One of our fellow directors of our residents management company has been carrying out the cleaning at our block for around 18 months as a self employed contractor who is not VAT registered. We have only been directors for a year so we were not involved in the decision to let her take on the cleaning. We have asked for a copy of the contract and been told that there isn't one and that the work is being done on a rolling contract (I assume this was done verbally).
The Managing Agent is receiving invoices in the name of the cleaner/directors son. He is also a Director and the invoices ask for payment to be made direct to his mum.
We have expressed our concerns about the way he is presenting his invoices i.e. dates of work completed missing, invoices dated before work completed, no description of what work has been done and how long it took and duplication of invoice numbers.
We have asked for invoices to be corrected before we authorise payment, siting the fact that as a Director his dealings with the company are open to the scrutiny of all members whose money we are spending, but the Managing Agent has informed us that as the Contractor is a Director he has been allowed to authorise the payment of his own invoices.
The articles of association state that a director can receive payment for work carried out but makes no mention of whether or not they can do what they have done.
We are concerned about any legal implications for us of allowing him to continue authorising his own invoices as I know we are jointly responsible for the actions of all Directors.
Any advise on this.
Replies (8)
Please login or register to join the discussion.
Are the flats cleaned properly, and is the amount being paid commensurate with market rates?
At the next board meeting, you could remind the director that he has a duty of responsibility to the company that are just as real as if an external contractor is being used. You could consider asking him to resign as a director because of the apparent conflict of interest. If he resists you could have an unpleasant time ahead.
You could, presumably, threaten to require an audit, but as the other directors and members are presumably your neighbours then you may not get much thanks and, if the flats are being cleaned properly at a reasonable price, who really cares?
Notwhat you asked but areas of concern
Is the cleaner really self employed?
Does the cleaner (whoever it is) carry public liability insurance?
Does the management company carry public liability and employer liability insurance?
Appreciate this is not really your question but having had a slip incident on a wet stair of a property we manage it is important to have covered the, "if something goes awry" scenarios.
Treat them as external contractors
I've dealt with several cases like this where a resident is only too happy to carry out cleaning or repair work for a modest sum and it's worked fine. In this case however, there's obviously friction and I also say that the managing agent should really have asked that another director OK the bills.
So you (and the other directors) have to look on this as if you were dealing with an outside contractor and, if you think you are being over charged, get agreement to get a couple of quotes from other external firms.
Whatever happens though, if it continues as it is, there is no way the director should be self OKing the bills, they need to be OKd by another director.
The audit issue is a potential nasty, I had exactly the same with a flat management company, where the 1960 memo & arts required an audit and they paid me over £3K pa to do it, whereas the accounts on their own may well have cost £1K.
Unless things have changed, the memo & arts are king and so the only way to avoid having an audit is to get them rewritten and OKd by the shareholders. You should ask the accountant to put in writing why the memo & arts can be ignored, but if you all agree I would certainly get them rewritten, there's a bit of legal stuff involved but you do not want to be a director who has failed to arrange for accounts to be audited.
Landlord and Tenant law, and provisions of the lease
There may also be issues with landlord and tenant law, for example to do with the reasonableness of service charges, see
http://www.lease-advice.org/publications/documents/document.asp?item=14
There may also be relevant provisions in the leases.