A share of freehold arrangement can offer landlords greater control over their property management, but it also requires effective governance and transparency. A recent case involving a 52-property development highlights how poor management, lack of oversight, and obstructive behaviour by directors and managing agents can create significant difficulties for shareholders.

Background: Share of Freehold Ownership and Governance

In this development, each property owner holds a 1/52nd share of the freehold, equating to roughly 4% ownership per property. The freehold company is governed by a board of five directors, typically elected from the shareholders. This structure is intended to allow owners to collectively manage the building and make decisions affecting maintenance, insurance, and other communal matters.

However, the effectiveness of this arrangement depends heavily on cooperation among directors, transparency in financial matters, and adherence to legal and contractual obligations. When these elements break down, the company can become dysfunctional, potentially jeopardising the interests of all shareholders.

Issues Reported: Obstruction and Lack of Transparency

In late November, significant problems arose when one director and the managing agent began obstructing the board’s decision-making processes. They refused to allow votes for appointing a chairperson or other decisions, frequently vetoed proposals, and denied requests for access to the company’s bank account. Shareholders who sought transparency were labelled as ‘confrontational’, creating a hostile environment.

This situation was exacerbated by the departure of two key figures—the previous chairman and managing agent—who had left the company in a precarious state. Three of the five directors were actively trying to resolve these issues, but one director remained absent due to personal reasons, and the remaining director refused to resign, aligning with the problematic managing agent.

Concerns Over Managing Agent’s Competence and Conduct

The new managing agent, appointed by the retiring agent, has been described as unqualified and lacking essential professional credentials. Notably, they do not hold professional indemnity or public liability insurance, nor do they manage other developments or operate through a registered company. Despite this, they have sole access to the company’s bank account, which holds over £200,000, with no oversight or transfer limits in place.

Further concerns include inconsistent and misleading statements from the managing agent regarding their contractual status and experience. For example, they have alternated between claiming to manage multiple developments and none at all, and denied providing a contract to the board despite evidence to the contrary.

Impact on Shareholders and Company Functionality

As a result of these governance failures, four directors resigned in an effort to trigger an Annual General Meeting (AGM) where shareholders could appoint a new board to address the issues. However, the remaining director, in collaboration with the managing agent, has resisted these efforts. Approximately half of the shareholders aware of the situation find the ongoing dysfunction distressing and unhelpful.

The company’s inability to function properly raises concerns about the validity of its insurance policies and the overall management of the freehold. The remaining director has called a virtual AGM with a single agenda item: appointing an associate as chairman. This individual, who lives in a small flat and has previously resigned twice after disputes, is not representative of the wider shareholder base.

Legal and Practical Considerations for Landlords

Landlords involved in share of freehold companies should be aware that the Companies Act 2006 provides statutory rights and remedies that may assist in resolving such disputes. These include the right to call general meetings, request information, and challenge unfair conduct by directors. However, navigating these legal provisions often requires professional advice.

In this case, shareholders seek a proper meeting with open discussion and the ability to question directors and the managing agent. They also wish to dismiss the managing agent due to incompetence and lack of transparency. Given the complexity and severity of the issues, obtaining qualified legal advice specialising in company and property law is advisable.

Implications for UK Landlords and Agents

This case underscores the importance of robust governance structures, clear contracts with managing agents, and transparent financial controls in share of freehold arrangements. Landlords should ensure that managing agents hold appropriate qualifications and insurance, and that company accounts are subject to regular oversight. Failure to maintain these standards can lead to operational paralysis and financial risk.

Agents and landlords should also be vigilant about director conduct and shareholder engagement, promoting open communication and adherence to legal requirements to safeguard their investments.

Looking Ahead: Support and Resources

The Landlord Association (TLA) is launching a new Trusted Partners Hub in Q1 2026, featuring verified and approved service providers selected to support landlords, tenants, and property management businesses. This initiative aims to connect landlords with reputable legal, trades, insurance, financial, mortgage, tenant screening, and other services. Providers interested in joining can register their interest at landlordassociation.org.uk/become-a-tla-service-partner/.