Making major works affordable
Our last blog focused on major works and difficulties in collecting funds for these. What we neglected to mention is that often these difficulties are due to how the property has previously been managed. The case study that we presented in the last blog had a professional managing agent prior to taking it over, however their ethos had been very different to MIH. Although we were aware that the additional service charges required would be objected to we were also aware of the requirement to do this long overdue work.
Backing of the Board
With the backing of the Board, we were happy to put our “head in the Lion’s mouth” as both they and ourselves believed in the project. We were also confident that the value add to the property hadn’t been considered by the owners and that ultimately this made the work affordable. The result of our efforts will not be known until March next year but we believe that the works will proceed.
The purpose of this blog, however is to look at other options that we have explored on behalf of one of our other clients. In this case, the property had been successfully self- managed for many years. However, due to a problematic owner who had inexplicably and suddenly decided to take exception to the management, they contacted MIH on a recommendation.
Aside from the difficulties of dealing with the legal case that the owner had decided to bring against the Board, MIH have also been responsible for putting the management of the property on a more formal basis.
Bringing in the new way
We must admit that we have faced great resistance from some of the owners, who like us believe that some of the management procedures we are required to put in place, are unwieldy and preferred the old ways. Nevertheless, we have persevered and we believe that many of the owners are now coming around to the MIH management style and appreciate are dedicated and conscientious management.
We are pleased to have instituted new contracts where necessary, or put those that were retained on a more formal basis, made cost savings and perhaps most importantly ensured compliance with the latest Health and Safety Legislation. As is our wont, we have also tried to future proof the property by having a long term maintenance plan prepared and this is perhaps where our biggest problem lay.
After years of having phased works undertaken by a local contractor, the budget costs for the overhaul were eye-watering and in no way fitted in with their budget. Furthermore, as many the owners are on fixed budgets for one reason or another, it seemed that the issues were insurmountable.
Showing our mettle
It was at this point that MIH were really able to really show our mettle. In the first instance we asked the Surveyor to obtain quotations for the full cost of the works required in the first few years of the plan, knowing that it is good practice to review long-term plans ever 3 years or so. We also asked that each element be costed separately so that the works could be swapped in or out to help the Board with deciding on what works they would look to undertake. Particularly as before we had assumed the management the priorities of the works had not been formally assessed.
Discussing possible funding
While the practical side of the major works were being considered (and as is the MIH way we had provided the long-term plan to all owners, had a meeting with them and the surveyor and discussed possible funding options or lack of them) MIH looked at other ways in which the Company could raise funds.
Previously the Director of MIH had been involved in the management of a property where owners had made advance payments to the Company to fund major works with a proportion of this being deducted over a period of years from their service charge. Sarah mooted this idea to the owners but this was not met favourably which put MIH in a bit of a quandary as we knew that there was no way the essential work could be carried out.
Fortuitously, while discussing the legal case with the solicitor, MIH were able to ascertain that four flats were on a short lease and after advising the Board of this, suggested that we should contact the owners to see if they wanted to extend.
Once the Board had agreed to this approach it was up to MIH to approach the owners, which they subsequently did and after four months of negotiation by MIH, which cost the Company nothing, we are pleased to advise that the deal was struck with funds being paid into the Company Account. The only downside being the unavoidable 19% (at time of writing) Corporation Tax that will be payable and which the Company won’t get the benefit of.
While we at MIH, appreciate that their Company may have got a higher premium if they had waited for the Lease term to decrease even further, we are also aware of the benefits to the Company in having this money to carry out the first phases of the works and giving the owners a bit of breathing space in which they can stagger their contributions. For us this was the best solution for the Company and we are proud to have been able to offer this kind of innovative thinking to our clients. If you would also like the benefit of our experience and problem solving please do get in touch.