If anyone has any helpful suggestions about why this odd collection of companies paid for Grant Shapps’ office when shadow housing minister, please do get in touch:
Michael Heseltine it isn’t … but ex-Housing Minister and Tory chairman Grant Shapps has a flourishing little publishing business to fall back upon in the event that his political career comes to a grinding halt.
Run out of squalid little offices in Enfield, north London, the Shapps family offer codswollop Freudian analysis of dreams and computerized plagiarism of out-of-copyright material to boost Internet search engine rankings.
Unfortunately, Google has blacklisted a string of 19 websites for breaching its rules on copyright infringement.
The sites are run by his wife Belinda, sister or 75-year-old mother, while Grant himself appears as either Michael Green or Sebastian Fox. Shapps made his fortune as a jobbing printer (see the company history below).
The Observer revealed yesterday that the former Housing Minister and new Tory party chairman Grant Shapps deleted Wikipedia references to donations from property interests to his private office.
He did so secretly, breaking the online encyclopedia’s code of practice which urges that those changing information in personal entries first identify themselves.
The original entry, the Wikipedia biography said: “It was revealed in May 2008 that Grant Shapps, along with other shadow ministers, had taken large donations from companies related to his frontbench portfolio … The revelations were potentially damaging for Shapps given the extent of the donations he had received – tens of thousands of pounds from two online mortgage brokers, an estate agent, a commercial property developer and a firm of solicitors specialising in conveyancing and remortgaging – and the suggestion that these might be influencing Conservative policies.”
Shapps scrapped sections 152 and 156 of the Commonhold and Leasehold Reform Act 2002 when he came into office, and consistently blocked any attempt at leasehold reform in spite of unanimity in the sector that this was necessary. Even the powerful British Property Federation issued a statement to the Leasehold Knowledge Partnership saying that it was in favour.
Oh, and why does Shapps want to regulate park homes and not leasehold, even though the issues are so similar?
Housing Minister Grant Shapps is alone in resisting leasehold regulation saying it will add to costs and landlords don’t want it … even though the British Property Federation, which represents the country’s largest landlords, has assured LKP that it favours the move.
But why – for the sake of consistency – does this minister feel so strongly on the subject of park homes, which he plans to license?
Park homes suffer similar issues to leasehold properties, including inflated service charges and poor maintenance. Yet Shapps wants regulation as part of “sensible, practical proposals, targeted at the worst practices and minimising the burden on those who do a good job for their residents”.
Admittedly there have been cases of park home landlords burning down the mobile homes of those who have complained, which to date is not a feature of leasehold living.
In other respects, the issues are very similar. Was it too much to expect some coherence and consistency from this minister?
Today both Housing Minister Grant Shapps and Siobhan McGrath, the senior barrister who presides over the Leasehold Valuation Tribunal system, face the cameras as part of the Channel Four Dispatches documentary into leasehold.
The programme will be shown on August 20. A second Dispatches programme on retirement leasehold is also nearing completition, although it has not been scheduled a date for broadcast. The following week, August 27, has been suggested, however.
Both Leasehold Knowledge Partnership and Carlex have assisted the programmes, as has the Charter Quay Residents’ Association.
Coinciding with the August 20 documentary is the publication of the liberal centre think tank CentreForum’s study of leasehold. It urges an independent regulator for leasehold property management and reform of the LVTs, which are weighted in favour of well resourced landlords and their lawyers.
Housing minister Grant Shapps has ruled out statutory regulation of the leasehold sector, but may well introduce measures to improve Leasehold Valuation Tribunals.
Furthermore, an announcement on the fraught issue of “exit fees” in the leasehold retirement sector, which are payable when a flat is sold, can be expected soon. These have been the subject of a prolonged inquiry by the Office of Fair Trading, which is due to make an announcement on the issue in mid-August.
Shapps says of leasehold: “I am therefore thinking about the issue and have not ruled out making other changes where I am able.”
His views are expressed in a letter to Kenneth Clark, the Justice Secretary, who raised the issue on behalf of a pensioner in his Nottingham constituency. The exchange of letters took place last month.
They are the clearest indication of the current thinking of the Housing Minister on leasehold issues.
By ‘Barrack-room Lawyer’
(As ARHM president Baroness Greengross defined OAP complainers in retirement flats with too much time on their hands)
In last Monday’s House of Lords debate, initiated by Baroness Gardner of Parkes following meetings with LKP, a number of important issues faced by the leasehold sector were raised.
They were rebutted by the Government Minister Baroness Hanham, of the Department of Communities and Local Government, who insisted that everything is balanced and that the vast majority of leaseholders are “satisfied”.
She went on to claim that the Leasehold Valuation Tribunal service is now nothing to do with her department, and tells us that it is the leaseholders’ responsibility to ensure that there is nothing onerous in the lease. (And you thought that’s what you employed a solicitor for and why we had laws to protect us!)
For many years, Hanham – and her predecessors -– have been able to rely on leaseholders not fully understanding the complexities of this form of tenure, which she admits is a complex issue.
As a result, many a Murdoch like statement on leasehold is thrown in the leaseholders direction. The Baroness is able to claim evidence where none exists and, conversely, to claim no knowledge on issues well known to her department.
I would like to correct some of the errors in her statement to the House.
‘Leaseholders are satisfied’
“We believe and understand that most leaseholders are, in fact, satisfied not only with their property but with the way it is managed. “
This is not true. Baroness Hanham and her department have absolutely no data to support this claim in much the same way that Housing Ministers Grant Shapps has absolutely no data to support his claim there is “balance” in the current legislation.
On the contrary, her department is fully aware that Which Magazine asserted late last year that more than £700 million is being overcharged each year in service charges, and that only a tiny percentage of that money is ever recovered by leaseholders through the LVT.
The department is also fully aware of the London Assembly report, Highly Charged, adopted by all parties in Assembly, as recently as March 2012, which says there are serious problems with leasehold. The report’s title would surely have given the minister a clue?
“We have a statutory framework in place that aims to balance the different parties’ interests in the same property,” she says. “The goal is to provide leaseholders with the rights and protections they need, while recognising the legitimate interests of landlords. “
Again the Baroness and her department have absolutely no data to support this claim and appears to ignore all the data which suggests a wholly different position applies.
“Service charges are an issue. All sorts of issues have been raised today about the protection of money and service charges, how much they are and what is involved with them.
“Again, I am afraid that that is a matter for the leaseholders to watch carefully.”
Hanham fails to mention that Grant Shapps abandoned legislation that would have protected leaseholders’ funds when he assumed office in 2010.
Leaseholders have few rights to “watch carefully”. Her department is also fully aware that there have been a number of instances where monies have disappeared and that there is little that can be done to recover the losses.
“It is important that what the managing agents do, and the costs that they put forward, are transparent, and that the leaseholders have a number of rights. They can and must ask for a summary of service charges, and those charges should be consulted upon.
“They must be able to see the supporting documentation. They have a right to see insurance documents and the right to have a management audit carried out, albeit at their own expense. So they have some control over the service charges, although I think my noble friend Lady Miller mentioned capital charges and the fact that some people had not understood that they were going to come in.”
‘Good codes of practice’
Hanham fails to point out that her department is fully aware that due to the complexity of the legislation few of these rights can be exercised.
Many sites receive their accounts years after payment and can take no action at all. Many sites also do not qualify for a number of the “rights” she lists.
To obtain a management audit, leaseholders must have 66 per cent of owners signed up to fund the audit. In many large modern developments with a high buy-to-let investor ownership, finding 30-40 per cent of owners can be impossible let alone finding 66 per cent!
Because of the difficulty of finding owners many sites do not have a legally recognised tenants’ association and, perversely, the legal guidance provided by Hanham’s department states that you need more members to become a recognised tenants’ (that is, residents’) association than it takes to obtain a right-to-manage ruling.
Hanham also fails to mention that right-to-manage is not available for many sites because the law was drafted long before many of the modern mixed uses developments, or sites with leasehold houses.
Also omitted from the Baroness’s statement on a number of these “rights” there is little or no sanction if the landlord chooses to ignore the law.
“Although the issue has not been entirely raised today, there have been concerns about the commissions taken on insurance. There are good codes of practice that ought to be adhered to.”
Again Hanham fails to mention that the disclosure of insurance commissions required under the codes of practice of both the Association of Retirement Housing Managers and the Royal Institution of Chartered Surveyors is very carefully worded.
It is only the managing agents’ commissions that are required to be disclosed, not those taken by the freehold-owning landlord! As such, Hanham’s assurances are meaningless.
Under the law, it is the landlord who is entitled to take out the buildings insurance and, therefore, he who takes the insurance commission.
An excellent question Hanham might ask is why do ARHM and RICS choose to word their code as they do?
We finish with what is Hanham’s most disingenuous statement. It is, perhaps, unfair to criticise her for this “Murdoch-ism” as she is obliged to repeat the words of Grant “call me James” Shapps.
“The current legislative framework, if properly dealt with, can deliver the right balance between the parties involved-but provided it is matched by an increasingly proactive and socially responsible approach by the professionals who are working within the sector.
‘ARHM and ARMA can only help’
“In taking this approach, the Government are, I recognise, presenting a real challenge to those professionals. I am therefore pleased to see this challenge being taken up by various professional bodies such as the Association of Retirement Housing Managers, to which the noble Baroness, Lady Greengross [ARHM president], referred. This can only help leaseholders and others concerned within residential leasehold. “
Of course, ARHM and the Association of Residential Managing Agents (ARMA) are nothing more than trade bodies, whose only interest is in supporting their members interests. Ultimately, it is leaseholders who pay the hefty subscription fees for organisations that don’t serve their interests at all.
On the contrary, they have as members those who perpetrate some of the worst abuses in the industry: those very same managing agents roundly criticised in the London Assembly report.
Hanham’s worst “Murdoch-ism” was to claim a lack of knowledge of the issues regarding the LVT, as it is now part of the Ministry of Justice.
The truth is relevant data on LVTs was not collected when under the DCLG – only two years ago – so off-loading the blame onto the Department of Justice sounds a bit feeble.
Her department is also still responsible for enforcing 20 or so leasehold laws. If Hanham were to be a little more candid she would perhaps admit that here that her department holds NO data at all on how the law is working.
It simply does not know whether there is balance, nor does it not have the faintest idea how much leaseholders are being overcharged and what percentage are able to go to the LVT to recover these monies.
The suggestion from Hanham that this is just a London issue is countered by cases such as City Heights in Nottingham, which this week featured on the BBC.
The abuses exposed in the celebrated London disputes involving hundreds of thousands or, in one case, a million pounds, are echoed elswhere at sites managed by the same companies, which never get to the LVT.
If a company is charging excessive insurance commissions on one site, it is highly likely to be doing the same elsewhere. If they are entering into onerous related party transactions with one development they may well be doing the same at all similar developments.
The cases of City Heights in Nottingham (£420,000), Charter Quay in Kingston (£400,000) and St George’s Wharf in Vauxhall (£1 million) all involved companies related to the Peverel Group which were until recently owned by the Tchenguiz family.
If the insurance is loaded on these sites, as has been established, Baroness Hanham may care to ask whether the same has happened at the other 190,000 or so flats managed by this same group, including the many retirement developments.
Hanham should ask herself why so few sites are able to find their way to the LVT. Could it be that the law is not balanced and that leaseholders are not as satisfied as she assured the House of Lords?
The body representing the most powerful interests in British property fully supports greater regulation of the leasehold sector – leaving Housing Minister Grant Shapps isolated in blocking regulation.
That was the main finding of LKP’s meeting with the British Property Federation’s chief executive Liz Peace and Ian Fletcher, who heads the BPF’s residential division.
The BPF had in fact lobbied in 2010 to stall the introduction of the discretionary sections 152 and 156 of the Commonhold and Leasehold Reform Act, which was passed in 2002.
These protections to safeguard leaseholders’ money were abruptly jettisoned by Shapps as soon as he took office in May 2010.
The BPF’s objections were that the sections were poorly drafted and the time-scale was unreasonable, but the basic principle – that leaseholders’ money should be better protected than it is now – was not disputed.
There is near unanimity on this – in theory – in the leasehold world, including among the trade bodies such as RICS, ARMA and the ARHM, and the BPF’s clarification will be hugely influential.
The London Assembly last month added its weight to the argument in its hard-hitting report on “opaque” service charges.
The only person who appears to believe there is balance in the system is Grant Shapps himself, who again in a recent letter to Zac Goldsmith MP, reiterated his opposition to improving the position of leaseholders.
He believes that greater protection will over-burden landlords and has an ideological aversion to regulation.
But the taxpayer-funded Leasehold Valuation Tribunals, which were supposedly low-cost simple tribunals, would benefit from clearer regulation.
At the moment, they are hugely weighted in favour of landlords, who play the system, repeatedly demand appeals and routinely employ counsel at hearings.
Whereas landlords can spend whatever they wish on legal representation – and, if they win, claim these legal fees out of the service charges – leaseholders can only win back £500 of legal costs.
The LVT battles of Charter Quay, St George’s Wharf and Chelsea Bridge Wharf all involved £20,000 to £30,000 of legal costs on the part of the leaseholders, and far more from the landlords.
The current inadequate LVT system does not represent good value for public money.
Compared with tenants in assured shorthold tenancies – whose deposit money has to be placed in a tenants’ deposit scheme – the position of leaseholders is astonishingly vulnerable.
Between £1 billion and £2 billion is paid by leaseholders in service charges every year – with £500 million in the capital alone, according to the London Assembly – yet there is hardly any protection for these funds at all.
They are simply held and used by the managing agent until such time as he choses to submit his accounts – and they need not arrive until up to 30 months after the money is spent, according to a recent a decision by the Upper Tribunal.
By that time a leaseholder may well have sold up, moved on or died.
For years the professional bodies have done very little to enforce their window-dressing codes of practice. Indeed, some of them have done their best to shelter the worst rogues in the industry.
Even the worst of these organisations now wants better regulation
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.
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.
- 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.
- 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.
- 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.
- 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.