Dear Interim Managers,
ENFIELD ISLAND VILLAGE TRUST RENTCHARGE & BUDGET
Today I write to you as an owner and needless to say having intrinsic knowledge of the Trust's business and financial affairs (income, expenditure & assets) as well as its legal obligations I am compelled to put my representations on all matters in writing not only for you to consider but also for all the members of the Trust who have been kept in the dark since your appointment.
I would inform you that as a Trustee, voted as such overwhelmingly, albeit currently with no powers I feel it is my duty to make Trust members aware of the facts as I see them so that everyone is adequately informed of the state of affairs as well as your intentions in the upcoming EGM.
The Rentcharge document
OPERATIVE PROVISIONS states:
1. In consideration of the covenant by the residents association herein contained the grantor with full title guarantee hereby grants the Residents Association a perpetual yearly Rentcharge (authorised by the Rentcharge Act 1977) comprised of:
1.1. a fixed sum of £1 (one pound)
1.2. a variable sum (hereby called the variable sum) computed annually to the 31st day of March in each year representing the Residents Association expenses outgoings and other heads of expenses as set out in part II of the Second Schedule such sums to be calculated and paid under the terms of the First Schedule
Before you breached my company's contract, I prepared management accounts for you as at 30 September 2015 to assist you to assess our position as a going concern. Those accounts clearly showed the net asset value of the Trust to be £919,069 and that was not taking in to account the capital appreciation of the properties which combined I estimate to be over £185.000. If and when these properties are sold the total net assets of the Trust will be approximately £1.1 million. Taking into account the cost of breach of contract of £300,000, the Trust would still be in net funds of approximately £800,000.
One of the basic principles of accounting is the principal of accruals and it is a fundamental requirement of all accounting frameworks, such as Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). In a nutshell this means that income and expenditure is accounted in the period in which they actually occur, rather than the period in which the cash flows.
As the Trust is not a for profit organisation one can safely expect that any surpluses of previous years should be used before further variable sums for Rentcharge are levied. That is one of the reasons when we were managing the Trust; the Rentcharge was reduced to abide with the covenant without paying a dividend to the owners which is not permitted by the governing document.
As the Trust has in previous years overcharged for the costs and as it is now well financed to achieve its object (maintain the infrastructure of the village) I have remitted £1 for each of our properties because by reason of my representations above you are only entitled to charge £1 per annum to each owner until such time as the reserves are reduced to a reasonable level for any unforeseen expenditure. I personally estimated that level of reserves needed by the Trust to be no more than £350,000, which should also provide a safety net for late payment and arrears as a reasonable level of reserves to hold and not £800,000. As such I submit that the Trust cannot legally charge more than £1 for the next two years.
If you do not agree with my assessment I would appreciate your views and the reasons why you disagree. If we fail to reach agreement I will decide whether I should remit the balance of £199 to the Trust and then issue a claim at the smalls claims court for recovery which as am sure you are aware, will allow the court to adjudicate the issue and set the precedence on the matter. In the alternative if you accept my assessment as valid, then I believe you have a duty to inform all owners and credit back £199 to each property.
MY COMMENTS ON YOUR BUDGET
As landlords, the Trust has a duty of reasonableness when expending service charges to mitigate expenditure. You will find the authority of this in section 19 of The Landlords & Tenants Act 1985 which states
"Relevant costs shall be taken into account in determining the amount of a service charge payable for a period -
(a)only to the extent that they are reasonably incurred, and
(b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard;
and the amount payable shall be limited accordingly
As such I submit that your budget errs as follows and for my observations I would appreciate a reply with explanations:
Action of responsible manager
1. Combined liability £1,820 (2015-2016 £482) - Obtain alternative quote.
2. General Repairs £10,000 (2015-2016 £5,937) - Why would you assume this increase in cost?
3. Wages £67,000 (2015-2016 £24,000) - Last year’s wages included the caretaker's wages of £22,000. You no longer employ a caretaker. The Trust now has only two employees. The part time community centre worker and part time one litter picker. Estimated wages £12,000. To whom will the balance of 55,000 be paid?
4. Gardening £31,000 (2015-2016 £21,000) - The Trust’s gardener works 5 days each week, 50 weeks a year and is paid £100 per day. That totals is £25,000.
Why would you over estimate by £6000 more for this year?
5. Income Community Centre £22,000 (2015-2016 £33,000) - Why underestimate by £11,000 this year?
6. Property rentals £0 (2015-2016 £28,800) - You omitted this income altogether. Was it an oversight or intentional and where does this income go? Either way it does not give me much confidence in your ability to manage the Trust.
Finally I cannot see the cost of your fees and neither I nor anyone else I spoke to has any idea of what exactly you were doing for the last 10 months.
Your instructions for your appointment were to investigate mismanagement and the validity of the elections. During the tenure of the current Trustees, who you purport to investigate for mismanagement, there was unparalleled transparency in everything we did. The website in particular contained all the information needed to create awareness. Now that you brought it all down we are all clueless of your progress and in which direction you are heading in respect to your instructions by the Charities Commission.
In addition I noticed that you appointed yourselves as directors. Please refer to the Articles of Association 32 (h) which state that A Trustee ceases to hold office “in the case of an Elected Trustee, if he ceases to be a member of the Company.” As you are not owners of property at the Village you cannot be members and as you are not members you cannot be directors. Please explain your actions. It would then follow as you are not directors only the board can call for an EGM or if 5% of the members requisitioned it. Having pointed that out, being solicitors, I am sure you would be alive to the fact that any actions you take contrary to the law would not absolve you from wilful negligence.
In your notice for the EGM you have not made any mention of any report required by your engagement on any mismanagement by the trustees. I have always assured you that you will not find such evidence and you are now noticeably evading any mention of the issue altogether. I challenge you to indicate to all the members any areas of mismanagement.
Similarly in respect to the details in your notice of the EGM you have not indicated or advised members of any findings of foul play in our elections and as such I am at a loss to understand why you would have made the decision to invalidate those elections. Instead you went ahead calling for yet another election and this time you are attempting to change the governing document to specifically preclude me and my partner (current or future) from being nominated. In this respect I can assure you that, neither my partner nor I have any plans or desire to serve as trustees or to manage the Trust ever again no matter what the remuneration might be.
When we held elections we had the common sense, for the first time in the Trust’s history, to hold fair elections by employing the services of ERS, an independent elections provider. To the contrary you are now holding new and illegally called elections where you are the organiser as well as the adjudicator. Please forgive me for stating the obvious, but your behaviour so far offers very little trust in your intentions or your objectivity. This I hasten to add was conveyed to me by a considerable number of owners.
Finally to summarise everything that precipitated matters to this point, your appointment was not about mismanagement or validity of elections. It was purely the malicious intent of one civil servant at the Charities Commission to target me personally and to invalidate my contract with the Trust just because I questioned his competence. Similarly your intransigence to negotiate with me any favourable outcome for the Trust was as a result of my questioning your intentions in this matter and as it now transpired convinces me that you are following explicit prejudicial instruction of the Charities Commission against me to this exact end no matter what.
28 June 2016
Letter to INTERIM MANAGERS