Q My wife and I live in a development of 18 maisonettes in its own road. Several years ago the leaseholders bought the freehold. We set up a company and the leaseholders became shareholders. For many years there was a quarterly service charge of £95 that covered ordinary outgoings and a sink fund for one-off additional works. In June, notice was given of the company AGM. We did not attend, but it seems that under “Any Other Business” a decision was made to increase the quarterly charge to £215. This includes a quarterly levy “to be set aside for the renewal of the paths if possible in 2010”. Was it legal to raise the charges without giving proper notice of precisely what was planned at the AGM?

A There are two entirely separate legal principles here. First, there are your rights as shareholders under company law. Basically, the company's articles of association say which decisions have to be made by shareholders and which are delegated to the directors. In the case of leaseholder-owned freehold companies, it is very unusual for the Articles to require shareholders to approve a change in the level of charges. So the directors probably did not have to give notice of the increase - although as a matter of courtesy they seem to have told people under “Any Other Business”. Secondly, there is the law relating to service charges. Whether or not it is owned by the leaseholders, the freeholder can still recover only what is properly payable under the terms of the individual leases. For example, it cannot claim anything towards a sink fund unless your lease says so - no matter what the other leaseholders may say. Similarly, a fixed charge like yours that went on unchanged for years and years at the same rate probably did not comply with the provisions of your lease for estimating and recovering service charges. Even if 17 leaseholders agreed with the freehold company to shortcut this service-charge machinery, they cannot force this on the one remaining leaseholder. You can always insist on the freeholder following the strict terms of your lease. The point is that your rights and obligations as shareholders in the company are entirely separate from those as leaseholders under the lease.

The writer is a barrister at Tanfield Chambers. E-mail your questions to: brief.encounter@thetimes.co.uk

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