Another tribunal challenge to FirstPort’s insurance costs – on behalf of freeholder E&J Estates – is being mounted by a chartered tax advisor, who is arguing that the capital value of his daughter’s block has been unreasonably hiked by adding VAT.
Brian White, MBE, (right) argues that the rebuild cost of the entire site at Hollin Bank Court in Blackburn, where his daughter Sophie lives, has been estimated at £16.2 million, but that the correct figure should be £13.5 million, as there is no VAT on residential new builds.
In his witness statement submitted to the tribunal, which will hear the case in January 2024, Mr White argues:
“They equally admit to inflating the sum Insured by 30% for “standard inflation purposes” and yet the policy is reset each year so loading the Sum Insured with a 30% uplift each year is designed to inflate the kickback commissions to the freeholder and its agents.”
FirstPort / E&J Estates charged premiums on values of £23.3 million in 2023, £23.1 million in 2022, £21.3 million in 2021 and £20.2 million in 2020.
Mr White claims in his statement that he has tried to raise his concerns with both FirstPort and E&J Estates but that the dialogue was “shut down”.
“Every leaseholder at Hollin Bank Court has been overcharged by FirstPort, who levy the charge and threaten late payment fees if a leaseholder seeks to challenge the premiums, as it clearly disturbs the kickback commissions of 18.22% as admitted by E&J Estates,” Mr White declares.
His witness statement includes an email from E&J Estates which appears to acknowledge this commission.
In addition, Mr White includes what he describes as a like for like quote for the building insurance from the broker Reich which comes out as £11,789.
Mr White’s argument is contested by E&J Estates and FirstPort, with a paper hearing set for January.
“There is no need for a hearing with witnesses, as all the issues are clearly available in writing,” he said.
Mr White, 59, who is a prominent figure in Manchester’s Jewish community, is chair of the charity Medequip4kids and was awarded an MBE in 2021.
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Can we get the case number please? Think we are in the same situation.
The 30% uplift for inflation works like this
If there was a catastrophic claim, where the building had to be demolished and rebuilt and if the rebuild cost equalled the sum assured, then you may think there is no problem. But there would be . It could take possible 24- 36 months to get planning permission to rebuild the block. In that time, inflation would be pushing up wages and building materials and professional fees. This 30% uplift is to cover those inflationary rises whilst the works are being undertaken.
My understanding from a senior underwriter is that the premium for this inflation protection is very small as it would only be activated in a catastrophic claim, which are obviously very rare.
If catastrophic claims are very rare, why is our insurance premium (before tax) 0.59% of the Declared Value (before the 30% uplift)?
In my experience firstport apply undeclared commissions or fees to building insurance, that can be + 50% of the actual premium cost. It was recently reported on this site that a RTM Company reduced the building insurance premium from 21K to 7K per annum and the RTM were “gobsmacked” with the savings achieved and who would not be!
I wish Mr White future success and hope that LKP report the conclusion of that case.
MAN/00EX/LSC/2023/0049 is the case reference at the Manchester property tribunal
Dear Mr. White,
Thank you for posting the case reference particulars on this site. If we can be of any help or assistance to you the LKP have my contact details and a free to share them with you.
VAT should be added to revaluation figure because HMRC recently won a case that even if the stumps of a foundation it is repair not mew build and the ontractor must charge VAT as repair. Insurers are of the same opinion. We checked.
Would you please by kind enough to post the case number? I would like to read that article in full.
Right Said Fred,
I have searched HMRC for that specific case and cannot find it?
Are you absolutely sure your posting is correct or just hearsay, or something from a Company hand out that you have posted?
I look forward to you reply
Every site we have taken over from Firstport and where we have taken the company to RTM, insurance cost have been almost halved, It is obscene that this and other scams are allowed to continue without them being brought to task, When will Government stand up to the plate and help all these leaseholders constantly just being used as cash machines by the big boys who are also busy gobbling up smaller companies in their effort to limit choice and keep their cash flow going.
We recently achieved Right to Manage and have so far reduced the service charge by 39.43% compared to the last proposed service charge from the former managing agent, and that is despite the astronomical cost increase for communal electricity and record levels of inflation.
The reserve or sinking fund has increased in value Year on Year, and the terms of the lease have been met. We have already achieved two consecutive Years of service charge reduction and anticipate another one next Year. The communal areas of the building both internally and externally have never been so well maintained during the six Years that we have called this our Home and the vast majority of Residents enjoy living here and are not constantly worried about the Yearly increase in the Service Charge Demand. The quality of life of Residents has improved dramatically and this is reflected in the attendance figures for communal activity’s such as Weekly bingo, coffee mornings and Residents party’s, etc.
I wish Mr White the best of luck with this claim
I have long been concerned about the level of insurance premiums charged by E&J Estates for my flat
The complete lack of transparency in respect of commissions RECEIVED by E&J Estates PAID FOR BY LESSEES continues to be an outrage which Parliament repeatedly ignores
Not all policies are the same. Far from it. The cost of insurance might well be much lower for a newly incorporated policyholder who has zero claims history to disclose as against the holding insurer who may well have paid out hefty claims. A lot depends on loss history
Excellent reply, demonstrating that policyholders like the managing agents or landlords will have previous claims, in managing many properties. In contradiction to the opinion that larger companies will get volume discounts. Untrue then. RTM and reap the benefits it seems.
Vinny Tchenquiz,
I was recently in correspondence with a contributor to this site about building insurance costs. It would appear that his Landlords unit cost for insurance was higher than this Right to Manage Company’s.
We insured this Apartment block of twenty one Apartments (including the entire building) at a lower unit cost for each home than his Landlord could for approximately 70,000 (seventy thousand homes). If this example is correct it blows an enormous hole in the economy of scale.
Things can get completely out of hand when “undeclared commissions, fees, and other improvised costs are added” In my day none of that terminology was used, it was simply known as either a “back hander or a brown envelope”, it is amazing how business has evolved in certain industry’s.
The claims history runs with the property – so a newly formed company will have to disclose what claims there were on the property
Those who might be tempted to be uneconomical with the truth should remember that insurers share a large data base of claims
I could write a book about specific managing agents who were either “Economical” with the truth or attempted out right fraud allegedly, and have documentary evidence to prove it, which I have passed onto the National Fraud Intelligence Bureau.
Stephen,
I agree with your posting. Telling the truth with evidence goes a long way even these days.
Company’s that post “unaudited accounts” are always a concern to me, what do they know that they wish to legally conceal from others?
In 2004 we formed RTM due to extortionate sums charged on Buildings Insurance. At that time the market premium was £7,500 pa when we were been charged £23.5 k pa!
We went to the old LVT (pre. First Tier Tribunal) and won. The archives are littered with similar stories. Ours was not an isolated case and the archives evidence a fraudulent racket that clearly continues unabated.
Today, our annual insurance premium, and following twenty years claims history, is £17.5 k pa – still £6 k less than demanded in 2004!
On achieving RTM we commissioned a survey of the premises. This revealed a legacy of willful neglect. Canopies were water logged and required complete replacement. Guttering had deteriorated to the point of non-existence and required complete replacement. The RTM company undertook these remedial works and continues to do so as necessary.
The freehold changed hands in 2002 without the knowledge of the majority qualifying leaseholders.: a criminal offence under the 2002 Act. Prior to the sale, the vendor recovered a flat roof and, as was later determined, leaseholders were charged in excess of four times the actual cost.
It is this legacy of unscrupulous, unregulated, and extortionate activity that demands an end be put to the nefarious practices of the criminal perpetrators who continue to flourish in this vile trade seemingly with impunity.
And it is for this reason in 2017 we joined with Sebastian and Martin at LKP and the Law Commission to hasten this end.
So, to the Rt.Hon Michael Gove: please bring on the King’s Speech as the time is well nigh for”leveling up” this sordid lot. There can be no further procrastination, obfuscation, or added delay.
And, Stephen, please do not add insult to injury by pleading “Human Rights”. 4.6 million long leaseholders have already had their Human Rights trampled upon. In the final analysis there will be a reckoning and one that should oblige the unscrupulous to hand over freeholds to the majority leaseholders based on little more than a “peppercorn”.
Alec,
In the first few Days of going RTM four top floor Apartments (out of ten) reported serious water ingress from the roof, they said that it had been reported to the former managing agent Years ago and nothing effective was done, apart from putting a few buckets, etc, in the loft space,
Following investigation we made arrangements for the installation of a new dry ridge roofing system on the whole building, and had to replace two large ventilation ducts due to serious decay and neglect. The guttering for the whole building had to be cleaned out and various external walls needed to be repointed, the list of to do’s was substantial. Cosmetically the premises looked fine but you literally only had to scratch the surface to discover a total absence of effective preventative maintenance.
The final insult (s) following handover to the Managing Agent of our choice materialised in the fact that the opening meter reading for the communal water was in fact under read to the tune of two Years worth of actual water usage. We challenged those figures and received £ 4,918.45 of money owed from the water Company. We had a similar experience with the communal electricity supplier, and received back £ 4,911.33 of money owed, which equates to about six Months electrical consumption that we had not used. Both suppliers refunded the money owed without hesitation once presented with the evidence.
I completely agree with everything that you have written and share many similar experiences with you and your Neighbours. Going Right to Manage is the best thing we have ever done and it only cost about £ 47.00 per apartment and is a one off cost.
The sooner Commonhold is introduced the better for those that wish to adopt it, and Legally enforceable regulation of managing agents has to be a must have, self regulation has been proven to be totally ineffective you only need to read the articles published on this site.