Who is the Landlord?

[BonzoDog]

For various reasons the terminology stated in our Company's Lease document has come up for scrutiny? Some parts of it are hard to understand. I wondered if anyone on here had any better insight. Though I appreciate the questions is mainly about a property lease rather than usual business issues..

In The Terminology of the Lease's our company provides to Lease holders it states -

1. ‘The Landlord’ = “Person A” and “Person B”

These “Persons” are the individuals who originally bought the property. The established the owner as ‘The Company’ and they converted it into 5 Flats and sold off the Lease’s on all of them except the ones they occupy. Therefore they became the Tenants and 2 of the Directors and 2 of the Shareholders.

The Lease still includes them as The Landlord, as it has not been property updated. “Person B” is dead. “Person A” is a tenant at the property.

The Lease also states in its terminology

1. The Tenant = “Person B”
2. The Managers = “The Company”

it makes no mention of shareholders, except that it contains a clause that the lease imparts a share in the company -

The Tenant agrees with the Managers

4.4 Not to transfer the tenants share in the managers save to an assignee of this lease upon..transfer etc.



The lease contains a part each for

1. the Tenant agrees and covenants with The Landlord…
2. the Tenant agrees and covenants with The Managers…
3. the Managers agrees and covenants with the Tenant…
4. The Landlord agrees and covenants with the Tenant…
5. The Managers agree and covenant with the Landlord…
6. The Parties Agree…

So … who…. is the Landlord?

 

[fisicx]

The landlord is the person who owns the freehold - the land the building sits on.

A landlord can also be a tenant and leaseholder.

The land registry will tell you who is the freeholder.

 

[Newchodge]

Is 'The Company' registered at Companies House?

 

[Newchodge]

For various reasons the terminology stated in our Company's Lease document has come up for scrutiny? Some parts of it are hard to understand. I wondered if anyone on here had any better insight. Though I appreciate the questions is mainly about a property lease rather than usual business issues..

In The Terminology of the Lease's our company provides to Lease holders it states -

1. ‘The Landlord’ = “Person A” and “Person B”

These “Persons” are the individuals who originally bought the property. The established the owner as ‘The Company’ and they converted it into 5 Flats and sold off the Lease’s on all of them except the ones they occupy. Therefore they became the Tenants and 2 of the Directors and 2 of the Shareholders.

The Lease still includes them as The Landlord, as it has not been property updated. “Person B” is dead. “Person A” is a tenant at the property.

The Lease also states in its terminology

1. The Tenant = “Person B”
2. The Managers = “The Company”

it makes no mention of shareholders, except that it contains a clause that the lease imparts a share in the company -

The Tenant agrees with the Managers

4.4 Not to transfer the tenants share in the managers save to an assignee of this lease upon..transfer etc.



The lease contains a part each for

1. the Tenant agrees and covenants with The Landlord…
2. the Tenant agrees and covenants with The Managers…
3. the Managers agrees and covenants with the Tenant…
4. The Landlord agrees and covenants with the Tenant…
5. The Managers agree and covenant with the Landlord…
6. The Parties Agree…

So … who…. is the Landlord?

Home made legal documents are worse than oral contracts.

 

[BonzoDog]

Home made legal documents are worse than oral contracts.

totally agree. it is a mess.
The owner is a registered Company Ltd. It is Dormant.
Question is if The Owner is also The Landlord.
And the Owner is Managed by The Directors of it.
Then by reference to the Lease all references to The Landlord can be substituted for The Managers?
So, presumably where it says -

7. The Managers agree and covenant with The Landlord

that implies that The Directors agree and covenant with The Directors...!

is that even possible and fair?

And if so it also says in

6. The Landlord agrees and covenants with the Tenant


6.2 To make good any default by The Managers in carrying out their obligations under this Lease, in which event this lease shall take effect as if 'The Landlord' were substituted for 'The Manager'

Which on the face of it sounds totally bonkers?

 

[Newchodge]

Question is if The Owner is also The Landlord.

What Owner?

 

[eteb3]

A landlord can also be a tenant and leaseholder.

Wouldn't that be merger of estate? As I understand it, landlord can only be simultaneously a tenant if there's a lessee in between the estates: so Person A is the landlord, Company Ltd head lessee, and Person A sublessee to the Company.

@HarrySmiler it'll cost you £3 per title to get the details from the land registry. Summary details are free. Go check that out and see what it says before going round in circles longer!

 

[eteb3]

it makes no mention of shareholders

As per my comments in the other thread, that's because it's a different type of property. "Personalty" and "realty" don't mix, the one can't be attached to the other. Except by having one person bound by contract to deal with the two things in related (but unconnected) ways.

it contains a clause that the lease imparts a share in the company -

The Tenant agrees with the Managers

4.4 Not to transfer the tenants share in the managers save to an assignee of this lease upon..transfer etc.

Not sure I agree with your interpretation.

What you have here is a negative covenant: you can assign the lease (pass it on to someone else), and you don't have to give up your share in the company / "the Managers".

But you can't transfer your share to anyone except someone who the lease has already been passed to. So only people who own a lease on the site can hold a share of the company that owns the freehold.

 

[fisicx]

It gets all sorts of complicated when freeholder and leaseholder are the same.

But it’s quite normal.

We are the freeholders of a building that has 4 properties each with their own lease. We are also a leaseholder (living in one of the properties). Which means I write to myself asking for insurance etc.

But doesn’t change the fact that the landlord owns the land. They can appoint managers to look after the land and any buildings they own on that land.

 

[eteb3]

The Lease still includes them as The Landlord, as it has not been property updated.

If A & B transferred the freehold to "the managers" (the company), there is no need to update the lease.

To simplify somewhat, the lease relationship is between the bits of land (aka "estates"), not between the people. And the leasehold counts as a bit of land, even though it's not a lump of earth.

So if the Company buys the land from A & B, the company is now the landlord. One would expect notice to be given to the lessees / tenants, but I don't know if that's legally necessary.

 

[fisicx]

All of which comes back to the land registry. Cough up and get a copy of the records.

 

[BonzoDog]

All of which comes back to the land registry. Cough up and get a copy of the records.

as said the freeholder is the company. that is all that is mentioned in the title. the landlord is not defined.

 

[Newchodge]

as said the freeholder is the company. that is all that is mentioned in the title. the landlord is not defined.

Does that not automatically make the company the Landlord? In which case the company cannot be dormant as it will be receiving ground rents.

 

[eteb3]

Does that not automatically make the company the Landlord?

Yes, I think so.

In which case the company cannot be dormant as it will be receiving ground rents.

Ground rents have been abolished, so it could be a mere holding company. And anyway, there's no need for a ground rent if the lease doesn't specify

 

[eteb3]

7. The Managers agree and covenant with The Landlord

that implies that The Directors agree and covenant with The Directors...!

I think you've said that "the Managers" is a synonym for the Company.

This is very unhelpful wording: The Managers Ltd is managed by its directors. So The Managers (=The Company) covenants with the Landlord to do XYZ. It's up to the directors to ensure that The Managers=The Company fulfils those covenants, but the directors are not directly liable if the Company does not. EDIT - I bet the directors don't get a mention in the lease - right? So they're not parties to the agreement.

In any case, I strongly suspect there's been merger of title, and the covenants between Managers=Company on the one hand, and Landlord on the other, are now a dead letter, because the Company is now the Landlord.

 

[Newchodge]

Yes, I think so.


Ground rents have been abolished, so it could be a mere holding company. And anyway, there's no need for a ground rent if the lease doesn't specify

I don't think that legislation has been passed yet, has it?

 

[eteb3]

6. The Landlord agrees and covenants with the Tenant
6.2 To make good any default by The Managers in carrying out their obligations under this Lease, in which event this lease shall take effect as if 'The Landlord' were substituted for 'The Manager'

Proceeding with my theory that there was (and there may still be) a lease between A & B (as freeholder) and The Managers Ltd (as lessee), and then a sublease from the Managers to the Tenant (as sublessee), this would read as follows:

The Company has the primary responsibility to do all those important things the Tenant is relying on, such as mending the roof and unblocking the drains. But if The Company fails to do so, the Landlord will do it; and for your comfort, dear Tenant, if that ever arises you can sue the Landlord direct, in place of the Company, without having to jump through extra hoops.

 

[BonzoDog]

I don't think that legislation has been passed yet, has it?

the lease does mention ground rents. but as the company is dormant it does not trade or take any income and has no account etc. though it may need to as a result of solicitor costs in the company name etc. i'm unsure of how that all effects the company. the costs were between 2022 - 2023. the last dormant return to HMRC and CH was up to 2022

 

[BonzoDog]

Proceeding with my theory that there was (and there may still be) a lease between A & B (as freeholder) and The Managers Ltd (as lessee), and then a sublease from the Managers to the Tenant (as sublessee), this would read as follows:

The Company has the primary responsibility to do all those important things the Tenant is relying on, such as mending the roof and unblocking the drains. But if The Company fails to do so, the Landlord will do it; and for your comfort, dear Tenant, if that ever arises you can sue the Landlord direct, in place of the Company, without having to jump through extra hoops.

but we've concluded that the company is the landlord?

 

[Newchodge]

the lease does mention ground rents. but as the company is dormant it does not trade or take any income and has no account etc. though it may need to as a result of solicitor costs in the company name etc. i'm unsure of how that all effects the company. the costs were between 2022 - 2023. the last dormant return to HMRC and CH was up to 2022

The Company defended the injunction? I cannot see that it can be dormant as it would have had to instruct solicitors and pay their costs.

Who was the fround rent paid to?

 

[BonzoDog]

The Company defended the injunction? I cannot see that it can be dormant as it would have had to instruct solicitors and pay their costs.

Who was the fround rent paid to?

The Directors or some of them themselves paid for the solicitors on behalf of the company. The solicitors are asking me to pay the the company in name , tho i suspect it will in practice go direct into the solicitors bank account as i doubt the directors have actually paid for the costs in total anyway. i as a shareholder have not seen any accounts. i assume the company will have to become active to declare it all?

 

[eteb3]

but we've concluded that the company is the landlord?

Company is Landlord now.

But (on my read of the little snatches you've posted) at one point the Company was a lessee:

‘The Landlord’ = “Person A” and “Person B”

You don't have to update the lease when ownership changes: the new owner simply steps into the shoes of the old one. Assuming the freehold was sold by A & B (as Old Landlord) to the Company (their lessee), the Company's obligations to Old Landlord and Old Landlord's obligations to Company then evaporate - because you can't oblige yourself.

The obligations of both of them (that is, both Old Landlord and Company) to the Tenant now fall on the new freeholder, the Company = New Landlord.

 

[eteb3]

i assume the company will have to become active to declare it all?

Yes. We rehearsed all that in a recent thread - you may be familiar with it. And further, the directors breached their duties, including to you as a member, by not filing the accounts and not sending you a copy.

 

[Annoying Donkey]

One would expect notice to be given to the lessees / tenants, but I don't know if that's legally necessary.

Landlord and Tenant Act 1987, Section 48...?

 

[BonzoDog]

Company is Landlord now.

But (on my read of the little snatches you've posted) at one point the Company was a lessee:


You don't have to update the lease when ownership changes: the new owner simply steps into the shoes of the old one. Assuming the freehold was sold by A & B (as Old Landlord) to the Company (their lessee), the Company's obligations to Old Landlord and Old Landlord's obligations to Company then evaporate - because you can't oblige yourself.

The obligations of both of them (that is, both Old Landlord and Company) to the Tenant now fall on the new freeholder, the Company = New Landlord.

On that point. The Company was formed together and at the same time as the lease.
so either the landlord was never the people A & B, but always the Company, or
The Landlord is the Shareholders.
As neither fact is defined. And only that the Freeholder is the Company. And that the Directors, must be The Managers. Is the conclusion that the Landlord MUST be the Company AND cannot be the Shareholders?

The Lease says, as i've said previously.

If The Managers fail in their duties to the Tenant, then the Landlord can step in.
Evidently if the Landlord and the Company are both controlled by the Directors, then this default to a higher authority than The Directors doesn't exist?

 

[eteb3]

the Directors, must be The Managers

Not according to one of your earlier posts: The Managers is a synonym for the company.

if the Landlord and the Company are both controlled by the Directors, then this default to a higher authority than The Directors doesn't exist?

It’s not a matter of authority, it’s a matter of liability. The lease is saying the Landlord can’t hide behind the company=The Managers. But yes, if there’s been a merger of estates as I suspect, the difference between Landlord and Managers (=company, not its directors) is nugatory

On that point. The Company was formed together and at the same time as the lease.
so either the landlord was never the people A & B, but always the Company, or
The Landlord is the Shareholders.

I don’t mean this in any way unkindly but I think there’s a basic problem with your way of looking at it all, which is you’re looking at the flesh and blood people and not the legal persons ( the parties to the lease) and the estates (the freehold and all the leaseholds). The same person can be the landlord, a shareholder in the Company, a tenant, and a director, all at the same time, and the agreement will be working exactly as it was meant to.

 

[BonzoDog]

Not according to one of your earlier posts: The Managers is a synonym for the company.


It’s not a matter of authority, it’s a matter of liability. The lease is saying the Landlord can’t hide behind the company=The Managers. But yes, if there’s been a merger of estates as I suspect, the difference between Landlord and Managers (=company, not its directors) is nugatory


I don’t mean this in any way unkindly but I think there’s a basic problem with your way of looking at it all, which is you’re looking at the flesh and blood people and not the legal persons ( the parties to the lease) and the estates (the freehold and all the leaseholds). The same person can be the landlord, a shareholder in the Company, a tenant, and a director, all at the same time, and the agreement will be working exactly as it was meant to.

Absolutely no offence taken. I totally appreciate any insight.
But, to press the question and I apologise if it is getting tiresome.
Yes, the Lease does state "The Managers" are "The Company Ltd". But, the Company is itself Managed by The Directors. And yes, as you thought "The Directors" is not mentioned in the Lease.
My only interpretation is that Managers and Directors here are indistinguishable?

 

[BonzoDog]

The Company defended the injunction? I cannot see that it can be dormant as it would have had to instruct solicitors and pay their costs.

Who was the fround rent paid to?

If a dormant company starts to trade (instructs solicitors), can it register as active (not dormant) for the following returns to HMRC? Or must it legally declare that it is 'trading' as soon as it starts to happen? Or, in practice is the most likely worst outcome a small penalty from HMRC and Companies House?
Are statements to CH for the previous year? So in September 2023 we would make a dormant statement for 2021 - 2022.
Whereas HMRC would at the same time want to see a return for this year 2022 - 2023? Is that right?

 

[fisicx]

Freeholder = Company = Landlord

The company has directors who can appoint managers to act on their behalf.

You write to the Company. The managers action your letter/email and report to the directors.

A manager and director can be the same person.

A manger can be a paid employee but not a shareholder.

A shareholder can be a director.

A shareholder can be anybody.

You are overthinking things.

 

[BonzoDog]

Freeholder = Company = Landlord

The company has directors who can appoint managers to act on their behalf.

You write to the Company. The managers action your letter/email and report to the directors.

A manager and director can be the same person.

A manger can be a paid employee but not a shareholder.

A shareholder can be a director.

A shareholder can be anybody.

You are overthinking things.

Why can a Manager not be a Shareholder?

 

[Newchodge]

Why can a Manager not be a Shareholder?

Can you explain why any of this actually mattters?

 

[BonzoDog]

Its a Company that owns a single small block of Flats.
The Leaseholders are the only Shareholders in the company (1 share per Lease)
The Managers are The Company, which is the Owner, which is the Freeholder etc.
The Company is managed by The Directors. The Directors (can be just one person) control everything, unless the Shareholders disagree (but what if the Shareholders are the Managers..)
The Directors are (but do not have to be) the Leaseholders, who are also the Shareholders.

This arrangement is not unusual. Though I think most similar arrangements might have a Right to Manage Company. we do not. And most Companies like ours should have a Shareholder agreement, we do not.
So I am trying to understand how the Lease fits into Company Law within this set up.
If there is legislation which says a Shareholder cannot be a Manager.
This would help to force our mess to be untangled.
Otherwise as descried, The Directors may hold too much control. And without some other arbitration or limit, to challenge that control seems to require a lot of risk and expense.

 

[Newchodge]

Its a Company that owns a single small block of Flats.
The Leaseholders are the only Shareholders in the company (1 share per Lease)
The Managers are The Company, which is the Owner, which is the Freeholder etc.
The Company is managed by The Directors. The Directors (can be just one person) control everything, unless the Shareholders disagree (but what if the Shareholders are the Managers..)
The Directors are (but do not have to be) the Leaseholders, who are also the Shareholders.

This arrangement is not unusual. Though I think most similar arrangements might have a Right to Manage Company. we do not. And most Companies like ours should have a Shareholder agreement, we do not.
So I am trying to understand how the Lease fits into Company Law within this set up.
If there is legislation which says a Shareholder cannot be a Manager.
This would help to force our mess to be untangled.
Otherwise as descried, The Directors may hold too much control. And without some other arbitration or limit, to challenge that control seems to require a lot of risk and expense.

The shareholder(s) own the company. The director(s) run the company on behalf of the shareholders who can get rid of a director in accordance with the company rules. There is no legal requirement to have anything other than shareholder(s) and director(s). The Directors, while they remain directors have absolute control. This is the case for every Ltd company.

All other matters would be defined in the Articles of Association and othe documents.

Why does it matter?

 

[BonzoDog]

The shareholder(s) own the company. The director(s) run the company on behalf of the shareholders who can get rid of a director in accordance with the company rules. There is no legal requirement to have anything other than shareholder(s) and director(s). The Directors, while they remain directors have absolute control. This is the case for every Ltd company.

All other matters would be defined in the Articles of Association and othe documents.

Why does it matter?

It matters if The Directors make or allow decisions which are not in the best interests of The Shareholders and of the Company.
For example a restriction on the Lease Title requires that, in the event of any disposition a certificate be be provided by The Managers, prior to any new registration. This certificate is intended by the restriction to provide that the Managers confirm that the provisions of the Lease have been complied with. A fairly standard restriction.
But, if the Managers should provide that certificate even if the provisions have not been fully complied with. Who can question it? This meeting to decide and take the vote is not at a general meeting. A member could try to sue based on a breach of lease or of fiduciary duty etc. But that is not easy and is a risk, nobody wants that fuss. The Shareholders can take action, but they may also be the managers anyway... Legal options all seem too risky.
Or, an objection can be made to the Land Registry, that the certificate is invalid.. which may result in a tribunal. Its all a lot of work and effort just to make Directors act within the prescribed duties. It seems to me that those duties are in effect voluntary if the board allows it to be so.

 

[fisicx]

Why can a Manager not be a Shareholder?

Because they are an employee of the company.

 

[fisicx]

Who is question it?

The sharehoilders!

This meeting to decide and take the vote is not at a general meeting.

Yes it is. Either an AGM or EGM. At these meetings you can vote them off the board.

 

[Newchodge]

Because they are an employee of the company.

 

[fisicx]

Company A has directors and owns property. They employ a manager to look after the property on their behalf. The manager doesn't have any shares, they just look after the property.

But....

This manager could be a director, or a shareholder (leaseholder).

We don't know because @HarrySmiler hasn't told us.

 

[Newchodge]

Company A has directors and owns property. They employ a manager to look after the property on their behalf. The manager doesn't have any shares, they just look after the property.

But....

This manager could be a director, or a shareholder (leaseholder).

We don't know because @HarrySmiler hasn't told us.

Sorry I thought your post meant they could not be shareholders because they are employees. which is not right, unless it is in the Articles.

 

[BonzoDog]

Company A has directors and owns property. They employ a manager to look after the property on their behalf. The manager doesn't have any shares, they just look after the property.

But....

This manager could be a director, or a shareholder (leaseholder).

We don't know because @HarrySmiler hasn't told us.

OK so The Managers is an entity regardless of whether it comprises of peoples or a firm, like The Company. The Managers does not and cannot own shares itself(s) in the company, but the individuals of The Managers can.. right?
So in practice.. The Managers of The Managers can be Shareholders..?
And The Company employs the services of The Managers, though in practice It is The Directors who can employ (though not necessarily pay) the services of themselves as The Managers?
Really? Is it meant to be this complicated and so open to ....