Management Company in Trouble

godtabh

Our management company run on behalf of the builder of our development has run into serious financial trouble. Many many people (more than half) haven’t paid their management fees and it doesn’t look like they will any time soon. Similarly the builder owes a considerable amount of money on units he as left or hasn’t sold.

The management agent has just sent around an email saying the builder has been struck of the company register for failing to submit accounts.

Because of this letters that had been sent by the builder to a debt collection solicitors are not valid and so proceedings cant be brought against the people who have outstanding management fees.

Has any one else been in this situation? Any ideas or tips about what can be done? The management agent said that supplementary budget would have to be introduced to pay the deficit. Some how I don’t see this being popular!

In this regard the management agent has sent a letter to the banks of the people who have management fees outstanding to say that they no longer have an interest in the block insurance. Hopefully this might do something.

Any one have any ideas as the builders position on the board of the management company? Apparently only a director can sign the letters to go to the debt collectors. So question goes for the common areas. If the builder has been struck off who “owns” the common areas?

The_Conductor

kearnsr wrote: »

If the builder has been struck off who “owns” the common areas?

The Minister for Finance- until such time as the company is reinstated and its assets vested back in the re-constituted company. Also- legally you may have trouble buying and selling the units- if the Management Company has been struck off. This is really really serious......

Ps- the Minister for Finance also owns all the units, etc- its not just the common areas.

Paulw

There is a big legal difference between the builder being struck off and the management company being struck off.

It is possible for the builder (named persons) to be directors of more than one company, and have one of those companies struck off.

What you could possibly do is call an EGM for your management company, and then remove the builder as director, and elect directors.

Your debt to the management company may still be valid, and can be chased through the courts.

You really should speak to your solicitor and get proper legal advice, as well as getting the full facts about the management company and the state of the accounts.

The_Conductor

Sorry- I should have elaborated.

jimmycrackcorm

So who is at a loss if the management company goes under? As a private house owner, I don't pay management company fees but my relations who have a duplex do. I can't see what benefit they get out of paying management company fees.

The_Conductor

jimmycrackcorm wrote: »

So who is at a loss if the management company goes under? As a private house owner, I don't pay management company fees but my relations who have a duplex do. I can't see what benefit they get out of paying management company fees.

Block insurance
Upkeep of common areas
Possibly refuse collection and other services
etc-?

You relatives do not own their property outright- they have a longterm lease on it. One of the terms of the longterm lease is the payment of the Management Charge to the Management Company (along with quite a few other conditions).

godtabh

At the moment there is no benifit from the managment company!

But what you are meant to get is refuse collection, light in the common areas, upkeep of the common areas, block insurance etc.

An EGM was called a few weeks ago but it was really just to say that the managment company is ****ed if people dont start paying their management fees.

If the builder still owns the common areas can they be voted out as directors?

antoinolachtnai

'No' is the short answer to that.

But you need to work out all the details. What exactly has happened here?

Has the developer been struck off or stopped trading/gone into liquidation/receivership/examinership? (the difference is important)

Has the management company been struck off?

Who actually owns the common areas at the moment? The management company or the developer?

Who do you receive your serice charge invoices from? The builder or the developer?

I take it there are unsold units in your development.

Whatever the exact situation, what's going to have to happen here is that a group of owners (probably owner occupiers realistically, although if there is a landlord who owns a number of units, he will be interested too) need to invest some time and get together, get legal advice and figure out how you are going to sort out this mess.

This might seem like a pain, but this is a big part of what living in a community is all about.

Paulw

kearnsr wrote: »

If the builder still owns the common areas can they be voted out as directors?

It depends. There is no clear answer.

In our development, we removed the developer as directors of the management company, even though the common area hasn't been transferred. The developer still has snags to do on it, and they are slowly doing it.

But, aside from that, we run our management company (our own elected directors).

In many cases, there are clauses that state that the developer will retain control of the management company until all common areas are handed over. That clauses was not in our management company, and the developer conceded that and stood aside.

Really, with your situation, you do need proper legal advice from a solicitor. Get as many people (owners) together as possible, and see where you stand.

mrgaa1

why not get the local council take over as the management company ? why have management companies at all - they are no good. I've heard that new developments are removing management companys.

astrofool

Because the council is generally awful at providing services to apartment blocks. A well run management company is essential in some cases.

godtabh

Paulw wrote: »

It depends. There is no clear answer.

In our development, we removed the developer as directors of the management company, even though the common area hasn't been transferred. The developer still has snags to do on it, and they are slowly doing it.

But, aside from that, we run our management company (our own elected directors).

In many cases, there are clauses that state that the developer will retain control of the management company until all common areas are handed over. That clauses was not in our management company, and the developer conceded that and stood aside.

Really, with your situation, you do need proper legal advice from a solicitor. Get as many people (owners) together as possible, and see where you stand.

How did you manage this? I am not sure about the clauses but I did ask at the previous AGM could we elect new directors but was told we cant.

antoinolachtnai wrote: »

But you need to work out all the details. What exactly has happened here?

The company that built the aparment complex has been struck off for failing to lodge accounts. The directors of that company are the directors of the management company. The management company is in debt by a large amount due to people not paying their management fees. The managment company can not issue debt collection notices because the letters need to be issued from the struck off company (which cant be done).

antoinolachtnai wrote: »

Has the developer been struck off or stopped trading/gone into liquidation/receivership/examinership? (the difference is important)

They have been taken of the company register for failing to lodge accoutns. I dont know if that means they have stopped trading/gone into liquidation/receivership/examinership?

Has the management company been struck off?

No. But they have no money to run the company. There is a mass of outstanding bills that dont look like they will be paid anytime soon

Who actually owns the common areas at the moment? The management company or the developer?

I take it there are unsold units in your development.

We have been told the developer as he hasnt sold all apartments

Who do you receive your serice charge invoices from? The builder or the developer?

All invoices have been issued through the management company

Whatever the exact situation, what's going to have to happen here is that a group of owners (probably owner occupiers realistically, although if there is a landlord who owns a number of units, he will be interested too) need to invest some time and get together, get legal advice and figure out how you are going to sort out this mess.

This might seem like a pain, but this is a big part of what living in a community is all about.

There is a group of owners who have been dealing with the management agent (who tobe fair are doing the best they can do but are in just a bad postion as we are i.e they arent getting paid either). We've had many meetings but there is nothing that we can do to get the oustanding fees paid. I have suggest that we should elect on of the group as a director and then get the debt collector letters signed but again we were told we couldnt do this

In terms of legal advice were do we go? The management agent spoke to their legal team and said there doesnt appear to be much that can be done.

godtabh

mrgaa1 wrote: »

why not get the local council take over as the management company ? why have management companies at all - they are no good. I've heard that new developments are removing management companys.

That process can take up to 5 years to get the go ahead. The ball is in motion but I cant see it happening any time soon and will prob take longer due to the down turn

markpb

kearnsr wrote: »

How did you manage this? I am not sure about the clauses but I did ask at the previous AGM could we elect new directors but was told we cant.

You were probably told that by the developers representative or, more likely, the managing agent. Neither of them will have any interest in the owners taking over. How you do it depends a lot on your situation. Some leases say that you're not a shareholder until the developer vests control of the land to the company. In that case, there's not a lot you can do. A senior government employee suggested to me recently that you could try to take a personal legal action against the developer for failing to vest in a reasonable time (breach of contract / good faith) based on your lease agreement. I've no idea if it would work to be honest, I've never heard of anyone trying it but it's an option.

If it's a normal company, you have a slightly better situation. There's a possibility that the developer will fail to show up or send a proxy to the AGM. Even if they have given themselves golden or preferential shares, if they're not there, they can't vote. In this case, the shareholders can vote the existing directors off and vote themselves on. This still leaves you not owning the land but you'll have control of the company which is a big start. Expect the developer to be seriously annoyed and to face resistance from the agent who will think it's not possible/legal.

The managment company can not issue debt collection notices because the letters need to be issued from the struck off company (which cant be done).

Our debt collection notices are issued by the managing agent, not by any of the directors (of which I am one) so I'm not sure where this rule came from. You could ring some of them and explain the situation to them. They should be happy to help, especially if you suggest that they'll get the work. PM me for some names if you want.

In any event, someone has been filling you with rubbish. The developers company and the management company are two totally separate companies, even if they share the same directors. Just because one has been struck off doesn't affect the other. They are still your directors and can still run the company (as far as I know).

godtabh

I asked the managment agent could we elect new directors, sign the debt collection letters and get another debt collection agent involved and this is the repsonce I got

Even if new directors are elected to <name of managment company> we cannot issue legal proceedings against non payers, as the legal proceedings will be issued in the name of <name of builder> . As that company is ‘Struck Off’ we cannot issue legal proceedings.

antoinolachtnai

I am guessing that a strict interpretation of the lease is that the debt is due to the developer, not to the management company, even though it is often the practice to pay the man. co., not the developer in these circumstances. The developer may need to collect the debt, not the management company if this is the case.

I can feel a trip to the High Court coming on for someone, one way or the other. If the developer intends to get the strike-off reversed, that's one way. If he doesn't, well, you'll have to somehow get the property vested in the management company.

Serious legal advice needed now.