Q&A - Major Works 

QUESTION

If a mangement company plans a project and if the cost involved requires a contribution great enough to be a problem for one or more owners, is it possible to obtain finance such that the cost to owners can be spread over 12 or more months?
Name Witheld

ANSWER

I would steer well clear of this for the following reasons: the RICS Code says we may loan money but we do it at our own risk; the “loans” would be subject to credit rules; and there may be difficulties in securing and collecting the loan.If the RMC sought a bank loan, personal guarantees may be required. There would also probably be a charge on the freehold (although in most cases, this would only be the ground rent income – not usually be enough to service a loan for major works). Finally, interest on a loan cannot usually be recovered as a service charge. I would strongly advise any leaseholder not to enter into an agreement with any agent offering this facility. An established reputation and proven track record for delivering effective property management services to an existing property should be enough for leaseholders to gain confidence with the incumbent managing agent to deliver major works project on time and on budget.
Anthony Tokatly, Managing Director of JJ Homes