Question 1

Directors and Managing Agents

Accepted Answer

Q: Our development seems to have been embroiled in problems from its start. The management company was set up at the outset, with every leasehold apartment and freeholder house owner buying a share. The freeholder/developer’s solicitor was appointed as sole director of the company by the freeholder/developer, and his instructions to the managing agent included, according to the managing agent, forbidding them to take action against the developer/freeholder to collect unpaid service charges on completed but unsold properties, and refusal to endorse the annual accounts, which were not served in good time for some years. There has never been an AGM, and the company is described by Companies House as dormant, although the administrator has told us that our annual ground rents are paid into the management company. When the developer was placed into administration, the administrator obtained the agreement of owners to “regularise the service charge regime”, and the solicitor/sole director eventually resigned. The administrator then appointed the managing agent as both individual and corporate directors. Three years on, the managing agent has invited the owners to nominate potential directors to replace themselves, and some owners have come forward for selection/appointment by the shareholders. They want this process completed in October. We worry that the Donald Rumsfeld effect may exist here; how can we know what questions we should be asking? We have contacted a solicitor about this situation but don’t know how much of all the mountain of information we hold is going to be useful/necessary to her. I worry that we might waste her time and our money on less important matters, and miss a key piece of information. Is there any way that we can find a pathway through this maze? Tony Hymers replies for FPRA: My advice in this situation is that I think the agent is actually trying to be helpful. As a group, i.e. the leaseholders, they should meet and elect representatives to become directors of the management company and put themselves forward. Appointed as directors, they can then start to work with the agent to strategically manage their development. I don’t see there is anything malevolent to worry about here, this is simply the agent putting the leaseholders back into the driving seat. The historic issues on the developer and the management company going into administration are unlikely to now be relevant. I hope this is helpful. [Submitted September 2016]

Question 2

Directors and Managing Agents

Accepted Answer

Q: Our development seems to have been embroiled in problems from its start. The management company was set up at the outset, with every leasehold apartment and freeholder house owner buying a share. The freeholder/developer’s solicitor was appointed as sole director of the company by the freeholder/developer, and his instructions to the managing agent included, according to the managing agent, forbidding them to take action against the developer/freeholder to collect unpaid service charges on completed but unsold properties, and refusal to endorse the annual accounts, which were not served in good time for some years. There has never been an AGM, and the company is described by Companies House as dormant, although the administrator has told us that our annual ground rents are paid into the management company. When the developer was placed into administration, the administrator obtained the agreement of owners to “regularise the service charge regime”, and the solicitor/sole director eventually resigned. The administrator then appointed the managing agent as both individual and corporate directors. Three years on, the managing agent has invited the owners to nominate potential directors to replace themselves, and some owners have come forward for selection/appointment by the shareholders. They want this process completed in October. We worry that the Donald Rumsfeld effect may exist here; how can we know what questions we should be asking? We have contacted a solicitor about this situation but don’t know how much of all the mountain of information we hold is going to be useful/necessary to her. I worry that we might waste her time and our money on less important matters, and miss a key piece of information. Is there any way that we can find a pathway through this maze? Tony Hymers replies for FPRA: My advice in this situation is that I think the agent is actually trying to be helpful. As a group, i.e. the leaseholders, they should meet and elect representatives to become directors of the management company and put themselves forward. Appointed as directors, they can then start to work with the agent to strategically manage their development. I don’t see there is anything malevolent to worry about here, this is simply the agent putting the leaseholders back into the driving seat. The historic issues on the developer and the management company going into administration are unlikely to now be relevant. I hope this is helpful. [Submitted September 2016]

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