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Geofruct

Buying Flat - Management Company Questions?

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Hello,

I am potentially buying a flat. It is one of four, in a converted victorian house. The owner of the entire property intends to keep 1 flat for himself. When the other three are sold, the freehold will go over to a management company, of which each flat owner will be invited to be an equal share holder.

I am slightly concerned. The management company, will be a ltd. I know from experience that if Ltd are not managed correctly it is very easy to incur fines. Obvious one's being for late or incorrect filing of returns. If there are problems with the running of the Ltd, then I expect all flat owners will be liable for any fines?

Is it possible to have a residents association and owners the freehold/share of freehold outside of a Ltd company???

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Hello,

I am potentially buying a flat. It is one of four, in a converted victorian house. The owner of the entire property intends to keep 1 flat for himself. When the other three are sold, the freehold will go over to a management company, of which each flat owner will be invited to be an equal share holder.

I am slightly concerned. The management company, will be a ltd. I know from experience that if Ltd are not managed correctly it is very easy to incur fines. Obvious one's being for late or incorrect filing of returns. If there are problems with the running of the Ltd, then I expect all flat owners will be liable for any fines?

Is it possible to have a residents association and owners the freehold/share of freehold outside of a Ltd company???

You could but there would be unlimited liability & every time a flat is sold massive legal cost so it's a bad idea if you want to own any part of the freehold.

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The freehold can be owned either:

By an individual

By individuals

By a company

Commonhold

If it's owned outside of a company, the main problem will be that when someone wants to sell his flat, all the joint owners have to agree. So the BTLer who buys the top flat, rents it out, and then emigrates to Australia, could be difficult to obtain his consent.

Plus, you could get a difficult flat owner - yeah, I'll agree to sign up to the change in ownership.... for £1,000......

Commonhold may be the way out, but since it's introduction in 2004, I believe there are only a handful of instances were it has been taken up.

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Thanks for the replies.

I looked into Commonhold - it's not without problems, but still may be easier than running an LTD? Not sure...

I presume I am right in regards to fines and such for mismanaging an LTD - those fines will come straight back to the flat owners? And who's going to run the LTD, and how will the other owners keep tabs on whoever runs the LTD?

I know from experience that HMRC planned to fine my previous company close to £8k for non filing or incomplete returns. It's only down to the fact the LTD has no money or assets that HMRC will be forced to drop the matter. However, in the case of these four Flats - there will be plenty of assets to pay any fines...

As you can see I am not happy with the possibility that someone else will screw-up and make me liable for crazy costs... maybe I am just over reacting, never done this before! )

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Thanks for the replies.

I looked into Commonhold - it's not without problems, but still may be easier than running an LTD? Not sure...

You're making a mountain of a probable molehill. Running a limited company isn't rocket science. You (the shareholders - in this case the flat owners) appoint a manager, who may be one of the owners if you trust them. Pay an accountant £500/year to audit you, or a little more to do the whole job. Millions of limited companies run just fine.

The case I'd worry about is if owners interests are misaligned. The big trouble is if the freehold is owned by mafia interests, but that won't happen where it's the flat owners. So the one to look out for is if some flats go to couldn't-care-less slumlords while others go to people who want and expect to live somewhere nice. Or the shareholders (owners) who are going through a messy divorce and doing everything to thwart each other. Or the repossession. Or ...

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...So the one to look out for is if some flats go to couldn't-care-less slumlords while others go to people who want and expect to live somewhere nice. Or the shareholders (owners) who are going through a messy divorce and doing everything to thwart each other. Or the repossession. Or ...

Thanks for the feedback, seems I may be overly concerned about the wrong things! :)

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