Avoid extra legal costs! – Why it is important to seek clarity of circumstance and give attention to record keeping
A few recent cases across our desk have hammered home this message. We discuss these below;
- How much control does an RTM company have?
We have been working closely with an RTM company that has taken over the management of their development. The development is situated within an estate. Members of the RTM company are still being pursued for estate charges by the management company for the Landlord. Although the RTM acquired the responsibility for management of the development there is no control over the management company that manages the estate. Therefore the leaseholders are required to make payment for the maintenance of the development to the RTM company and then still are required to pay the estate charge to the management company.
The RTM company acquired the right to manage from the management company with agreement as the application was not contested. They believed at the time that they would also control the maintenance of the estate.
The case shows the importance of ensuring that in situations like this there is a clear agreement and understanding from the parties as to how best the services are split and where one party will stop and one party will begin.
There is recent case law that allows for there to be a split in the management of a development and an estate which also emphasises the importance of clear communication.
- Know your Demise!
We have been advising on a sensitive situation where two penthouse apartments within a development have assumed the exclusive use of hallways and open areas that are only used by the occupants of their property.
Upon inspection it was discovered that these areas were being used for storage and also extended living rooms by the penthouse owners. Our client was concerned about issues surrounding correct insurance cover and fire safety.
It was clear that clarification was needed as to the extent or limitation of the demised premises.
After a detailed review of all of the leases within in the development it was apparent that although the penthouse owners had exclusive use of the areas. The areas had not been included in the demise (transfer of the property) and therefore still remained a communal area. By using it for storage the leaseholders were actually in breach of their lease and the situation needed to be rectified.
Extra care needed to be taken in dealing with the situation as the penthouse owners felt that there was some confusion over the extent of their demised when purchased.
- Keeping the Company in check
Companies House obligations can often be forgotten. Managing Agents acting on behalf of Management Companies must ensure that Companies House is updated and all conditions set by the Companies Acts are complied with.
There can be penalties if Companies House is not properly updated. For example if there is a change of directors or an amendment to the articles of association. Companies House must be notified within 14 days or it could amount to a criminal offence and unlimited fines.
We recently acted for a Managing Agent who had held an AGM at one of their developments. It was agreed by special resolution that there was to be a change to the articles of association of the management company regarding how Directors could be elected. We made the relevant application to Companies House on their behalf.
In addition, many leases require leasehold owners to become shareholders of the Management Company. The Company will therefore need to be aware of new owners and issue a new share certificate to the incoming owner within 14 days.
If we can help you with any of your property management needs then we would love to hear from you.