s.20C to strike-out non-compliant expenditure.

Not a lot of point if we are also the freeholder as we will end up paying somehow... I'm thinking the Directors have broken the law, and therefore become personally liable for our losses. Is this a way forward?

Anyone know of a forum regarding company law and the liability of Directors?

[animal]

T can sue under s.20C to strike-out non-compliant expenditure.

The articles of out company have a clause which says:


All members shall from time to time and whenever called upon by the Company so to do, contribute equally or in such proportions as the Directors may reasonably determine, to all expenses and losses which the Company shall properly incur and in respect of which they are not otherwise bound to contribute in their capacity as dwellingholders and members.


Does this give the management carte blanche to ignore the requirements to consult? i.e. if I take them to the LVT to dispute service charges, can they just ignore any judgement and charge me anyway?

[jeffrey]

The articles of out company have a clause which says:


Does this give the management carte blanche to ignore the requirements to consult? i.e. if I take them to the LVT to dispute service charges, can they just ignore any judgement and charge me anyway?

The clause in Co's Articles simply means that expenses of Co. are payable by members. For example, if Court obliges Co. to pay-out damages to you as T, Co. reserves right to recoup from its members generally.

The clause does not over-write Co's service charge information duties under LTA 1985. Since the Articles are drawn by Co., not by legislation, you as T could also ask Court to disapply the clause if appropriate (so as to make "guilty" directors personally liable instead).

[animal]

Thanks Jeffrey,

Have a top class Christmas... :-)

[animal]

1. Is there a statute or precendent that I can quote to show that the directors may be liable where they have acted contrary to the legislation?

2. They have issued a demand for service charges which is not in accordance with the legislation. My understanding is that as a result, the service charge is not payable. What I am not clear on is if they can subsequently amend the demand to fulfill the legislation and consequently the liability is restored?

Regards

[jeffrey]

1. Is there a statute or precendent that I can quote to show that the directors may be liable where they have acted contrary to the legislation?

2. They have issued a demand for service charges which is not in accordance with the legislation. My understanding is that as a result, the service charge is not payable. What I am not clear on is if they can subsequently amend the demand to fulfill the legislation and consequently the liability is restored?

Regards
1. See (in LTA 1985):
a. s.20C (T can apply to County Court for Order that L cannot recoup own court costs);
b. s.25 (criminal offence not to comply with s.21/22/23); and
c. s.33 (directors liable for company's criminal offences under Act).

2. Non-compliant demand is invalid. There are time limits re recovery, in s.20B. For jurisdiction, see s.27A.

[animal]

Thanks again Jeffrey...

[animal]

the L&T act states:

21B
Notice to accompany demands for service charges
(1) A demand for the payment of a service charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to service charges.
(2) The Secretary of State may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.
(3) A tenant may withhold payment of a service charge which has been demanded from him if subsection (1) is not complied with in relation to the demand.
[snip]
----------------
This implies that all service charges must have a summary of the rights and obligations or there is no liability on the tenant?

Has 21B-1 been in force since 2003 or has it come into force since Oct 2007 when the SI describing the format of the accompaning notice came into force?

[jeffrey]

The commencement date for s.21B of LTA 1985 (inserted by s.153 of CLRA 2002) was only in 2007 but I don't know exact date.

[animal]

Apologies for that last question, I meant to ask about administration charges... (blame the morning after the night before)

Schedule 11 of 158 has been in law since Aug 2003 and states:



4 Notice in connection with demands for administration charges
(1) A demand for the payment of an administration charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to administration charges.
(2) The appropriate national authority may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.


However I am unable to find anything which defines the form and content as specified in (2). I assume though, as it is current legislation, that some form of summary of the rights and obligations must be supplied?

I can also find nothing regarding time limits on issuing a correctly formatted demand. s20B appears to be solely about service charges.

As a result of your earlier comments regarding service charge liability where there has been no consultation, I have estimated a director's liability of some £250,000 since Jan 2003, as no proper consultation has taken place in that time. Is there a defined procedure for a lessee/shareholder to force an independent audit to determine the actual liability of the directors?

Regards

[jeffrey]

Section 158 and Schedule 11 deal with variable administration charges for L's work re approvals, information, documents and re T's aleged breach of lease.
These are nothing to do with a typical "block of flats" service charge scheme (L covenants to provide services; T covenants to pay specified proportion of costs for this): see para. 1(3) in that Schedule, under which "variable administration charge" definition excludes where lease specifies charge or formula for calculating it [e.g. service charge % shown in lease].

[jeffrey]

Schedule 11 of 158 has been in law since Aug 2003 and states:



However I am unable to find anything which defines the form and content as specified in (2). I assume though, as it is current legislation, that some form of summary of the rights and obligations must be supplied?

Section 158 and Schedule 11 came into force on 30 September 2003 (England) or 30 March 2004 (Wales).
For England only, see Administration Charges (Summary of Rights and Obligations) (England) Regulations 2007 [SI 2007, no. 1258], which came into force on 1 October 2007 and set out the form of the summary.

[animal]

Thanks again Jeffrey,

I missed SI 1258, so thanks for that.

What I am trying to establish is what was the requirement the rights and obligations to be included between 2003 and 2007. Schedule 11 was in force in 2003, but the definition of the format did not appear until 2007.

The issue is a number of legal actions which took place in this period due to T withholding service charges in order to get information out of the management. No special notices and no statement of rights and obligations was issued.

Regards

[jeffrey]

From 2003/2004 (commencement) until 30 September 2007, there was no prescribed format. The Schedule was in force but para.4(2) had not yet been activated- so L would simply have needed to explain to T the general effect of paras. 2/3/4(3)/4(4)/5. Failure to do so would have meant that:
a. L was in breach of para. 4(1); and
b. T would have benefit of paras. 4(3)/4(4); so
c. T could withhold payment; and
d. lease covenants re non-payment would be temporarily ineffective.