Many leaseholders assume that management comes as standard with the block they are in, and that they are unable to change any poorly led or bad management. In fact, the truth is that the leaseholder is often in charge and they can organise new management if they wish.
Ending a contract with your block manager due to unsatisfactory, or unfulfilled terms of agreement is a common occurrence, but before embarking on changing your block manager ensure that you understand your legal rights, your type of lease, and your terms of agreement.
Whilst ending a contract can be far from straightforward, we’ve outlined the easiest way possible to change block management company below.
First, assess the structure of your lease.
There are usually 3 types of leases and each one will have a different set of terms for exiting, or ending an agreement.
In this lease agreement there are three parties: They are the freeholder or landlord, the block management company and the first leaseholder or property owner.
In a Tri-Party Lease Agreement, it is the management company who holds responsibility for choosing the managing agent. When leaseholders purchase their property, they usually become members of the company. Above this company sits a board of directors who are themselves leaseholders and responsible for instructing the managing agent on all matters, and if you need to identify who those directors are, this information is discoverable via a search on Companies House. If you are a leaseholders you should be able to become a directors. If you do become a member of the board, you will be granted the opportunity to make decisions and persuade other board members to re-tender any management contracts.
To do this, contact your current managing agent and state your intention to become a director of the management company, and ask to have your request sent to the current board of directors.
Alternatively, if you opt against becoming a member of the board, you will need to speak with the current board with a view to re-tendering the current managing agent’s contract.
A two-party lease is made up of an agreement between the freeholder or landlord and the first leaseholder or property owner.
Unfortunately, a two-party lease is the most complex when it comes to wanting to change block management companies. The very limited list of options includes:
- Asking the freeholder or landlord to agree to change block management agents. This could be a difficult or awkward conversation so you must present strong reasoning for doing so.
- Claiming your right to manage – of which, at least two-thirds of qualifying leaseholders will need to agree to become members.
- Purchasing the Freehold with the other leaseholders in your block. Be aware that this is entirely dependent on the freeholder agreeing to sell and other leaseholders being able to raise funds to do so. In this scenario, it could be quicker and more efficient to instigate your Right to Manage in order to obtain management control. Then later on, at a more suitable date, leaseholders could join you in trying to buy the Freehold.
- Making a request to the Tribunal to appoint a new block manager. Just like the conversation with the freeholder or landlord, you must be able to demonstrate poor, or incorrect management.
Tri-Party with A Management Agent named in the Lease.
Three parties make up this lease agreement: The freeholder or landlord, the Managing Agent and the first leaseholder or property owner.
Due to the size of the agreement, within these leases there is usually a clause already written into the lease as to how to exit the agreement.
Within the deeds, additional provisions may force the withdrawal of the named management agent, and instead a newly formed Resident Management Company will be formed by the property owners, who become shareholders able to be elected onto a board of directors.
Secondly, check whether there is a breach or cause to terminate.
In your lease agreement terms, it will state whether or not a cause to terminate is required. If a cause is required, the allocated causes and further actions to be taken will be stated. If no cause is required, the contract can be terminated for any reason.
If there has been a breach of contract by your Block Management agent, identify the breach and gather substantial evidence to assist in your request of termination. Breaches could include putting your property, and or residents at risk.
Third, give notice.
Just like in any formal contractual agreement, a required notice period will be specified in order to terminate the agreement. Notice periods could range from anywhere between 30 to 90 days.
You should ensure to abide by the rules of the notice period, else your request to terminate may be ignored or place you as being in breach of the contract yourself.
When you provide notice to terminate, complete it in writing and attach the date in which the termination will occur. It is advisable to opt for a written notice as opposed to digital, so avoid emailing and obtain a proof of postage. This proof is vital for ensuring there is a written, trackable record of your notice to terminate. The agent should be informed who its successor is in order that they can provide them with the necessary handover information.
Fourth, receive confirmation and notify other leaseholders.
The block management agent should also confirm the termination in a written response that states the date at which the management will cease and if is the case, be transferred. Just like giving notice, this is a key element of the written record. You must receive this document as it is evidence proving the request of termination has been processed and completed.
Next, any leaseholders who pay service charges must be notified that there is to be a change in block management. Again, leaseholders should be notified in writing.
Finally, receive completion paperwork and handover any funds.
In this final stage of handover, the balance of funds no longer necessary to meet any prior commitments or requirements should be transferred by the block management agent. The balance should be handed over alongside an up to date statement of accounts. This balance is recommended to be passed within three months unless other agreements are made.
Lastly, ensure you have received any document that will be given over at the handover process that is stated in your management agreement.
At Scanlans Property Management we can assist with any changes that need to be made when it comes to changing block management companies. Our team has a wealth of experience and training, and we’d be happy to answer any questions or offer advice. Get in touch with us today.