Disputes within flat-management companies

Posted: Wednesday, 5 July 2017 @ 10:32

Flat management companies are companies that are set up to manage blocks of flats. They mainly deal with issues such as repairs but also may have a role in ensuring that flat owners comply with the terms of their leases.

It is usual for the shareholders of these companies to be the flat owners. They buy shares as part of their purchase of the flat and sell them to the new owners when they sell their flat.  

The directors are usually flat owners who have taken on this role and have been approved by the shareholders but each company can be slightly different when it comes to who can or cannot be directors.  

How should they be managed?  

The particular documents that set out how these companies should be managed are:

  • The leases;
  • The company’s Articles;
  • The Companies Act.  

Decision-making is undertaken by the directors rather than the shareholders. However, all decisions are constrained by the following:

  • The terms of the leases – these usually set out what role the management company should take;
  • The company’s Articles and the Companies Act – these set out the powers of the directors and how decisions should be made;
  • The shareholders – the shareholders have the power to vote at General Meetings with a view to passing a resolution telling the directors what they must do on particular issues (as long as they comply with the leases).  

How should a director carry out his role?

Directors should make sure they have read and understood the key documents, particularly the leases and the company’s Articles.  

They are free to make decisions as they deem fit as long as they comply with the leases and Articles and the decisions made are in the best interests of the company.  

Directors should be aware of conflicts of interest and not do anything that would benefit themselves at the expense of other flat owners.  

What can other flat owners do if they disagree with the way a director is running the company?  

  • They should first look at their lease. If the director is taking actions that breach the terms of the lease, they can take action for breach of the terms of the lease.
  • They can propose a resolution to be voted on at a General Meeting of the company’s shareholders that tells a director what to do on a particular issue.
  • They can propose that a director is removed (and another appointed) to be voted on at a General Meeting of the company’s shareholders.  

Comment

Flat management companies are frequently hotbeds of disputes and are generally very badly run. It is quite common for directors of these companies not to have sufficient knowledge of their duties and to make decisions that breach the leases or their duties as directors.

It is important for either directors or other flat owners to take legal advice as soon as a problem arises so that the correct approach can be considered. It is also vital that the correct procedures are followed when taking action (such as to remove a director or call a General Meeting to tell the directors what to do).

I advise directors and shareholders in dispute and am always willing to have a quick no-obligation chat on the phone to see if I can help with your particular situation.

Blog by Gary Cousins
Gary has been providing legal advice to shareholders, directors and business owners for over 25 years. Specialising in dispute resolution Gary is based in Birmingham with clients throughout the UK and overseas. View profile
Call Gary on +44 (0)121 778 3212 or by email
This blog is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this article applies to your particular situation. We offer a free telephone consultation to discuss your particular circumstances.

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Thank you. Your response is great, very straight to the point! Hopefully this will bring an end to the matter. I will certainly be recommending your services as I am very impressed with the prompt dealing of this matter.
Janet Burbidge

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