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Sep, 2014

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  1. #1

    Default Service charge/management- freehold house on l'hold estate

    Hello

    Hopefully I have posted in the right place and maybe someone has some relevant experience of this issue:

    We own a freehold house on an estate build in 2006 which has surrounding communal areas. The charges have increased dramatically every year since we moved in 2007.

    There seem to be 3 parties involved in the running of the estate:

    1) An estate management company, who look after the general running of the estate, gardeners, paths, lamp posts and so on

    2) A company, which is a landlord of the communal areas

    3) A further company has been set up by the developers, on which when the last plot was sold, each resident was given a share in "Road Name" Company Ltd.

    As a simpleton like me it seems a rather convoluted way of setting up an estate, but i understand its now becoming the norm for new estates to be set up in this manner.

    The reason this question has come about is that many of the residents are increasingly frustrated with the cost of maintaining the estate which has nearly doubled in the period of 3 years, compounded with a budget shortfall every year, and generally there has been a lack of attention from the management company managing the gardeners well.

    While we have been in communication with the Management Company on those matters, would somebody be able to explain in laymans terms how/why the structure is how it is, specifically:

    - what role does the landlord of the communal areas play - what is his interest?

    - what is the point of "Road Name" Ltd Company, (the one which each resident have a share?) What "powers" does this company have


    - who does the management company work for - it is the "Road Name" Ltd Company, or do they work for the landlord who has bought the freehold to the communal areas?

    - Can we fire the management company as shareholders in "Road Name" Ltd Company?

    - on all residents recieving our 1 share in the "Road Name" Ltd Co, we were asked to nominate or put forward a director - as yet we have not done so due to question marks over liability e.g. accidents, health and safety etc? Should this be a concern?

    - Has anyone here successfully cut out the middleman and done it themselves, as approx 50% is a maintenance cost, the other cost is the management company?

    Apologies for the questions, there is a lack of info I've been able to find having trawled for 6 months!

    Thanks

  2. #2
    Join Date
    Dec 2008
    Posts
    1,141

    Default

    Hi

    You have my sympathies! I have dealt with various arrangements of this type over the years and they can be complex. I also agree that they seem to be getting a little more common. I'm not sure why, other than the communal areas freehold company is sometimes set up to manage issues which local authorities would be reluctant to take on by way of the "adoption" process without substantial cash subsidies ("commuted sums") from the developers. For example, one site I am familiar with has substantial pumped drainage systems across the whole estate.

    Anyway, I am afraid that your questions can really only be answered by reference to the documents relating to each of the companies.

    As an example, one model I am familiar with works like this:

    a) Freehold company owns communal areas across whole estate. It charges all residents a service charge. It employs a management company to do the day to management. When the estate is complete, ownership of the freehold company passes to the residents, who each have one share.
    b) On the same estate, there are some blocks of flats that have been sold on leaseholds. Each of these blocks has its own freehold company. This freehold company usually employs its own managing agent to look after cleaning, maintenance etc of its particular block. When the last leasehold in the block is sold, ownership of the freehold company is passed to the leaseholders, with each owning one share.

    So, a flat leaseholder will pay a service charge to the freehold company for the block and a service charge to the freehold company for the communal areas. The leaseholders can hire and fire their "block" management company. All the residents on the estate can collectively hire and fire the estate management company - although there are some restrictions on how and when this can be done.

    Does this sound anything like your situation?

    Preston

  3. #3

    Default

    OK you've asked a lot of questions and i'm going to try to explain it as best I can. I have some rental properties which have a very similar set up so I assume yours will work the same.

    1. The 'Limited' company which you all have 1 share each of usually has a group of residents that run the management of the estate. These are unpaid, volunteers who are elected at an AGM held every 12-18 months.

    2. The group of residents would then employ a property management company to act as their managing agents due to their expertise in building maintenance, housing & company law etc. They would also attend the meetings, collect the service charges etc.

    3. In addition there is usually a 'landlord' who is the freeholder who collects the ground rents.

    In our case the system work extremely well. We have about 6 residents (out of 96 properties) who manage the estate. All work/ bills/ maintenance goes thru this commitee who vet the work, cost, quality, value for money and also decide what & when the money gets spent.

    Most of the details for these arrangemnts are usually set out in the documents included with your property or your lease.

  4. #4
    Join Date
    Jun 2008
    Location
    Andalucía
    Posts
    9,470

    Default

    I think it is virtually impossible to answer your questions without seeing the documentation. Really everything ought to have been explained to you by your conveyancer when you bought. I can only suggest you refer your queries to him.

  5. #5

    Default

    Hi guys - thanks for your replies.

    I should have elaborated a bit more on the estate and documentation to assist.

    Preston/subjecttocontract - sounds pretty similar to your setup. The estate is made up of about 35 houses and a few flats.

    Of the 35, only 22 households pay a service charge, so there is a bizarre situation where a household across the road to me doesn't pay due to the fact his driveway is connected to the road that will eventually be adoped by the council. But his neighbour has to pay because a small patch of tarmac (size: roughly 2 foot x 8 foot perhaps) connecting him to the road and his own driveway is classed as a shared area. Following the logic, we have to pay because our parking space is accessed by going across a shared area, and we have a path that runs through our grassed area that we own at the front of the house. You could argue that all the houses on the estate benefit from the communal areas so we were quite surprised to find some households on the road didn't have to pay at all.

    All the houses are freehold, and I presume that the flats in a different road to ours are leasehold as on the breakdown, they have to pay a ground rent. We just pay a fee to the management company who then look after everything on the estate. And we have just urged the management company to change the gardening contractor, which has now been done.

    I'll try not to stray off topic with a series of moans, but as a group of residents, I suppose at the moment we have convened an informal committee who are jointly disatisfied with the management company. One example is that they have not recieved an electricity bill since handover and didn't know the supplier for 2 years, and then spent the money for electricity elsewhere, and still had a shortfall in funds. More recently, because they claimed the developer didn't tell them on handover which bits they needed to garden (we pointed it out as it became clear a particular wasn't being maintained) they now want to charge hundreds of pounds for what would have been 3 occassions of gardening work.

    There are numerous convanents listed in a TP1 document outlining what each party has to do, but doesn't seem to specifically mention the role on the company we have a share in.

    The letter from the solicitor regarding this says "...you are entitled to a share in the company set up by the developer to manage common parts of the estate..."

    With that being so, could we elect change the management company for another?

    Unfortunately, we don't have any info relating to the flats, and I wonder if there would be a conflict with the Landlord if, as a group of residents we changed the management company. The Land Registry however still lists the proprieter of said shared areas as the developer, not the name we have given of the landlord company (documented on the Management Company's latest invoice)?

    Finally, is it worth seeking legal advice given the complexities, or is a case of put up and shut up?

    Thanks guys, your help is appreciated!

  6. #6
    Join Date
    Sep 2006
    Location
    Sheffield
    Posts
    39,409

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    As already advised: seek legal advice from your solicitor or from another one competent to assist with non-standard leasehold complexities.
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

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