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Lords to debate leasehold abuses

March 30, 2012 by

The House of Lords is to debate residential service charges next month.

The move comes from Baroness Gardner (above) following meetings with Melissa Briggs and Sebastian O’Kelly, of the LKP, in February.

Baroness Gardner, a former Westminster councillor who as an Australian comes from a country where English leasehold law was uprooted, has raised the issue of leasehold abuses several times in the past.

She is particularly interested in examples of money being pocketed by freeholders or managing agents – such as insurance and energy commissions (see below) –  without leaseholders’ knowledge.

Baroness Gardner will be raising to wider public awareness the staggering LVT rulings at prime riverside developments in London in recent months.

The £1 million payment residents at St Georges Wharf, Vauxhall, and the devastating LVT ruling against Estates and Management at Charter Quay, Kingston, is likely to form part of of her evidence.

Likewise, the rapacious stealth charges inflicted on pensioners living in retirement developments.

The debate is scheduled for April 23.

Filed Under: House of Lords, News Tagged With:

Government receives a full and frank message from LKP

March 27, 2012 by

Prompted by an invitation by Housing Minister Grant Shapps, three representatives of Leasehold Knowledge Partnership had a positive meeting with the Department of Communities and Local Government today.

The department was eager to learn more about LKP and its fast-growing accreditation scheme.

The meeting dwelt at length on the origins of LKP and why such an organization is necessary.

The department was reminded of the massive LVT settlements at prime London riverside developments, and strong criticisms of the freeholders who appoint themselves as managing agents, insurance brokers, CCTV providers and the rest.

The predatory charges at retirement developments that Carlex made into a national scandal were referred to and the department was reminded of the  London Assembly’s hard-hitting report Highly Charged.

Shapps is reportedly in touch with the LA and wants to meet for talks about this.

Developers are distancing themselves from the familiar offenders – big managing agents who were handed out vast numbers of leasehold units to manage during the boom years, and lost no opportunity to load service charges, insurance commissions and numerous other extras.

LKP made clear its views on the feeble codes of practice of trade bodies such as ARMA or RICS. The former has been particularly craven by declining to name a single managing agent who has been expelled from the organization over the past 10 years for malpractice – rather than simply for failing to pay its ARMA subs.

The consumer-driven approach of LKP was made clear.

It was accepted that LKP would be consulted along with the trade bodies in future discussions of leasehold issues.

The department argued that the record sums paid to London riverside leaseholders may indicate that the present system functions. But all the actions here have cost tens of thousands of pounds and have involved highly successful professional residents living in owner-occupied blocks.

The young homeowner, probably living in a block with many rental properties, is extremely vulnerable and most simply sell up and leave a block where rip-off practices prevail.

Filed Under: ARMA, News Tagged With: ,

Chelsea Bridge Wharf: a win for Peverel

March 25, 2012 by

Did residents really vote to be managed by Peverel?

 

Not everyone is happy at Chelsea Bridge
Wharf – just as they weren’t at St George’s
Wharf, Vauxhall, and Charter Quay, Kingston.
All were Peverel managed.

This astonishing item of news emerged from a recent meeting with the Berkeley Group, where it was suggested that residents at Chelsea Bridge Wharf actually voted to be managed by Peverel.

Improbable though it may be, the event did, in fact, occur at Chelsea Bridge Wharf, in Battersea, two months ago. But the circumstances are not quite a ringing endorsement for the troubled managing agent, which was taken out of receivership earlier this week.

Chelsea Bridge Wharf, the largest riverside scheme in central London, which sits beside Battersea Power Station, is in the midst a costly Right To Manage struggle with Vincent Tchenguiz – until last March Peverel’s owner.

Having lost at the Leasehold Valuation Tribunal, Tchenguiz has appealed to the Land Tribunal, which will rule imminently on whether the appeal is permissible.

There are nine separate buildings at Chelsea Bridge Wharf, plus a hotel.  Five of these – Howard, Centurion, Eustace, Oswald and Horace – that make up more than 600 units of the 1050-unit site voted to dump Peverel and opt for RTM.

The 89-unit Burnelli building, where only 15 units are owner-occupied and the rest are shared ownership, had been run by the Genesis Housing Association.

It was a tall order for a social landlord like Genesis to run a block in one of London’s most expensive apartment complexes and the residents weren’t happy. Two months ago they elected to be run by the same managing agents that ran the rest of the site, which is Peverel.

So next month Peverel will be in the happy and unusual position of taking on the management of a new block – rather than losing one.

Chelsea Bridge Wharf illustrates the complex inter-relationship between the Berkeley Group and the troubled Tchenguiz organisation. It sold a ‘superior lease’ on some of the blocks, not actually the freehold, to the Tchenguiz for the best cash offer and by doing so it avoided having to offer the freehold for sale to the leaseholders first, as required in law.

Of the three other buildings on the site, the Warwick Building has a superior lease owned by the L and Q Housing Association, while the freeholds of Lanson and Hawker are retained by Berkeley.

Tony Pidgley

At the base of these buildings Berkeley Group’s legendary owner Tony Pidgley will have his London office suite. For that reason, Berkeley wanted to retain control of this area of Chelsea Bridge Wharf.

Although RTM had been voted on, it was dropped. In these blocks the residents are not unhappy. Berkeley does not fleece residents over the building insurance, for example.

The 142-unit Oswald building, where Tchenguiz has the superior lease, the insurance – through Peverel – costs £79,000 a year. At the 147-unit Lanson building, where Berkeley has retained the freehold, it is only £27,000.

“Berkeley does not scam the residents. In fact, it gets good deals on insurance, possibly better than we could with RTM, so we might even ask them whether we could double up with them,” says a CBW resident, who is backing RTM. Meanwhile, the RTM process has cost way over £20,000 and if Tchenguiz wins right of appeal the whole process will be delayed by more than a year and cost double that.

Filed Under: Chelsea Bridge Wharf, News, Peverel, RTM Tagged With: , , , ,

Seeking stars in the east

March 14, 2012 by

What picture emerges from LKP’s tour this week of East Anglia?

Apart from Cambridge, leasehold property ownership more resembles the North West than the affluent South East.

In Norwich, Ipswich and Bury St Edmunds, most leasehold flats are owned by buy-to-let investors – and so far they have proved pretty wretched investments, down 40-50 per cent since the peak.

The much heralded revival of Ipswich, with its boat-bobbing marina, has gone spectacularly phut with the end of the property mania.

One local commentator even said that Ipswich being knocked out of the Premiership was to blame as no longer did Londoners arrive by train, see the lovely marina and realize you could buy a “bargain” flat over the water.

Many are now rented out to social tenants, and the block management put in place by the developers has often been abysmal.

In affluent Cambridge the position is different and there is a strong owner-occupier market.

LKP had interesting discussions with chartered surveyor Jeremy Wager, of Cambridge Property Management.

In the new town of Cambourne, west of Cambridge, developers handed over the management of their schemes to Peverel, Trinity and Mainstay.

We also met Stephen Chard and Neil Robinson of Encore, which has 7,000 units under management in Cambridge, Ipswich, London and, within the last nine months, Nottingham and Bedford.

Stephen and Neil were large-scale residential property investors and founded Accent, which they later sold. Encore is a major property manager in Cambridge and has recently won the management of a new 200 unit Berkeley Group scheme.

In Norwich,  Guy Hudson, a multi buy-to-let landlord, set up Norwich Residential Management at the converted resi scheme Paper Mill Yard following appalling experience of national managing agents: soaring service charges, poor maintenance and ever changing property managers (who had no experience of maintenance).

With 1,500 units under management, and numerous sites around the city, he has won the contract to manage Taylor Wimpey’s NR1, which is on the opposite side of the river to Paper Mill Yard.

National outfits such as RMG, Countrywide, Remus and Mainstay (running the NU Centrale block) are all active in the city.

At Bury St Edmunds, father and son Derek and Daniel Wilson have run Temples Property Management for a number of years.

Such is their reputation that local estate agents send them putative buyers to learn the basics of leasehold ownership – and its obligations.

“If you explain the lease and the charges to people beforehand you will avoid having arguments in a year’s time,” says Daniel, who claims not to have lost the management of a block.

“It costs me far less to keep people and ensure that they are happy than it would do to go out and get new business.”

 

Filed Under: News Tagged With: , , , , , , , , , , , , , , , ,

Background to right to manage

March 13, 2012 by

Right to Manage was a power given to leaseholders in 2002 by the Commonhold and Leasehold Reform Act. The legislation empowered homeowners to force the transfer of the landlord’s management functions to a special company set up by them – their own “right to manage” or RTM company. The right was introduced not only to wrestle power away from poor landlords but to give the decision of managing the block to the people it affected most, the leaseholders.

Right to Manage is a technical legal process requiring diligence, accuracy and experience. LKP/CarlEX have now advised many developments which have lead to in excess of 100 successful Right to Manage companies being formed, resulting in the removal of failing management companies. A common failing encountered on numerous occasions is the inability of management companies to budget in advance with any real accuracy. In nearly all cases the result is an overspend of the service charge collected, and an immediate recharge to disgruntled leaseholders.

[Read more...]

Filed Under: RTM

LVT: the things they never tell you

March 13, 2012 by

and the things they never tell you.

This is the first in a series of articles designed to help leaseholders (always called tenants in the law) to understand (leasehold) law, the Leasehold Valuation Tribunal (LVT) and the “low cost” legal system intended to resolve issues arising on many aspects of leasehold law. Unfortunately there are no definitive sources of information for tenants on how to go to the LVT, and this series of articles is intended to fill in some of the gaps left by LEASE, the LVT and various books which help guide the reader through the process. We will try to outline some of the difficulties you may face, some of the things you need to know and some of the tactics the landlord may try to use against you and to then offer some tips and hints on how to meet these challenges.

Are you missing £630 Million pounds?

We would have liked to start this series with some statistics about the LVT but sadly the Department of Communities (DCLG) which overseas leasehold legislation advises that both they and the LVT do not hold the data which you might want to know about. The LVT do have statistics on the number of cases heard in each region, and their own costs but no statistics on case outcomes or make-up.

The only real option to date has been to look at the decisions on a case by case basis. After some initial research LKP is now able to make its first estimates based on a sample of this years LVT cases. The results show:

  • Approximately 80-90% of cases which go to the LVT are taken by tenants and only about 10-20% by landlords. The exception to the normal rule of tenants taking the action appears to be a growing trend of landlords seeking to establish their entitlement to charge for a set of proposed major works. This recent change may in turn have followed on from a decision obliging a landlord to pay a very large amount of money having failed to consult correctly on a set of major works.
  • It also seems from anecdotal evidence tenants are proportionally far more likely to have to give up before they get to court because they either sell their property, run out of resources, become intimidated at the possible costs or feel obliged to reach a deal with the landlord, which may mean that over 90% of cases may be being taken by tenants.
  • Other than in the very small sites of less than 5 or perhaps 10 flats, it seems that in over 85% of cases landlords are legally represented. Sometimes with a solicitor but in many cases with both a solicitor and barrister instructed as per the normal court system. There is a clear correlation between case size and representation but even when a single tenant takes a case the landlord sometimes chooses full legal representation.
  • For tenants the level of legal representation is far more variable  with representation in the region of 40% and perhaps up to 50% of cases which may be paid or pro bono. There are certainly many many more instances where tenants are represented by lay members from amongst the residents, even when facing a landlord using a solicitor or both a solicitor and barrister. This perhaps suggests that for system intended as a “lay” court has gone wrong as there is clearly a differential presentation system between landlord and tenant.
  • Even in cases where tenants are represented, that representation comes from a much wider range of barristers rather than that might be described as the more expensive specialist leasehold chambers more often used by landlords.
  • Looking at the data on Right to Manage applications and lease extensions looks more positive. Of course most RTM applications succeed since in most cases this is an automatic right. But we need to looked at the Upper Tribunal data as it appears a reasonable proportion of these cases won by tenants are then appealed to the Upper Tribunal by the landlord. We will report more more on this issue when we have data from the Upper Tribunal.
  • One final statistic. To appeal an LVT decision to the Upper Tribunal it must normally be passed back to the LVT for review from them to consider if they made the right decision. After which if a decision is still not accepted it can be referred to the Upper Tribunal. In 62% of cases adjudicated on by the Upper Tribunal they previously been been refused permission to appeal by the LVT. Which perhaps goes to show that asking someone to judge if their own decisions is not a good idea.

There is the suggestion by some commentators that the number of cases is going up at the LVT because of the recession but there seems no data to support such a claim. It could equally be speculated that the case load at the LVT is going up simply because tenants are becoming more an more aware of their rights through web sites such as CarlEX and LKP. There certainly seems to be no suggestion the case load is increasing because the government is communicating more effectively with leaseholders about their rights. We assume as more and more sites assert their right to manage, and more sites seem willing to challenge the service charges, the knowledge base amongst tenants keeps improving. Perhaps it is inevitable that challenges will increase rapidly when the LVT is able to boldly conclude that some landlords are passing on to tenants the cost of “onerous” contracts let within the “quasi biblical structure” of their related party companies.

It should be emphasised this is our first attempt to draw out statistics which inevitably have potential for a considerable margin of error. However they at least constitute a first effort which is more than the government has managed ever since the LVT came into being. With 100% confidence we can say our data is likely to be a little more accurate than the Housing Minister’s empty claim of balance even though he has no data. We would argue that drawing any conclusions on the effectiveness of the current legislative system is impossible in the absence of data . The Minister may choose to say the system works but given his lack of data this must be pure speculation.

The one reputable source of data is the Which Magazine which in October 2011 launched its own investigation into service charges. Which calculates that £700 million of excessive fees are being charged each year through leasehold service charges in England and Wales. On average that means that each of  the 1.8 million leasehold properties is being overcharged by £388 per year.

Unfortunately its not possible even when looking at individual LVT decisions to know how much is actually recovered in each case. Taking the apparent LVT case load and a rough approximation of each award case it can be guesstimated that just 5-10% of this £700 million is being recovered.

So we end this article on a less than optimistic note the landlords are maybe keeping over 90% of the monies that are being overcharge each year even though tenants bring 90% of the cases through the LVT. The only way we can think that Grant Shapps the Housing Minister is able to claim this current position represents a fair balance is by refusing to look for the evidence.

It will not surprise anyone to learn that the softest target is the retirement sector. But drawing out those statistics will take a little more work.

For the next article we’ll give an outline of how the LVT system is intended to work and start offering a few hints to counter the tactics some landlords use in opposing the cases. If you have been to the LVT and have any cases you think may be of interest to others please contact us at LKP. If you’ve had a success or a horror story at the LVT then let us know.

Filed Under: Leasehold Valuation Tribunal Tagged With:

London Assembly’s report ‘Highly Charged’

March 1, 2012 by

London Assembly damns property management racket

A London Assembly report into leasehold service charges published today is a devastating attack on the stealth charges that are rife in leasehold and it urges the property industry to clean up its act.

Referring to “opaque” service charges regimes at numerous London developments, the report can also be read as veiled criticism of Housing Minister Grant Shapps, who has rejected measures that would give leaseholders further protection.

The report acknowledges the role of the Leasehold Knowledge Partnership by referring to both the £1 million settlement at St George’s Wharf, where Peverel presided, and the devastating Leasehold Valuation Tribunal ruling at Charter Quay, in Kingston. Both cases are extensively covered on this website, which is quoted.

The LA report estimates that more than 500,000 London leaseholders pay service charges and that these amount to more than half a billion pounds in service charges.

The number of leasehold disputes has increased by more than 50 per cent and with thousands more leasehold properties to be built over the next ten years there is “growing pressure for reform”.

‘Highly charged’ recognises that there is little immediate prospect of further legislative reform, although some feel that this may be necessary in future.

The lack of transparency that pervades the system ranges from leaseholders being unclear on what they’re paying for, to a perception that some charges – particularly for insurance – involve excessive commissions.

The report calls on private landlords and managing agents to make contract procurement and bills more transparent.

It urges the Association of Residential Managing Agents and the Royal Institution of Chartered Surveyors to set an example of good practice.

During the inquiry ARMA was criticized for shielding bad practice, which is why many London managing agents decline to join the organisation.

Improved consultation – which is beneficial to both leaseholders and landlords – is recommended, with the private sector urged to learn lessons from public sector landlords, which tend to have more comprehensive consultation processes.

Steve O’Connell AM, who led the investigation, said: “Problems have dogged the service charges regime for many years.  In some ways it’s an archaic and opaque system and many leaseholders are tearing their hair out with frustration.

“Some people would like to see leasehold done away with altogether, but failing that we must make sure that the system we have is as fair as possible.

“With disputes on the rise and many more leasehold properties in the pipeline it’s critical that all the agencies involved, from central Government down to the leasehold tribunal, look at ways of improving the transparency and equity of service charges.”

The investigation showed that when disputes arise, leaseholders can feel disadvantaged by taking on landlords who may have unlimited resources or large legal teams.  To address this, the Leasehold Valuation Tribunal is asked to review their processes to rule out any unfairness associated with leaseholders conducting their own cases.

Further, the report calls on the Government to look at making mediation a compulsory first step of the dispute resolution process to help leaseholders avoid potentially costly court cases altogether.

It also appears from our review that buyers rarely consider the obligations to pay service charges when purchasing their property and need access to far better information if problems are to be minimised.  Here conveyancing solicitors have a role in providing leaseholders with more information up front, the way public sector landlords like local authorities have to.

Notes

  1. Over a hundred organisations and individuals provided written views including 30 landlords in the social rented sector 16 leaseholder organisations and nearly 50 individual leaseholders.  In all, over 700 pages of evidence and views were submitted to the review, and the report draws on much of these facts, opinions and examples.  As well as holding meetings with DCLG, the LVT and Camden Leaseholders Forum, a meeting was held in public where a range of landlords, both public and private, managing agents and the Government advisory service LEASE were asked for their views on what leaseholders had told us through the first stage of evidence gathering.
  2. Service charge disputes in London increased by more than 54 per cent between 2005 and 2010 and the London LVT caseload increased relative to the rest of England.  The London region’s caseload is about 4,000 per annum, of which about 1,500 are service charge related.  The remaining cases will concern issues such as enfranchisement and lease extension.
  3. The Committee welcomes the Government’s intention to keep the issue under constant review and to assess whether there is evidence that reform of leasehold legislation is required.  The Committee recommends that the House of Commons Backbench Business Committee recommends a debate on the need for leasehold reform if any of the current e-Petitions reach the required number of signatures.  See Section 8 of the report for more details.
  4. There have been some recent LVT decisions on high profile cases that illustrate the nature of these concerns.  For example: In September 2011 the LVT awarded St George Wharf (Vauxhall) leaseholders £1 million to recover “management charges stretching back over a decade, as well as the company’s practice of employing its own subsidiaries to provide CCTV and insurance services.” In November 2011 the LVT awarded Charter Quay (Kingston) leaseholders £185,000 and criticised the landlord for entering into contracts with related party companies and taking excessive insurance commissions.  The LVT determined that the landlord must repay 75 per cent of 2009 management fee (and 50 per cent for 2008) and that insurance commissions for the landlord be reduced from over 30 per cent to10 percent.

 

Highly-charged-report-EMBARGOED

Filed Under: London Assembly, News Tagged With: , , , , , , ,

Boris summons LKP

March 1, 2012 by

Boris Johnson has invited LKP to discuss the London Assembly’s hard-hitting report into leasehold service charges, called Highly Charged, that was issued earlier this month.

 

Boris … talk to me

The meeting will take place within the next two weeks.

In a statement to LKP the mayor’s office said: “The Mayor recognises that leasehold service charges are an important issue for both leaseholders and local authorities, with many Londoners concerned over seemingly unfair costs, a lack of transparency in how charges are calculated and the lack of good quality information and advice about the issues.

“In particular there are concerns in London that the nature of the housing stock may make it difficult for leaseholders to exercise their right to manage.

“Like you, the Mayor welcomes the Assembly’s report, and hopes that the report will be given due consideration by all interested parties. The Mayor will be encouraging the authorities and agencies to whom the report recommendations are addressed to do their best to implement the recommendations as far as reasonably practicable.”

Apart from the obvious issue of rip-off stealth charges – which have been the subject of record LVT payouts (including £1 million to the residents at St George’s Wharf, Vauxhall) – cash-strapped leaseholders face being hit for huge bills to make their homes eco-efficient.

The mayor is keen to ensure these bills are limited and that leaseholders can pay the bills with interest free payments over a number of years.

Filed Under: London Assembly, News Tagged With: , ,