QUESTION
I have just bought the freehold interest of a block in which there is a Right to Manage company which was formed about 18 months ago because of problems with the former freeholder. As the new freeholder, I have written to the Board of the RTM company requesting membership of the RTM company. I have also sent each of the flat owners ‘lessee information forms’ – asking for their contact details and the details of their tenants / managing agents etc. if they are not resident in the flat. Although I thought that these were straight-forward requests, I am facing a lot of resistance from the lessees and also from the RTM company. The questions I have are these: 1. As the new freeholder, is the RTM company obliged to allow me membership of the RTM company? 2. Are the lessees obliged to supply me with their contact details or those of their tenants / managing agents if they are not resident? 3. If the RTM company is obliged to allow me membership of the RTM company, what is a reasonable time-frame for them to complete my membership request in? I wrote to the Board of the RTM company on 7th September 2015, enclosing a cheque and they have not responded to my request or cashed my cheque yet 4. What are my options if the RTM company continues to ignore my request to join the RTM company? 5. There is a non residential component to the block (a disused residents’ gym in the cellar). As the leases state that the lessees and the freeholder have access to all the common parts etc. does the RTM company have to provide me with keys/access codes to the main front door and also the gym area so that I can have free access to the common parts whenever I please? 6. I get the impression that the lessees are very wary of giving me access to their personal information and also access to the communal front door and common parts. Is there anything I can do about this? 7. The RTM company has informed me that the former freeholder still owes some of the lessees money as he failed to hand over any unspent service charge revenue when the RTM company was formed. He also failed to credit some lessees’ service charge accounts in the amounts that the LVT/FTT disallowed in matters that lessees took against him in 2013. The deficit is £4493.00. The former freeholder’s company is now in receivership – which is why the freehold of the block was sold at auction by the receivers. Can the RTM company make me pay up the amount that is owed by the former freeholder? 8. Since the RTM company has informed me in writing that the year end 2013 accounts have already been signed off by the Directors of the RTM company noting the former freeholder’s debt in the amount of £4493.00, if I cannot be made to pay off this debt, what is the impact on the RTM company?"
ANSWER
i) Immediately upon the RTM company taking over on the acquisition date, the landlord becomes entitled to membership of the company, with full voting rights as a company member (if he wishes to take it up). The landlord's votes are, in the first instance, determined according to the units he holds in the building, flats or non-residential parts. In cases where he holds no units, and therefore would have no votes, he is allocated one vote as the landlord. If the outgoing freeholder was a member of the RTM then you need to follow the transfer of membership provisions in the Articles of Association. ii) The Lease may have obligations on the leaseholder stipulating that they need to inform the landlord of contact details. In any event whether or not there is an express provision in the lease you should consider taking the following practical points: a) The details of the leaseholders should be with the current managing agents. b) Obtain up to date Official Copies of Register Entries from the Land Registry which may have contact details. It is important to note if the ground rent is not demanded in this prescribed form the tenant (leaseholder) is not liable to make payment unless, and until, it is properly demanded. The notice must be in the prescribed form and "may" be sent by post. If the notice is sent by post, it must be addressed to the tenant at the dwelling on which the ground rent is payable, unless the tenant has notified the landlord in writing of a different address in England & Wales at which he wishes to be given notices. (In which case it must be addressed to him there). The key here to recover rent therefore is to ensure you serve a valid rent demand addressed to the tenant at the premises on which the ground rent is payable unless the tenant has notified the landlord in writing of a different address in the England & Wales. iii) A reasonable time is approximately 21 days looking at the circumstances in each case. It could be the director responsible for the membership is not well or abroad etc iv) You could carry out a company search against the RTM to see who the directors are and then make contact with them to see what the reason for the delay are. Legally you are entitled to become a member which is supported by both the Articles of Association, and Companies Act 2006 duty of care that the company directors need to be adhere to amongst other legal provisions. Assuming you hold no units in the building you will be allocated 1 vote if you were to become a member of the RTM. How much control would this give you with the other leaseholders who would have 1 vote each? You should be aware of this and decide to take proportionate steps to regularise the current position accordingly. v) As all the management functions of the buildings pass to the RTM from the acquisition date there will be a reduced need for you to access the building and so it follows that the RTM company do not have to provide you with keys/access codes etc. Generally this is subject to the terms of the lease so it's important to also review these to see the extent of your rights reserved over the building. vi) As the new freeholder legally your position is one who collects ground rent and leaves the management of the building to the RTM which will be managed by the leaseholders. As a way of improving your relationship with the leaseholders take positive steps to introduce yourself and look out for leaseholder meetings so that you can attend to use these as opportunities to work together with the leaseholders. If the leaseholders exclude you there really isn't much you can do unless their actions adversely affect the value of the freehold, namely their standard of management of the building falls below a reasonable standard. vii) This sum should have been addressed by your solicitor when you completed the purchase of the freehold. viii) You will need to see the management accounts from the accountant to see what the financial position is to date and to establish what impact the deficit of £4493.00 has on the RTM Company. Contact with the receiver may provide assistance on whether a payout to creditors is likely. Ultimately you may be held responsible for this shortfall as you purchased the freehold from a receiver and were no doubt made aware of this situation and because furthermore the breach of the landlord passes to you as the new registered proprietor.
Selchouk Sami, Solicitor Ronald Fletcher Baker LLP
