QUESTION
I would be most grateful for any advice you could offer on the question outlined below.
I am a director (unpaid) of a RM company responsible for a block of 21 flats and we own the freehold. Each flat has one share.
Under the terms of the lease, when a transfer occurs the share should transfer and the new leaseholder should become a member of the company. When this happens a new share certificate is issued which involves a small cost and the new owner is entered onto the company membership register.
It is clear that this process will apply when flats are sold. But should the same process apply in the case of transfer by inheritance?
I have two cases in mind. In the first a flat was owned jointly by a married couple and both names were entered on the share certificate and the register of members. When the husband died the widow inherited sole ownership. Does this constitute a transfer requiring the issue of a new share certificate. Is she ineligible for membership of the company in the meantime?
In the second case the transfer was from a deceased leaseholder to her son. His name was not on the original share certificate and therefore he was not a member of the company. Did the share transfer to him automatically along with the bequest of the flat? Or should a transfer be effected by the means previously described?
Despite reminders in both cases neither has sought a transfer and therefore both appear not to be a shareholder or a member of the company and to be in breach of the lease. How can they be persuaded to comply?
Any guidance that you might be able to offer will be greatly appreciated.
ANSWER
Under English law, where an asset is registered in the names of A and B (joint tenancy), survivorship is always presumed, and on B’s death, the asset passes automatically to A.
The deceased may have been a co-owner as a “joint tenant” with others. If so, the property passes automatically by survivorship to the surviving co-owner(s) and the deceased’s will is not relevant at all to the property. All that is required is a certified copy of the death certificate to be placed with the title deeds if the title is unregistered.
If the title is registered then the Land Registry Form API Application to register the death of a joint proprietor, should be sent to the Land Registry together with the death certificate (or a certified solicitor’s copy) and the land or charge certificate so that the fact of death is noted in the Proprietorship Register. No fee is payable. Alternatively,the death certificate can be registered through the Land Registry Direct service on the internet via the Land Registry portal.
When a shareholder dies, the shares vest by operation of the law of succession in his or her executors or administrators. That process of automatic vesting is known as the transmission of the shares. The articles of association usually provide that in such a case the company will only recognise the transmittee as having any title in the shares. If so, it need then take no account of beneficial interests under the will or intestacy.
It depends on the articles as to whether transmittees can vote and attend meetings on proof of transmission without being registered as members.
Subject to anything in the articles to the contrary, the transmittees are entitled to be registered as members in respect of the shares. But they do not, without that, become members of the company. The company cannot, without their consent, register them as members. It follows that there must be an express request for registration. Transmittees are to be registered as the owners of the shares and not as holding in a representative capacity.
Once registered, the personal representatives may transfer the shares in the normal way as members.
Such a registration is not a transfer of the shares and so no instrument of transfer is needed (s.770(2) of the Companies Act 2006). Instead the company is bound to accept the production of the grant of probate, letters of administration or confirmation as executors as sufficient evidence of title (s.774).
Under s.773 of the Companies Act 2006, personal representatives of a deceased shareholder may transfer the shares to another without becoming registered as members themselves. Such a transfer is as effective as if they had been members.Proof of title is the same as stated above.
With the first case that you described, as the widow is already named on the share certificate there is no need to issue a new one in her name alone. Her right to membership of the company hasn't ceased at anytime.
In the second case, I've assumed that the son has continued to make payments towards service charges etc. as required. Indeed, as the beneficiary of the flat (as part of his late mother's estate) he would remain liable for such charges. Once you've reviewed your RM Co's articles, you should be able to determine the son's status following the automatic vesting. In terms of trying to get an individual to comply with your request to complete the relevant transfer documentation; you could raise the fact that failing to do so now will simply cause delays and potential issues at the time of a future sale of the flat as the purchasers solicitor and mortgage lender will require all of the documentation to be in order. This may result in further engagement.
Naveen Agnihotri, Barrister at Arden Chambers
