LKP welcomes privatisation of the Leasehold Advisory Service, but why wait until 2020?
The Leasehold Advisory Service is to be privatised by 2020, by which point it should be self-financing through commercial revenue generation.
LKP welcomes this development, albeit resignedly.
The reasons why are given below in our detailed submission to DCLG in October 2014 to the LEASE three-yearly review. A year later in 2015 the DCLG invited bidders to tender for the provision of the services provided by LEASE.
The policy to be self-financing was announced quietly by the LEASE chief executive at the annual conference in February, but it is now official as new staff are being recruited with the 2020 cut-off date clearly indicated.
LEASE was born after some heroic leasehold disputes in 1994, and it was headed by a dynamic consumer champion, Peter Hayler.
In those days there were even representatives of leaseholders on the board. There is not a single one today.
In recent years, a succession of dismal chairmen have been appointed, the budget has been slashed and the quango has had to wash its face by offering commercial services to the sector.
That is, to freeholders, lawyers, surveyors and property managers who earn their livings in the leasehold sector: the very people from whom ordinary flat owners need protection.
The result of this conflict of interest is that LEASE is silent on all the abuses of leasehold and has made no suggestions for legislative or regulatory reform that might protect leaseholders.
Or even tell the government that its figure of there being only two and half million private leasehold properties was an utter fantasy.
It was left to LKP, which has virtually no resources, to get this raised to a more plausible 4.1 million. Having a grasp of the size of the market in flats is important, when forming housing policy.
Individual leaseholders – at least, those prepared to wait the average 28 minutes for their calls to be answered – have been helped by LEASE. But many others, as the Competition and Markets Authority report made clear, turn elsewhere for help.LKP unreservedly pays tribute to LEASE staff who adhere to the public service ethos which originally inspired it.
The incoherence of today’s commercialised LEASE is best shown by its misleadingly named “annual conference”. This is, in fact, a trade show for leasehold professionals, and is a significant income generator.
LKP still finds it difficult to credit that in 2010 Gary Murphy, of Allsops, was given a platform by LEASE to explain that freehold investments were a wonderful thing because insurance commissions can be 50% and, the best bit, leaseholders have no right to know about them.
That this presentation was hosted by a government quango set up to protect leaseholders demonstrated how far the rot had set in.
The full article can be see here, but Mr Murphy’s presentations slides are clear enough:
It is also depressing that Martin Paine, the freeholder who is landing leaseholders with £8,000 a year ground rents after extending leases, honed his skills in landlord and tenant law courtesy of the taxpayer-funded LEASE annual conference. He was a regular attender, and had a ticket to this year’s event, although he apparently scarpered when he realised LKP was present.
This event is coupled with seminars and lectures in property management, and a paid-for premium advice line much used by the legal profession.
But all these services are duplicated by trade bodies, legal associations such as ALEP and conference organisers such as News on the Block.
There is little reason at all why these commercial practitioners should be competing with a taxpayer-subsidised rival.
It was perhaps always naïve to think that a government quango could somehow operate with complete impartiality in this poisonous, but highly lucrative sector.
We are now producing more leasehold in England and Wales than ever before. Almost all London housing is leasehold. Some housebuilders, such as Persimmon, are building leasehold houses in preference to freehold ones because of the monetising possibilities. Owing to the housing crisis and desperation of buyers, they are getting away with it.
Above all, the leasehold sector is double the size it was in 1994 when LEASE was established.
For those seeking to change the laws and regulations in this sector, LEASE is a minor distraction.
There is really no reason for taxpayers to keep on paying for it, and privatisation will make very little difference to the lives of the vast majority of leaseholders.
LKP submitted its thoughts on LEASE at its triennial review by the Department of Communities and Local Government, its paymasters, in October 2014.
We made clear our concerns about LEASE’s commercialising agenda, and argued that LEASE take seriously its role of complete impartiality.
Others who made submissions were:
The National Association of Park Home Residents
The Property Tribunal
The questions are posed by DCLG
1) What is your overall view of the services LEASE provides?
As set out in the background document the Leasehold Advisory Service provides free advice on leasehold law for all.
It is neutral and makes no distinction between leaseholders and the commercial interests in residential leasehold: freeholders, managing agents, lawyers, surveyors and similar.
LEASE is not a consumer advice service for ordinary leasehold homeowners. It cannot be an advocacy service, like Citizens’ Advice Bureau and others.
It simply provides advice on the letter of the law. How you choose to use that advice, is up to you.
LEASE has been silent over the abuses in leasehold, which have been left to LKP and Carlex, and others to expose. It has no view on them, provided that they are lawful.
It is neutral to the point of advising how the law can be used by a freeholder to forfeit a leaseholder’s property (and possibly render the leaseholder homeless and destitute).
LKP / Carlex cannot fault LEASE for providing this advice, even though we strongly argue for the abolition of lease forfeiture.
LEASE’s narrow remit of providing advice on the law to all comers is useful, as are its explanatory guides and archive of tribunal cases.
However, LEASE also seeks to monetise advice to freeholders and other commercial providers. Seminars are provided to private property management and law firms, paid training /webinars from £50 +VAT – £299 +VAT each are offered, there is paid-for professional directory on the website and the annual conference is a revenue earner.
LEASE has justified these initiatives because it states the revenues help fund the free service for others. Our understanding is that the majority of LEASE monetising activities pre-date the current administration’s request to increase commercial incomes.
But these commercial activities are corrosive, inappropriate for a government entity and undermine LEASE’s position of impartiality.
LKP/Carlex believes that LEASE should strictly adhere to its self-proclaimed role of providing free advice to all on leasehold law. There should be no paid-for services of any sort, and no attempt to monetise conference or seminars.
AgeUK has also expressed its reservations in its formal submission to the Competition and Markets Authority: “While we recognise the important work of LEASE, its role in providing legal advice to both providers and leaseholders is problematic in terms of reform”.
Given that serious disputes that are endemic to leasehold, these controversial monetising initiatives are best left to the private sector – where, in fact, remarkably similar seminars and conferences to LEASE’s are already provided by RICS, ARMA, IRPM, ARHM, CIH, ACCA, ICAEW, Law Society etc.
This year, LEASE has had to remove one advertiser in its professional directory, Benjamin Mire of Trust Property Management. It took eight months for LEASE to remove this advertising of an individual who, following a Judicial Conduct Investigations Office inquiry, was not deemed appropriate for a judicial appointment.
LKP / Carlex would be concerned if there were any suggestion to increase LEASE’s remit or resources.
2) Have you used the services and, if so, which ones? How did they benefit you?
LKP uses the service of LEASE to examine property tribunal cases in its database (a service partly duplicated within the Ministry of Justice element of the .gov website).
The database of both sites has always been of very poor quality owing to the flawed manner of recording and archiving tribunal rulings (they are unsearchable scans of rulings photocopied from paper). LKP raised the issue with Judge Siobhan McGrath in April 2013, who acknowledges that improvements need to be made.
Professionals in the sector can use a paid-for database maintained by News of the Block, the trade newspaper.
The legal advice offered by LEASE can be more help to freeholders and managing agents than to leaseholders. They may know how to use the law, but always have a need to address the many questions that may arise under leasehold legislation.
Consumers’ experiences of LEASE’s services can be controversial. Some leaseholders appear to believe, quite wrongly, that the role of LEASE includes advice on how to apply leasehold law.
For leaseholders a little knowledge can be a very dangerous thing. There are many instances in a dispute where more than one statute or section might apply. If the leaseholder is not provided with all the options and, more importantly, the possible counter arguments, it opens up the danger of the leaseholder starting a flawed case. Yet it is obviously inappropriate for a public entity such as LEASE to provide such detailed advice in a civil dispute.
LEASE has been publicly criticised at its annual conferences several times by leaseholders.
Some blame LEASE for pointing out an issue of law which, in itself, was insufficient to win a case. Ordinary leaseholders without professional representation need to be cautioned about the risks of initiating legal actions in tribunals, where the freeholder’s costs can be awarded against them.
Martin Boyd, co-director of LKP and chairman of the Charter Quay Residents Association, has had direct experience of LEASE’s services.
It has been mixed. Sometimes very useful information was provided sometimes less so and sometimes the wrong advice was given.
In December 2012 LKP needed to persuade both LEASE and MoJ and DCLG that the advice they were offering on property tribunal cost limits was fundamentally flawed.
It was a repeated problem that leaseholders enter the tribunal thinking that costs are limited to £500, whereas they are open-ended in many cases. LKP repeatedly warns leaseholders of the serious risks of litigation in the property tribunal, and so should LEASE.
On several occasions, LEASE has been publicly criticised by aggrieved leaseholders (one lost in excess of £40,000) who blame the quango for misleading information regarding the award of freeholder’s costs.
3) Do you feel that these services should be provided by a body funded primarily by Government?
LKP / Carlex has no issue with LEASE being a government funded body providing a neutral and impartial service to provide free information to all on leasehold law.
It should offer no paid services of any type.
If it does so, the clientele is overwhelmingly the professional sector, which is therefore being advised by a government funded organisation on laws that applied to the detriment of ordinary leaseholders. This is evidently an unacceptable position.
Seminar, webinar, conferences and trade shows are all monetising initiatives best left to the private sector. To considerable degree these services are provided but the private sector, and it is undesirable for LEASE to become a commercial competitor.
At the 2010 LEASE annual conference, Gary Murphy, the vice-chair of the RICS auctioneering group, held a seminar entitled “Why Invest in Ground Rents?” demonstrating how freeholders of a site could help themselves to up to 50 per cent of the total insurance premiums in commission, and – best of all – leaseholders would have no legal right to know the level of payments.
This was a wholly inappropriate presentation at an event hosted by a taxpayer-funded body.
Loading insurance commissions is one of the scandals of the sector, and commercial interests should not be informed how to do it, courtesy of LEASE.
Shula Rich, an established leasehold stakeholder who runs the Brighton and Hove District Leaseholders Association, strong critcises LEASE for setting up an out-of-hours advice line run by practising solicitors who are members of ALEP. It is reported on LKP here: http://www.leaseholdknowledge.com/alep-den-cheque-books
There is no reason at all why ALEP (Association of Leasehold Enfranchisement Practitioners) should not do this, but LEASE is obviously conflicted.
4) In the future would you be willing to pay for the services that LEASE currently offers, which are free at the point of delivery? If yes, what would be a reasonable fee?
LEASE should provide free advice impartially to all. This sector is highly controversial and a taxpayer funded entity offering paid-for services is corrosive.
LEASE should not be offering any paid service of any type.
The provision of a paid advertising service on the LEASE web site is wrong. LEASE states that advertising on its site does not amount to an endorsement but inevitably gives the public the impression that those included on the list are better than those who are not.
LEASE’s position sites in direct opposition groups such as the Intellectual Property Office. Their Q&A raises the question
Q: Does the IPO have a list of preferred advisors?
A: Because the IPO is a government body it is unable to recommend individual advisers…
It then lists a number of commercial groups who do list such advisors.
5) What other services could they provide which would be of use?
LKP strongly opposes any suggestion that LEASE expand its role into mediation, which failed in the past.
The property tribunal also offers a mediation service in London, which would be a better option to develop if felt relevant.
LEASE should limit itself to free legal advice to all on points of leasehold law.
6) Taking into account the amount of funding it receives from Government and what it delivers, do you think that LEASE provides value for money?
The provision of static information on the law and the guides appear to provide good value for money as set out in the accounts. 700,000 of the guides are downloaded, however this represents a 30% decline from the 2011-12 data which records 1,038,671 downloads and booklets. In contrast the number of web site visits continues to grow.
There is much bigger question over the merits of the funding used to provide the telephone and email advice. The latest accounts show LEASE reached just 26,903 customers via email telephone and appointment, a decline from 28,684 in 2011-12 which is a decline for 38,871 in 2009-10
Although no the breakdown of these contacts in no longer detailed, the historic figures from 2009 show that approximately 22% of those enquiries come from these working in the sector – ie free advice offered to what may well be in the majority of cases will be commercial organisations.
Within the breakdown there is no detail of the amount of time allocated to each enquiry, but it can be reasonably assumed that the 22% of enquiries coming from the sector is likely to be more complex and therefore take up more time.
The fact that London represents 50% of enquiries, while the capital represents only 33% of leasehold properties, may reflect a system which helps the more economically advantaged given that London contains a higher proportion of high values leasehold homes.
The use of the service by profit-making landlords and managing agents is not only a poor use of government funds, it again acts to disadvantage the very leaseholders who government had intended to assist when LEASE was created.
The impartial provision of services to all also raises one further problem. Some of LEASE’s customers will include agents and landlords who are seeking to deliberately overcharge their customers. These are the very customers who may be most willing to pay LEASE for additional services to promote their advantage. This seems analogous proposing a system where trading standards offers the better level of help to a rogue trader than they would to the victims of the rogue trader.
7) What would be the impact if the organisation didn’t exist?
LEASE provides useful published guides and other written information as well as the archive of tribunal cases (which are duplicated in part by the Ministry of Justice and are recognised as inadequate).
As the ALEP advice line illustrates, legal practitioners are more than happy to provide some advice for free, possibly in the hope of winning business.
LEASE should certainly not continue as it is, providing some free advice to leaseholders while simultaneously selling advice to professionals in the sector and hosting revenue-generating events. Some of these have been directly to the detriment of ordinary leaseholders who were supposed to have been helped by LEASE.
LEASE’s role in providing legal advice to all is useful for many leaseholders and commercial operators in the sector, but the latter do not need to be subsidised by taxpayers and could pay for this advice elsewhere.
The advice to leaseholders could be provided elsewhere: by legal firms, their representative bodies, by Citizen’s Advice Bureau and other not-for-profit bodies.
LEASE has made no contribution to the reform of the sector. It has expressed no opinion on the abuses routinely reported by LKP, Carlex and other bodies.
It is correct not to do so: its role is purely to provide independent, neutral advice on leasehold law.
LKP / Carlex questions whether it is strictly necessary for taxpayers to fund such a restricted role.
The Competition and Markets Authority Ipsos MORI poll of leaseholders casts doubt on whether many leaseholders are helped by LEASE.
It showed that only 4 per cent consulted LEASE, compared with 9% a solicitor, 7% an MP, 8% the Internet, 7% Citiziens’ Advice Bureau.
8) How else could the services be provided and/or funded? (eg by another organisation or a different model)?
LEASE’s role of providing independent, free advice to all on the law is useful. So are the published guides and the tribunal archives.
However, as we have seen with the ALEP out-of-hours service LEASE has welcomed others to provide an advice service (on lease extensions and enfranchisement).
It is possible to envisage a period when advice on leasehold law and disputes is provided through voluntary organisations. This would have one considerable advantage over the advice offered by LEASE: leaseholders could be advised on how to build their case and present it at tribunal.
LKP / Carlex is frequently consulted by leaseholders heading for the tribunal, both as respondents and applicants. We urge extreme caution, especially when consulted by leaseholders intent on disputing a case against legal professionals.
In all but the simplest cases (eg sublet fee disputes) we urge leaseholders to seek professional advice. We also advise leaseholders to pay disputed monies beforehand and then demand their restitution. If a leaseholder disputes service charges, refuses to pay and subsequently loses – or, even, fails to win on all points – the resulting legal fees can be considerable.
The Dennis Jackson case illustrates this with a £7,000 service charge dispute ending in legal fees of £80,000 and the forfeiture of an £800,000 flat (which was overturned owing to the intervention of Sir Peter Bottomley and LKP). More here http://www.leaseholdknowledge.com/category/news/plantation-wharf
Leasehold advice was provided with some success by AgeUK; CAB does the same; and LPK/Carlex has come across local services assisting. Many times leaseholders are referred to LKP/Carlex on the advice of other advice bodies who are not specialist in leasehold disputes.
9) What do you think the potential benefits, challenges to implementation and risks of this would be?
The key advantage of voluntary organisations providing advice on leasehold law is that advice can be given on how to build a case and present it either at an ombudsman or at the property tribunal.
Extreme caution is required by those offering advice in this sector. If a case is lost, a leaseholder can blame the advisor.
The legally qualified advisors of ALEP and other organisations would be well aware of these risks and the possible liability involved.
LEASE itself has been publicly blamed for misleading leaseholders over legal costs in tribunal, as stated above.
10) Are there any other comments that you wish to feed in to the review?
If LEASE remains unchanged, a fundamental review is needed of its role and its relationship with leaseholders.
As so often it is accepted that “professionals” working in the sector for the landlord/freeholder are best placed to advise on what is needed. The leaseholders pay both the tax that funds LEASE and the companies that operate in the sector. Yet at best they are treated as second class citizens.
LEASE must understand that it is unacceptable to offer one level of free, lower-level advice to “non-professionals”, and a wholly different level of service to the “professionals” via its paid services.
Similarly, the LEASE annual conference – a misnomer, for it has been hitherto a trade show – needs urgent attention. Only for the last two occasions has LEASE, under pressure from LKP / Carlex and others, felt it relevant to invite leaseholders, offering an evening session for “non-professionals”.
In its first year, the evening session had junior speakers from assorted law firms who were of such poor quality that the advice was incorrect and seriously misleading.
By contrast, the day event attended by professional representatives who pay c£350 can attract ministers and top legal speakers to advise the “profession”.
LEASE should not be allowed to continue breaching the fundamental principles of its remit: to provide equal advice to all. Government should not allow LEASE to provide any higher standard of information and advice to landlords and their paid advisors than it provides to homeowning leaseholders.
LEASE claims that these paid-for services help fund the free advice to leaseholders, but in fact it emphasises the inequalities in the current system.