Forfeiture and how to bring it to an end was the subject of a LKP meeting with the Council of Mortgage Lenders and the Building Societies Association in London this afternoon.
LKP is trying to push the subject of forfeiture up the political agenda: for all leaseholder readers new to this site, forfeiture means you lose your leasehold property and all equity in it. Everything.
And so does the mortgage company that has a loan on it, hence the meeting.
Sir Peter Bottomley has called for all forfeitures to be reported to the Master of the Rolls, as head of the civil judiciary.
LKP urged the CML to back its demands for more data on the subject.
We need to know how widespread is this draconian measure – unique to leasehold – and report all cases where it has happened.
LKP will shortly being asking the Chartered Institute of Housing the extent of forfeiture in among local council leasehold and social providers.
In all cases of forfeiture – especially those involving social landlords – the equity an owner has in a leasehold property should be returned after the payment of outstanding debt.
It is quite wrong that freehold owners can obtain a massive cash windfall. No one in the leasehold sector has made a public defence of forfeiture, so far as LKP is aware.
In the case of Dennis Jackson, whose £800,000 flat was forfeited after a dispute over £7,000 service charges – which he substantially won – resulted in a £70,000 legal bill. More here
Worse, the decision on whether or not the forfeiture should stand – ie whether Jackson should be rendered destitute and homeless – was taken in a closed court after two representatives from LKP were thrown out.
Only in leasehold and forfeiture could a decision of such importance be taken in secret.
The CML is understandably concerned about forfeiture as lenders can lose the security for their loans if they are not vigilant. This happened with Mr Jackson, as the Prudential messed up the initial case which resulted in forfeiture.
An excellent point on this subject has been made by Nigel Wilkins, of CARL, the Campaign Against Residential Leasehold.
He points out that a convicted mortgage fraudster in leasehold properties in Regina v Waya was better treated than a non-criminal. The criminal courts were punctilious in returning the crim’s seed-bed equity which began his scam. More here
The CML said that it would pass on data on the subject to LKP and consider re-examining an issue which is detrimental to its members as well as leaseholders.
Other issues that were discussed concerned Flood Re and Commonhold.
CML has been part of the group seeking to persuade DEFRA not to exclude leasehold from the proposed flood Re scheme.
If flood insurance for leasehold properties becomes more expensive of excesses increase it could place some leaseholder in breach of their mortgage conditions. Both CML and BSA will be monitoring the issue going forward to see if this becomes an issues.
The meeting ended with a discussion on Commonhold and that although the number of properties built under commonhold has been very small the relevant guides still contain the relevant information for lenders to provide mortgages to a commonhold development.
Both CML and BSA would be happy to cooperate with government if it were to revisit this legislation.
Related posts:
Plantation Wharf leasehold pensioner has forfeiture order on his £800,000 flat
CML: Will mortgage lenders lend on commonhold? No. Yes. Maybe … er
Mortgage lenders and conveyancers lay bare the rot of leasehold to MPs
UK Finance mortgage lenders doled out cash on dodgy leases, but don’t know how many now can’t sell
Have lenders refused mortgages on doubling ground rent properties?
Now LEASE survival is at stake … it wants to meet the ‘stakeholders’
These high profile leasehold cases are truly abhorrent but surely we should be extending our horizons to look at how we deal with those leaseholders who are also renting out their properties, either privately or on council-led schemes and the difficulties this can cause.leaseholder-controlled RMC’s rather than just the so-called ‘big boys’.
The conveyancing process still leaves a lot to be desired with a lot of the leasehold information not divulged and there are significant weaknesses with the ‘due diligence’ allegedly carried out when it comes to placing vulnerable tenants in properties with no visible means of support.and, to make matters worse, placing them with landlords that don’t give a damn.
I work across the leasehold sector and the PRS as 18 of our 22 flats are sublet and I shudder to think about the loss of any power I may have in tackling landlords who fail to carry out repairs, fail to pay service charges and fail to curb the anti-social behaviour of their tenants.
Forfeiture (or at least the threat of it) is my ultimate tool in these situations and it must not be removed on the single avenue of blameless leaseholders being shafted, disgusting though it most certainly is.
It is the law that allows such situations to happen and therefore it is the law that must be properly written. If forfeiture is totally removed then leaseholders will be no better off when they find that their block deteriorating because the managing parties or RMC freeholder have had their teeth well and truly extracted!
I feel very strongly about this which is why I continue to run a ‘live’ article on my site, based on my personal experiences. It is entitled ‘Rachmanism and a Fragmented PRS’
Sharon,
You do make a very good point. However, if it is judged in open court (and it must be in open court) that a breach of lease is so serious as to merit forfeiture, than a reasonable amount of time must be given to repair any breach.
More important, if a property is forfeited, as a result of a mischief that costs £20,000 and is sold for £180,000, it is unfair that the leaseholder loses the entire £180,000. They should be refunded £160,000 . It gives the freeholder an unfair advantage, and actually encourages them to escalate disputes.
Hi Michael
Thank you for following on from my comment. I don’t have a problem with the principle of waiver but some landlords on my block refuse to carry out serious repairs expediently. Giving them a chance to remedy through waiver will only be used as yet another delaying tactic. So not only must forfeiture be kept but the circumstances under which waiver is deployed should also be re-constructed..
If these forfeiture cases are now high profile, it is because LKP has reported them. No one else has been.
Certainly not the complacent and shifty leasehold sector.
If the Dennis Jackson case, settled in a closed court, does not disturb you, then I am afraid we are on different planets.
The windfall to the freeholder of forfeiting all the equity in a property to settle a debt that is far less, cannot be justified.
Indeed, I have never heard anyone attempt to justify it.
It is an anomaly that needs addressing.
Deliberately engineering a forfeiture by provoking those incapable of self-defence is something we have encountered. It happens in surprisingly upmarket postcodes. The windfall is substantial.
You have righly done something about the abuses in the leasehold sector. All I have done is submitted a comment based on my own personal experience..
This does not automatically put me on a different planet just that I am coming from the issue of forfeture from a different angle!
Sharon,
In the Spanish (a system of which I have some significant personal experience) and the majority of other European Commonhold systems for blocks of flats if the apartment owner (commonholder) repeatedly breaches their title deed (Escritura) and causes harm to other commonholders (whether through poor condition of their apartment, noise and dirt or non payment of service charges) then ultimately, and after suitable legal approval the Community of Commonholders can put the flat up for sale and recover all financial debts they are owed but must then return the outstanding balance beyond that amount to the offending apartment owner.
You are clearly only arguing that you find total forfeiture better because it is a more scary and more unreasonable form of power. But it is that very scariness and unreasonableness that also makes it totally morally wrong and abhorrent. Whereas you are basically saying you now find yourself in the same position of desiring control as a freeholder when you act as managing agent and you want the right to rule by force whether that is fair or not.
Of course some leaseholders may well be mad, bad or crazy but if they own an asset worth say £2 million and the harm that they have caused the other flat owners collectively only amounts to £50,000 then what exactly gives the managing agent or the other combined joint shareholders in the company owning the building the right to make a windfall gain of £1.950,000?
Forfeiture is rarely used but its very existence as an ultimate sanction is so scary that it prevents most of one’s fellow leaseholders having the moral spine to ever stand up to almost any form of abusive behaviour by a freeholder or a managing agent because they tend to believe that forfeiture can be the ultimate consequence of almost any form of objection to their freeholder or managing agent’s behaviour.
You need to stop thinking about what just makes life easier for you as a managing agent and instead start thinking instead about what position actually occupies the moral high ground.
Julian,
Thanks for your direct response to my observations on forfeiture.
I cannot be sure that you really understand what I have written especially when you refer to my needing to stop thinking about what just makes life easier for me as a managing agent and instead start thinking instead about what position actually occupies the moral high ground.
Where is there any moral high ground for me to take when I am specifically targeting those leaseholders who don’t just deliberately fail to pay service charges (well and truly outside those reasons defined by legislation) but are usually also often PRS landlords who deliberately leave their tenants to live in squalor and place their lives at risk from faulty gas and electrical appliances. Not to mention their impact on other residents.
Again, you tell me where my moral high ground should be when these very individuals leave myself and my partner (resident freeholder) to deal with anti-social behaviour from their tenants when they know all about it, do nothing and we are again violently assaulted as a result..
They flout every law and whether you like it or not it remains my belief that people such as I describe deserve to lose their asset when they believe that no amount of legislation can touched them. And when a landlord commits assault because he doesn’t like having legislation quoted to him when his tenant is cold through lack of heating and ill through his refusal to deal with mould and damp in the property, then would I like him to lose his asset? You’re damn straight I would!
I can’t make it any clearer that I abhor those freeholders and agents that LKP are highlighting but my situation is markedly different and it why I hold views from a different perspective.
PS I work for the Directors of the freehold RMC (limited under guarantee so not a profit making company) and I have 18 out of 22 flats sublet.