Having an Expert on board
Running a management company for flats is sometimes not a job for the faint-hearted. Generally, matters can be dealt with by your managing agent but, if you have taken the time, trouble and effort to buy your freehold, you may well find that you are faced with issues that need to be resolved promptly and which require direct input from you as the property owner.
These can cover matters such as employment, particularly if there is a caretaker or porter, or perhaps insurance, if there are claims that have been made because of a leak or accident that has occurred at the property.
Or it may be that you have received a request from a flat owner to develop part of their property or to take over part of the common parts to add value to their apartment.
All the above will require your input into matters which have legal consequences. Accordingly, you would be well advised to ensure that the freehold company has the right advisors on board.
One of the advantages of using a multi-disciplinary practice familiar with property issues is that all the above issues can be dealt with in one place. For instance, where we act for flat owners in the collective purchase of their freehold, we realise that we are assisting them in incorporating a company to bring together the collective will of the property owners, and to take on a new venture which they may never have dealt with before.
There are always teething issues that need to be sorted out, and it is essential to get off on the right foot to avoid later issues arising.
In addition, owners may be unclear about the extent of their legal rights and obligations, and it is important for you to engage with experts who can assist you in understanding your dual role in this process.
Firstly, as a flat owners and member of a freehold owning company and secondly (if you accept such a role) as a director responsible for making decisions for the benefit of all of the properties in the building. Matters such as conflict of interest can occasionally occur where people seek to push agenda items for their own advantage to the detriment of others.
Some examples of typical scenarios that we have seen in practice appear below: -
Taking over the common parts:
People may seek to appropriate parts of the property that do not belong to them. The company will need to act to ensure that, if a flat owner is to acquire a flat area and make it permanently theirs, that suitable compensation is paid of this area and/or for the value of any improvements which are carried out to their property.
It should not be assumed that there is an automatic ‘God-given’ right to develop the property as the lease may well be restrictive and in any event the area in question may be outside of their ‘demise’.
Issues with staff/caretakers/porters
Issues can arise in several ways. In particular, if the property is purchased and the freehold is acquired, staff may transfer their employment obligations to the new company under the provisions of TUPE.
This may require a level of employment law due diligence. Day to day instructions are likely to be given by the managing agent, and it is important to ensure that contracts are reviewed to set out properly the appropriate duties.
It is also essential to ensure that no one owner seeks to monopolise the time or resource offered by the porterage services, or indeed to engage them in services which they are not obliged to provide under their contract of employment or, in extreme cases, to engage in a campaign of harassment or intimidation against such individuals.
Turning this around, issues can also arise where staff fail to perform their duties and need to be released from their obligations and/or where there are breaches of conduct such that employment arrangements need to be terminated.
Occasionally opportunities may present themselves for the generation of extra income – for instance if a telecoms provider were to situate a mast on the top of the property.
It may also be that areas within the property may be rented out to residents either short term or long term. Or there may be car parking spaces which may offer the opportunity to generate an income. The legal position needs to be investigated fully before entering any such arrangement, and the company needs to properly consult to ensure that it has acted in the interests of its members in entering any obligation or changing any existing arrangements.
Service charges and debt recovery
It may be that there are arrangements with suppliers that need to be reviewed such as agreements or contracts etc. Occasionally there may be arrears that need to be collected.
In discussing the setting of the service charge budget with your managing agent, it may also be necessary to take legal advice in relation to the proposed implementation of any major works so as to ensure the best protection for the company in being able to recover the service charges from the residents.
In an extreme case, it may be necessary to make a pre-emptive application to the First-Tier Tribunal for a ratification budget prior to commencing a consultation on major works.
This shows by way of a few examples the need to have access to good quality and accessible advice at the end of a telephone or a short email away, so that when one of these issues pops up you can deal with it immediately, without having to waste time hunting around for a suitable advisor.
Mark Chick is partner at Bishop & Sewell LLP where he is a solicitor specialising in leasehold law. He is also a director of ALEP (the Association of Leasehold Enfranchisement Practitioners). If you would like to discuss any of the issues raised in this article please firstname.lastname@example.org
or visit www.bishopandsewell.co.uk