Management companies in apartment complexes

Management companies in apartment complexes

1. There are good reasons for the existence of management companies in apartment complexes. The need exists for some legal entity to manage and control the “common areasâ€?, those portions of a development that are not part of any apartment. Normally each apartment owner has a share in the management company or is a member. These are usually companies limited by Guarantee. The management company will insure the apartment complex (including the apartments) and will ensure that cleaning and lighting is maintained. The plan of the scheme will be reflected in the conveyancing arrangements for the scheme. “Conveyancingâ€? is a reference to the land law and form of documents used in the scheme. It would be necessary to inspect the title documents to fully understand the conveyancing aspect of any particular scheme. The developer’s scheme of development will usually contemplate the transfer of the ownership of the common areas from the developer to the management company, on completion of the sale of the last apartment to be sold. Normally membership of the management company is limited to the apartment owners (after the sale of the last apartment). (Do not confuse the management company with the “managerâ€?. The “managerâ€? might be also a company, hired by the developer to provide management services).

2. As the Law Reform Commission consultation paper on Multi-Unit developments shows, difficulties arise where the developer retains a share or shares in the management company. The interests of a developer and apartment owners will usually be different. The developer will sometimes perpetuate control of the company to the exclusion of the apartment owners. Whether it is possible to wrest that control from the developer will depend on the facts of each case, but it should be possible, by resorting to the Companies Acts, to ensure that the developer does not wrongfully retain control.

3. A method of doing this is in making the developer comply fully with the provisions of the Companies Acts. This would mean, for example, that the records of the company must be properly kept and be available for inspection. If there is a breach or breaches of the relevant provisions of the Companies Acts, every member/shareholder is entitled, following delivery of 14 days notice to the Company of any such breach, to apply to the High Court for injunctive relief to remedy the situation. The defendants (or respondents) will consist of the directors and secretary of the management company and the management company itself. The defendants will have to pay the costs of the application. It is proper that those costs be levied on the defaulting officers of the company rather than the company itself (otherwise the innocent plaintiff would indirectly wind up paying some, at least, of the costs incurred by the company).

4. Before a Notice is sent, ascertain that the company and officers are in breach by writing to the company, requesting, for instance, access to the statutory books of the Company. (Adopt the list in the Notice, duly adapted). When this produces no satisfactory response, within say, seven days, send a Notice.

5. A draft Notice is set out below, to be adapted in any particular case. The contents of the Notice will vary depending on the facts of the case. Consult the Notes to decide which requirement should be made. The “NOTESâ€? should not appear on your Notice.

Re Section 371 (1) of the Companies Act 1963

RE: ABC Management Ltd. (“Companyâ€?) NOTE A

Re Claimant “Rita Hayworthâ€? NOTE B

WHEREAS the claimant is a member of the Company and requires:

a) Inspection of the register of members of ABC Management Ltd.; NOTE C
b) Inspection of the Index of the register of members of ABC Management Ltd.; NOTE D
c) A copy of the register of members of ABC Management Ltd. NOTE E
d) A statement as to the actual location of the registered office of ABC Management Ltd. NOTE F
e) A copy of the Annual Return of ABC Management Ltd. for the year 2005-2006. NOTE G
f) Inspection of the minutes of general meetings of ABC Management Ltd. NOTE H
g) Inspection of the register of Directors of ABC Management Ltd.; NOTE I
h) Inspection of the register of Secretaries of ABC Management Ltd.; NOTE J

AND whereas the Company and relevant officers of the company are in default in respect of same TAKE NOTICE that in the event of continued default by the company and the relevant officers the claimant intends to apply to the HIGH COURT after the expiry of 14 days from the date hereof for relief against the default of the Company and the officers thereof under S.371 of the Companies Act 1963

Dated the day of 2007

Signed:

__________________
Claimant

TO ABC Management Ltd. [address]
TO Joe Soap, Secretary [address]
TO Thomas Soap, Director [address]
TO Michael Soap, Director [address]
TO Arthur Soap, Director [address] NOTE K

NOTE A: Change to name of your company
NOTE B Change “Rita Hayworthâ€? to the name of the member of the company
NOTE C (Sections 116 and 119 Companies Act 1963). The Register of Members is one of the statutory books of the company. It is usually to be kept at the registered office of the Company. The names of all members should be found in it. The information is necessary and relevant in deciding whether to call a meeting of the company and canvassing votes to defeat the developer.
NOTE D (Section 117 (1) Companies Act 1963). The register of Members is to have an Index where the number of members exceeds 50. This could easily happen with companies limited by Guarantee; this will help in checking if it is in order or not.
NOTE E (Section 119 Companies Act 1963). You could inspect the Register and make notes; it’s easier to require a photocopy be furnished. Inspection should also be undertaken.
NOTE F (Sections 113 (3) Companies Act 1963) There will be a record of the Registered Office in the Companies Office. Is it accurate? If there has been a change, that change should be registered. The Registered Office is the address for service of the Notice on the Company. See NOTE K and ask the law searcher for the registered office. Very likely you will not ask for this information. If you believe you know from inspection (personal visit) that the registered office is no longer at the office recorded in the companies office, that can be incorporated into the legal proceedings later; proceed on the basis that the office is in fact as registered in the companies office.
NOTE G (Sections 125 and 127 Companies Act 1963) The Company is obliged to register an Annual Return. The contents and form of the Return are set out in Parts I and II of the 5th Schedule of the Companies Act 1963. The request assumes there is such a Return; perhaps there has been default in registering it in the companies office; if so, do not ask for it, let the defaulters take the consequences.
NOTE H (Section 146 (1) Companies Act 1963) This will reveal what was transacted and/or absence of meetings or failure to send notification to one or more members.
NOTE I (Section 195 Companies Act 1963) This will show the names and addresses of the director/officers to whom the Notice should be sent, (in addition to the Company itself). The Notice is sent to the officers in order to show they are responsible for the default and appropriate defendants and liable for the costs. Under Section 379 (1) Companies Act 1963 service on the company is at the registered office (ordinary recorded post is sufficient). For the notifying the officers it would be better to send the Notice by registered post to them. Keep the posting slips as evidence.
NOTE J (Section 195 Companies Act 1963). This will show the name and address of the Secretary to whom the Notice should be sent, (in addition to the Company itself). Check what is registered in the Companies Office; it may or may not be accurate, but if some other person (not registered as Secretary) is performing the functions of Secretary, possibly that is the Secretary and the company and its officers are in default in registering that change.
NOTE K Get the names and addresses from the Companies’ Office. To save a visit to that office order a Companies office search from a law searcher (such as DLS at 01-4922851).

The information contained in this post is not intended as and does not constitute legal or other professional advice. It’s posting is not intended to create a Solicitor – Client relationship. While care has been taken in the preparation of the information, no responsibility is accepted for its contents and readers are advised to seek legal advice from their solicitor. McGarr Solicitors make no warranty regarding the accuracy or completeness of the information contained in, or accessible from, this posting.