Management of a building

The Royal Institution of Chartered Surveyors’ (RICS) Service Charge Residential Management Code (the Code of Practice) aims to:

• Improve general standards and promote best practice, uniformity, reasonableness and transparency in the management and administration of long leasehold residential property.
• Ensure the timely issue of all documentation including budgets and year end accounts.
• Reduce the causes of disputes and to give guidance to resolving disputes where these do occur.

The National Leasehold Group (NLG) is an independent body focused on promoting professional leasehold management in Housing Associations.

The Institute of Residential Property Management (IRPM) is a professional organisation whose objective is to promote and stimulate improvements in the technical and general knowledge of individuals engaged in residential property management. In doing so, it aims to achieve high standards of practice and professionalism. Its members are required to operate within a Code of Professional Conduct.

You should consult the company’s articles of association to check the procedure for appointing directors. If the procedure has not been followed properly, then you could argue that the appointments are invalid and perhaps that any decisions made by the improperly constituted board are equally invalid. You may need to obtain specialist company law advice to support any argument that you have in this regard.

The articles of association will contain information about how to convene meetings. You will probably need to convene an Emergency General Meeting (EGM) to discuss the ongoing issues with a view to making decisions about the next steps. The Leasehold Advisory Service provides very limited company law advice, and we strongly recommend that you get specialist advice to help you further with this issue. You can find a solicitor through the Law Society.

More information you might find useful;

• The company directors have resigned. What happens now?
• The company directors are refusing to hold meetings at a convenient place or time.

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You will need to consult the articles of association to find out what procedure is mentioned for holding meetings, If the proper procedure has been followed by the directors then it may be difficult for you to challenge their decision.

The directors as officers of the company act in an executive capacity and owe a duty of care to the members. It is a question of fact as to whether the directors are in breach of that duty of care when they do not pay regard to the concerns of the members of the company. The Leasehold Advisory Service provides very limited company law advice, and we strongly recommend that you get specialist advice regarding the action you could take. You can find a solicitor through the Law Society.

It is important to note that taking legal action can be expensive and time-consuming, so it should be considered a last resort. You may also want to consider speaking to other shareholders to see if they are experiencing similar issues and whether you can work together to resolve them.

You could also consult the articles of association to see what procedure it contains for having someone else go to the meeting on your behalf, as a proxy.

More information you might find useful;

• The company directors have resigned. What happens now?
• The company directors have not called an Annual General Meeting (AGM), so the annual renewal of director appointment has not been verified. Can they still be directors and what should we do to fix the problem?

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The priority is to appoint new directors to the company to replace those who have resigned. The appointment of new directors may be carried out by the members or by the remaining directors.

A company that has no directors can be struck off. This would have serious implications for the building, as there would be no management, and it could be hard to sell any flats in the building. The process for striking off does not occur immediately. Companies House will send a notification to the company that is intending to do so and if they do not receive any responses after a few attempts will start the process for striking off.

In the meantime, it is important that the company continues to fulfil its obligations as the freeholder of the building. This could include collecting service charges from leaseholders, maintaining the common areas of the building, and ensuring that the building complies with relevant health and safety laws.

If the company is unable to fulfil its obligations as the freeholder, then this would be grounds for the leaseholders to appoint a manager.

More information you might find useful;

• The company directors are refusing to hold meetings at a convenient place or time.
• The company directors have not called an Annual General Meeting (AGM), so the annual renewal of director appointment has not been verified. Can they still be directors and what should we do to fix the problem?

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This is a serious situation, as the building will not be managed, and it could be hard to sell any flat in the building. Your options are as follows:

• Restore the company. For example, if the company is owned by the leaseholders, then they could pay to get the company back on the register.
• Exercise Right to Manage
• Appointment of a manager
• Buy the freehold

If a freehold company is struck off (dissolved) the freehold goes to the Crown. It is important to note that the Crown has no responsibility to manage the building, so do not undertake maintenance work on the property, enforce covenants against other lessees, manage or insure the property. All of these have a significant practical and financial impact on you as a leaseholder.

Was the company struck off at the time you bought the flat? If so, you should discuss this with the solicitor who acted for you during the purchase, as you should have been informed of this.

More information you might find useful:

• Can I and the other leaseholders exercise the Right to Manage?
• What is the procedure for the appointment of a manager?
• The company directors have resigned. What happens now?
• The company directors are refusing to hold meetings at a convenient place or time.
• The company directors have not called an Annual General Meeting (AGM), so the annual renewal of director appointment has not been verified. Can they still be directors and what should we do to fix the problem?

Still not found the answer?

Contact LEASE to have your enquiry dealt with by one of our experienced advisers

If the behaviour amounts to intimidation, harassment, violence, or abuse, you should report this to the police. If the behaviour is less serious then you have the following options: removal of the director, suing for breach of lease, mediation, appointment of a manager, or right to manage. 

If you would like to remove the director, then start by checking the articles of association of the company. If the director has breached the conduct obligations, then the articles should show how the director can be removed. Usually, a director may be removed from office by ordinary resolution of the members passed at a general meeting. It is possible for resolutions to be proposed by members, to appoint and remove directors. The members of a company may require the directors of that company to call a general meeting. The relevant members must serve special notice on the company of any resolution to remove a director. This must be given to the company at least 28 days before the meeting at which the resolution will be moved. The director might seek to obstruct your intention to remove them; having received the 28-day notice of the meeting, they might call a meeting within that 28-day period. However, the Act makes provision for this. The special notice to the company of the resolution to remove the director is effective even if the full 28-day period has not elapsed. 

If the director has caused the company to breach your lease, for example through bad management of the building, the leaseholders could sue the company for breach of lease. However, this would be an extreme action and could prove to be expensive for the leaseholders and wipe out all existing funds presently held by the company. 

As an alternative approach, you may wish to consider mediation. This is a low-cost alternative to litigation. 

You could also consider appointment of a manager. This allows an individual leaseholder to apply to the relevant tribunal to ask it to appoint an independent person to step in and take over the management. 

Lastly, the leaseholders could exercise the right to manage and start from nothing. You would appoint a board of new directors and on the acquisition date – 2-3 months after serving the initial notice on the company – your new right to manage company will acquire all the management functions.

More information you might find useful:

• I am the leaseholder of a flat. Can I and the other leaseholders exercise the right to manage (RTM)?
• What is the appointment of a manager?
• Application to the First-tier Tribunal (Property Chamber)
• More Frequently Asked Questions on Appointment of a Manager
• More Frequently Asked Questions on management of a building

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Contact LEASE to have your enquiry dealt with by one of our experienced advisers