Your questions answered...

publication date: Feb 1, 2008

 We are here to help you with your questions about your flat. Have a question? Then contact us at one of the following: editor@newsontheblock.com with Question in the subject line, or by telephone at 08700 600 663, or by post at News on the Block, One Great Cumberland Place, London W1H 7AL.

Q
Dear News on the Block,
I am the treasurer of a block of flats with 12 units. We need to elect a new company secretary. As there is a limited number of people able and willing to do this job we are thinking of appointing a lady who is capable, but although she is a permanent resident, is neither a share-owner or joint owner, although she lives with the person who is. Would this be acceptable from a legal point of view just in case it may be challenged? We attempt to manage the building ourselves and operate as a limited company.
Name and address withheld

AIt is usually in order, unless the articles of association state otherwise, for the company secretary to not be a member of the company. Indeed many associations appoint their accountants or managing agents to carry out this responsibility. Therefore it should be in order to appoint the lady. The important point is that whoever is appointed is capable of performing the duties – which are not that onerous. However, if the documentation required by Companies House is not received by them then things can get serious: fines can be levied and ultimately the company struck of the companies register and the assets forfeited to the crown. So ensure that your company secretary knows what is required. Incidentally, we (FPRA) have recently made representations to Companies House on these issues and there is an article on this subject in the current FPRA Newsletter.
John Peartree, Chief Executive, Federation of Private Residents Associations
The Federation of Private Residents Associations (FPRA) is a non-profit making organisation run by a committee of volunteers. More information on www.fpra.org.uk

Q
Dear News on the Block,
The buy-to-let (B2L) culture has taken off and estate agents and property management companies do not wish to bite the hand that feeds them. However, there is real and growing concern with resident shareholders to the B2L market; that it will reduce the effective management of blocks of flats that have ownership of the freehold. If too many flats are bought and let by B2L investors the integrity of the flats falls apart and management is undermined. The B2L investor does not wish to know about the issues of management as they are wholly interested in the investment aspect of the matter only. In blocks of flats in central London where money is no object the problem is less acute as the freeholders can contract out the management of the block to an external property management company.
We are in the process of having a new 999-year lease prepared. We have taken the liberty of including in it new clauses which forbid:
any person from having more than one share in the estate so as to discourage multi-ownership of flats in one block;
not to allow charities, housing associations or businesses to make investments so as to produce social dumping on our estate;
no further subletting over and above the initial let;
insisting on an initial residency period of not less than six months by the purchaser so as to deter B2L investors.
Peter McNally, Devon

AThe question assumes that B2L investors have a negative impact on the management of a development; an assumption that in my experience is incorrect.
B2L investors invest in property in order to generate and maintain wealth. In our experience of advising private investor clients, this translates into investors taking ownership very seriously. They realise that upkeep of the development is important to those that live there (both their tenants and other owner occupiers) and that a well-maintained development attracts quality tenants, and also enhances the rental income that can be achieved and the capital value of their investment.
Furthermore, well-informed investors ensure their property assets are cash flow neutral and geared at the correct level to ensure that meeting service charge payments is never an issue.
Rather than vilifying B2L investors and putting measures in place to prevent investors owning flats in the development, I would encourage your readers to welcome them with open arms; he or she could be pleasantly surprised by the effect that it will have on enabling the entire development to realise its true value.
David Mackenzie
Portfolio Manager – Young Group