WE’RE A COMPANY WE DON’T HAVE TO CONSULT!

Its common for those with business experience to superimpose those rules and experience without understanding why they don’t apply, or even to accept that they do!

The simplest explanation is that

A the company can do anything lawful that  its Articles permit but

B a lot of what it does is governed by it’s contracts, the leases

and those leases ( and in some cases freehold houses or commercial parts) are subject to landlord and tenant and housing law which have their own logic and rules.

So for example  a Company decides to do external decoration, but must be aware that they must consult under “Section 20” as the service charges used to fund it are subject to it. Care should be taken to avoid a situation where the general meeting decides to do something and agrees options or even the prices, without first consulting, as the consultation might be considered to be void.

Similarly its tempting to decide to do a project as it is desirable and for which there may be some support, but its vital to ensure that the lease allows the costs to be recovered. Often a change in service provision is agreed by a majority but cannot be affected as the company has the obligation in its leases to provide it “no matter what” to each and every leaseholder. 

While freehold houses and commercial premises are outside these rules, there are sometimes contractual requirements on notice and consultation, and with leases of mixed use, it is safer to include than exclude as its likely that they will be subject to it.

In some cases Articles may allow for  direct funding and it is common to meet expenses not recoverable under service charge such as company admin expenses, but can refer to expenses which are normally service charge or sinking fund items.  Specific advice must be taken as they may be treated as service charge and subject to that statutory control.

The principles above also apply to freeholder groups   RMCs and RTMs and their dealings