Report of APPG on retirement housing 27 March 2023
We thought scandals in retirement housing would be the downfall of the leasehold system, but that was before doubling ground rents and the Grenfell disaster
Speech by Sebastian O’Kelly, trustee LKP, to the APPG
When Martin Boyd (LKP chair) and I began this – he the chair of Charter Quay in Kingston, the most valuable enfranchised block of flats in the country; me, a national newspaper journalist – we always thought that it would be scandals in the retirement sector that would crack the leasehold system and make the unanswerable case for doing away with it.
It has to be said, 10 or so years ago it looked like we on the right lines.
The then Office of Fair Trading did away with the one per cent exit fees that the retirement housebuilders had squirrelled into retirement leases for no good reason at all (except that they could); Peverel’s (which afterwards renamed itself FirstPort) subsidiary Cirrus had been rumbled by running a bid-rigging racket for electronic door entry systems – no punishment of course, but £100,000 repaid as “a good will gesture” to the cheated retirement sites; we alone revealed the utterly dismal resale values of retirement flats evidenced by the unspun, unarguable data of the Land Registry – an issue taken up by The Times which boldly claimed families had lost £3 billion as a result of their decisions to buy retirement flats.
I suppose one could also throw into the mix the arrest of Vincent and Robert Tchenguiz, property financiers and at the time at the top of the corporate players in the UK, by the Serious Fraud Office in February 2011. They owned – and astonishingly Vincent still does, although deeply indebted – one per cent of all the residential freeholds in the country, including almost all the old McCarthy and Stone and Pegasus retirement sites. One must add that they won a judicial review into their arrest, which was ruled wrongful. So no stain on their character.
The money in retirement housing has commissioned report after report from assorted think tanks and other bodies – some of which really should have known better – urging the case for downsizing, freeing up the housing market, vacating big empty family homes for younger generations etc.
But the consumers stubbornly remain wary and unpersuaded. Only 2 per cent of over 60s in the UK live in designated retirement sites, which is tiny compared with other English language jurisdictions like North America, Australia and New Zealand.
The obvious explanation – ignored on the whole by reports into the sector – is that the old do not trust it. Quite understandably, in my view. Instead, they prefer simply to downsize to smaller houses or flats in the general, non-retirement specific market.
In short, Martin and I were right to be concerned about this sector, but wrong to think that a sector of less than 300,000 units (600,000 if including social, cf David Fothergill, of the Local Government Association below) was really going to be the motor behind reform of the leasehold system by which we sell and manage flats.
However, both of us had underestimated the greed and stupidity of our hugely subsidised housebuilding sector, who started spreading the scourge of leasehold houses around the country adding to them impossible income streams such as ten-year doubling ground rents, which meant they were unsellable and unmortgageable – once the lenders had woken up to what they had foolishly issued loans to in the first place.
We managed to make this a national issue by the autumn of 2016.
And then came a far worse disaster: the tragedy of Grenfell in June 2017. By the autumn of that year we were asking whether the leasehold system would survive the kind of scrutiny that would inevitably result: our plc housebuilders had built with sneaky and cheating income streams in leasehold tenure, and they had knowingly built rubbish as well.
After wasted years, government woke up to the issues and the property sector’s hold on decision makers was broken.
The Leasehold Reform (Ground Rents) Act – which has ended new ground rents – passed with barely a whimper last June and the full gamut of leasehold reforms including commonhold are promised.
Inevitably, our focus has shifted from retirement housing in recent years, but it remains the origin of our organisation and a sector we do want to see improve and prosper.
Living in a retirement community is an excellent solution for many older people, particularly those becoming frail or who are bereaved.
I am always drawn up short by an old fellow in Yorkshire, who bought a flat off a household name retirement housebuilder who said:
“I know I paid too much for it; I know the service charges are too high and uncontrollable; I know the flat will sell for half what I paid for it. But after my wife died, the others in the block consoled me and were an invaluable comfort and relief. What’s the price of that?”
It is important to understand that there is a division in the retirement sector: between the housebuilders who knock out retirement flats, sell them and move on; and those retirement community providers who manage these sites for the long term. The management, in short, is the business.
The two sides are coming together to some degree. The old game of loading income streams into the leases of your customers, and making a run for it, is coming to an end.
Ground rents – absurdly high in retirement flats, at £450- £550 a year, so therefore quite unmortgagable (£625 now in the case of Churchill Retirement, it seems) – have come to an end. It is depressing to see the annual report of one of the retirement housebuilders [Churchill] which expresses the hope to reverse this ground rent ban.
But on the whole, the business models of the retirement community operators and the housebuilders are aligning, and that is something to be welcomed.
There are still going to be many issues.
The result of the past 25 years of boom in the world economy – the fruit of the labours of people very distant and more skilled than those to be found here – led to the UK (and other parts of the West) to ramp up the value of the family silver. Among it being UK residential property, which in investment terms should be as dull as ditch-water, has become a hyper-inflated worldwide investment asset.
Housebuilders ran off to Dubai, Singapore and Shanghai to flog their products to eager investors. And still do.
All those who owned residential property over the past 25 years have seen their wealth hugely increase.
Retirement housebuilders of every sort want to tap this market, and get older people to swap their blameless, valuable freehold houses and trade them for new and shining apartments.
It is no surprise that the likes of Blackrock, the US private equity fund, and Goldman Sachs have been eager to enter this market.
Add in highly complex property contracts such as shared ownership – where consumers are at the mercy of both leasehold law and as a tenant paying monthly rent – and it becomes evident why such dubious notions such as “for profit social housing” – surely akin to “Atheists for God” – are now coming to the fore.
We have made a right mess by making our housing a worldwide investment asset, and pricing out the young who have been in unequal competition for homes with baby-boomer buy-to-letters and, more recently, worldwide eager investors.
I will just end by this: if you are slightly confused by the young and educated repudiating their culture, wanting to chop down the forest of statues around places like this [Westminster], rename ancient hospitals and schools and so on, you can either just believe that they have gone mad and use terms like “woke”.
Or you could ask: if the young and talented are not going to have any meaningful material stake in society – and many aren’t – why on earth should they feel any loyalty to it?
Retirement housebuilders may make hay with this crop of affluent retirees, but long term the prospects are thin.
Retirement housing won’t grow until downsizers are offered a product that they can trust
By Michael Voges, CEO of the Association of Retirement Community Operators
The leasehold system in retirement housing is flawed and ensures that consumers taken on all the risk of future costs at a site, Michael Voges, the CEO of ARCO told the APPG on 27 March 2023.
“ARCO commissioned a YouGov poll and found that while respondents would have liked retirement housing to be cheaper, an even greater concern was on-going costs.
“What Sebastian (above) has just said – that the service charge is not controllable – the research bears out. They want control over these costs, that they are not going to be hit by things like expensive new electronic phones, new roof or whatever.
“It is very clear that people do not want to take on that risk.
“What does the leasehold system do? It means that the residents are liable for all the risk. So the leasehold system does not provide what older people really want which is control over ongoing costs.”
ARCO is a trade body representing 35 members which house 30,000 residents, of which the largest part of the sector – two thirds – is for affordable rents.
On the other hand, 70 per cent of older people in the UK own their own home so that is what attracts private operators and where the growth of this sector is coming from.
Mr Voges said: “ARCO buyers typically stay for 6-8 years, but we are selling older people leases of between 120 and 999 years. And when those leases sell they sell under exactly the same terms as thatthe first owner accepted.
“Will the lease actually be uptodate in 100 years time? We don’t know. So it is a very inflexible system.
“ARCO on the other hand has always been calling for more consumer regulation. Because every country that has a mature market in retirement housing, as Sebastian said, they have something equivalent to a retirement villages act.
“We have very little in terms of sector specific regulation here.
“The Consumer Rights Act only applies to the very first person buying a lease and not in subsequent resales. And a lot of people do not realise this It is insufficiently evolved.
“What our members are trying to do – or, rather, the emerging thinking – is move on from a service charge to a management fee: basically this pays for the cost for providing the services, but operator takes on all the liability to run the scheme for the long term including capital costs and repairs.”
This means that older people can pay less for these services in return for a larger percentage exit fee when the property is sold.
“When older people are asked whether they want to halve their service charges and you want to doub;e the fee that you pay at the end – figures differ at different sites – but overwhelmingly people prefer to pay at the end with a larger fee when the flat is resold.
“There will be a three way transaction. Someone coming into one of our schemes gets a new lease so the whole issue of a wasting asset is no longer relevant because the new lease with be for 125 year or 150 year lease or however long … but your consumer rights apply not just to the first customer but to every customer at the site.
“Covered by a statutory code of conduct both in management charges and disclosure of fees.
“The fee paid at the end does not go to an external freeholder as was the subject of the OFT investigation: a person entirely unconnected to the running of the scheme.
“We are talking about fees that go back into the pot to pay for services.
“The retirement market is evolving into more long term operators like our members we are evolving further and further away from the leasehold system.
“We would like a Retirement Community Act for the UK.
“But as a minimum have the ARCO consumer code put on a statutory footing.
“Reputationally, our members recognise that this sector can never grow if we can’t offer the customer a product that they can really trust.”
Taking over from Bob Bessell as CEO of Retirement Security: what we offer and why
Melanie Gowers is the newly appointed chief executive of Retirement Security Limited, a retirement housebuilder founded by Bob Bessell, a trustee of the Leasehold Knowledge Partnership
Bob Bessell, a former head of Warwickshire social services, became a retirement housebuilder and set up Retirement Security. He has undertaken to leave the freeholds to his sites in trust to the leaseholders who live there. Now in his eighties, he lives at a retirement site he built in Stratford upon Avon.
By Melanie Gowers, CEO Retirement Security
I’m Melanie Gowers; as the CEO for Retirement Security (RS) I’ve been asked to offer some insight into our Independent Living, Retirement Housing model; associated risks now and in the future.
In 1983 our founder concluded that there needed to be an alternative to care homes and nursing homes – the only options for supported later living at that time and ones which denied older people who could have still lived independently, of that right to do so. By establishing a new model he offered that independence within a community supportive environment – THUS Retirement Security was born!
40 YEARS ON: WE ARE A LONG-TERM OPERATOR
Our model is based around right to manage, with RS as Freeholder – (post the sale of the new properties – development profit did not benefit RS), and as Freeholder, we are acting as the management agent.
Our Residential developments are known as Courts. Each Court is registered as a Limited Company with a Board of Directors who represent the individual leaseholders, who all own a share in the limited company. In addition, each Court has shares in RS which allows for the Courts to have a say in how RS operates.
RS currently is the freeholder of 32 Courts with an average at each Court of 50 properties. These are a combination of apartments and bungalow, located throughout the country from the South, Southwest through the Midlands and East to Northwest England, with one Court in North Wales.
This broad geographical dispersion gives RS an equally broad range of property values and demographics. For example our property values range from below £100k to over £750k and therefore can meet the needs of the wider community.
RS acts as managing agent for 26 of these 32 Courts. The management fee passed on by RS is to cover only the costs of providing the management support.
Whilst RS supplies the model, each Court runs autonomously and appoints its own Directors from within the Community. RS supports the Directors and oversees the appointment and management of a qualified Court manager who in turn manages the business and on-site team. The Courts make final decisions around the budget but are supported by RS, to keep up to date with best practice and legislation. Our model is based around 24/7 support 365 days of the year.
If Owners are doing well ……we’ve done our job.
As a philanthropic business RS has operated without the need for ground rents since the inception of the model. Thanks to the tenacity and great work by the LKP The Leasehold Reform (Ground Rent) Act 2022 puts an end to ground rents.
To function RS operates a 3% Transfer Premium on resale value – in the main this TP goes toward the management and marketing support to the Courts with roughly a 1/3rd of this going into a reserve for future development.
2023 What is the ideal model for when we develop our next site?
We are selling a Lifestyle – not bricks and mortar . A Potential owner/leaseholder is buying security – the ideal outcome for later living and most importantly … are not alone!
Commonhold does not work for our business model of Independent later living within a supportive community. Commonhold would leave Owners living independently but entirely on their own.
What price can you put on peace of mind, community, support, security; how do you tackle loneliness? You can ask current owners if they are pleased to have made the decision to downsize and move into one of our courts – the answer: “wish we’d done it years ago”.
However, the retirement living landscape is now different and changed greatly since RS started. We were an early adopter, a Pioneer…. at the vanguard of the model – Independent living within a supportive community. Now, the later living model is being taken further with many different operators and models.
Many offer Deferred Management Fees (DMF), which are designed to maintain affordable service charges and funds for future maintenance, in an attempt to make living within this model affordable today. This model utilises the equity of their homes they are living in to offset the deferred portion of the fees; thus ensuring peoples’ pensions and savings are available, to really enjoy their later years.
I’m here to discuss the merits of what RS is doing as a long-term operator – we are long term custodians and are there to help and protect the owners present and future. We have never charged ground rents but do operate a Transfer Premium within the model, this is to ensure the support of our Courts and sustainability of the model. However we are conscious the model needs to keep evolving.
That is where Leasehold reform comes in – the retirement sector can’t just stick to the old typical general housing leasehold model. Which is often… Sell property, make money… place a management company in to run it, change this management company regularly to kick the responsibility for long term sustainability down the road – all responsibility subsequently lies with the residents and no one, including in some circumstances the tenants, really care until something goes wrong.
I stress that is not the RS model nor the practice of Independent Retirement Community operators working in conjunction with ARCO.
Nor can we adopt a Common Hold approach– the later living requirement is different to a block of flats with all associated costs and is a model whereby on site you also have a manager, cleaners, café, support, care, where loneliness can be addressed, and communities can thrive.
The challenge is to find the model or models – fit for purpose – fit for the future for both owners and providers.
RS supports Leasehold but a leasehold where owners have a strong voice. However, we agree it is in need of a better regulatory environment and protection for the consumer.
Deferred Management Fees, sinking funds and sustainable financial models are complicated transactions and it is a travesty that we don’t protect older people with any form of consumer, sector specific legislation – at all.
Consumer confidence is key – this can be driven by reputable operators putting leaseholders first – demonstrating that charges are delivering value for money.
RISK – immediate and in future years…
Cost of living – inflation in general
Leasehold or Commonhold – everyone still has the same concerns /problem – how do you sustain the rising costs of repairs and maintenance?
Net zero initiative targets 2035/2050 – Currently it is not clear if or how this will affect old housing stock. But, inevitably retrofitting will be costly. Within the retirement housing sector, it may be more difficult to get the buy in – effectively paying for the ‘long term’ future, today. This is different and additional to general lifecycle long term maintenance already being charged through Service Charges or DMF’s. It may even encourage freeholders of existing stock to make the decision to demolish and rebuild.
This will impact residents and stock availability.
In conclusion I leave you with our strong belief – “That our owners should be Living the best years of their lives in the later years of their lives.” To achieve this across the entire sector there is clearly still much work to be done and many conversations to be had. Together I am sure that the best solutions can be found for all Leasehold environments to meet the needs of both owners and providers.
Owners should not be worried about having to sell the home that they downsized to, believing that it would be their last home, just because they can’t sustain the service charge, and whilst there are options to prevent this – regulation is required.
Whatever suggestions are made about leasehold reform by various bodies, the Retirement Sector’s voice should be paramount when discussing leasehold reforms which impact later living. There is no one-size-fits-all solution.
Local councils should encourage retirement house building, says LGA
By David Fothergill, chair, Local Government Association Community Wellbeing Board
Our society is ageing. Longer life expectancies mean that over 70 per cent of UK population growth between 2014 and 2039 will be amongst the over 60’s. This group will grow from nearly 15 million people to nearly 22 million people over 25 years, with the number of those over the age of 65 forecast to rise by 27 per cent over the next decade.
While this is fantastic for individuals, families, and society as a whole, it brings with it significant challenge for national and local government, who play a pivotal role in ensuring its ageing population is supported to live an independent life for as long as possible.
One of the biggest challenges with supporting an ageing population with growing and complex needs lies in housing. The suitability of housing, with a variety of housing options for older people, is of critical importance to the health of individuals. It also has a wider impact on public spending – particularly adult social care and the NHS.
There is a growing body of evidence about the value and role of older people’s housing, however, retirement housing currently accounts for only around 2.6 per cent of homes across the UK – approximately 620,000 homes. The value derived from providing adequate levels of sheltered and extra care housing can be found in benefits to the individual, to the community and to the taxpayer, not least in increasing independence and reducing or delaying the need to enter residential care.
Building more age friendly homes would also help to free up larger homes for families in need of space. According to a recent report, three million people over 65 want to move to a smaller property but are put off by the lack of choice.
There is also a great deal of social value to retirement and sheltered housing. Studies show residents feel more sociable, more autonomous, safer, healthier and overall happier in these kind of schemes.
But its also important to note that many older people may not want or need specialist accommodation and may wish to stay or move to general housing such as bungalows, or adapted homes. Keeping people healthy, active and independent in their own homes for longer with easy access to local amenities, will help to reduce demand on social care and health services. Inappropriate housing for the over-55s is projected to cost nearly £20 billion by 2041. Councils therefore need to consider not just whether they have enough specialist accommodation, but also to identify the role of general housing in meeting the needs of older people.
There are a range of issues and barriers that are affecting the ability of councils to plan for and deliver a range of housing solutions that will better support an ageing population.
The planning system can play a key role in supporting and incentivising the building of age friendly homes and neighbourhood infrastructure. However, there is a need for policy and financial incentives to line up so that general housing developers are persuaded by the economic returns of designing and re-purposing properties that are aspirational and desirable to older buyers or renters. There may also need to be incentives for housing associations to invest in more social housing that is suitable for later living, particularly where land acquisition costs can be a barrier.
The LGA recommend that Councils use the planning system to facilitate suitable housing for older people. As part of developing local plans, we recommend councils set out in their evidence base details of the need for different types of housing suited to older people. This should include mainstream housing that is suitably designed and specialist types of housing, such as retirement housing and housing with care.
Councils should also consider creating guidance for developers. Telford and Wrekin council have produced Supplementary Planning Documents as a way of directly influencing the market to deliver the types of housing and accommodation required by older people
Action in the fields of housing and planning can align with some of the most important policy areas currently challenging national and local government. For an integrated approach to housing, health and care, councils and their NHS partners should make use of the local Integrated Care Systems arrangements to align care and health priorities for the local older population with housing planning and delivery. Southampton City Council does this by demonstrating the benefits to the health and social care system of housing with care services.
Government can support councils by publishing guidelines through the Task Force on Housing for Older People, that clarify the different housing models for older people with recommendations on how planning can help address the local need for older persons housing.
Government and Homes England should also consider recommendations from the National Housing Federation around minimising financial risk and incentivising housing providers to develop long term supported accommodation by increasing the level and flexibility of capital investment in supported housing.
Government could also make a long-term commitment to meeting housing-related costs in supported accommodation. There could be reform of the Rent Standard which would help to cover the higher actual costs of developing and managing supported accommodation schemes, and Government could also commit to meeting the costs of providing support services to the people who live in supported accommodation.
However, this is not solely about new build housing, there is a need to also consider creating a better housing ‘offer’ for older people in existing poor quality or unsuitable mainstream housing in disrepair or poor condition. 78 per cent of the older households living in non-decent homes are disadvantaged homeowners, with issues such as lack of accessibility, need for adaptation and fuel poverty.
It is estimated that 80 per cent of the homes we will be living in by 2050 are already built, so we need to make best use of existing housing, by encouraging wider age-friendly communities, and supporting people in their own homes to have access to timely interventions and access to social networks. Both minor and major home adaptations can improve a range of outcomes for people in later life.
Many councils provide and commission home adaptations services that are part of a comprehensive approach to sustaining older people in their existing homes by aligning adaptations services with local programmes. A good example of this is the adaptations service provided by the councils in Gloucestershire as part of a wider housing and health service model. Many councils are also providing or promoting assistive technology aimed at supporting older people to maintain their independence.
The Adult Social Care Reform White Paper recognises the importance of home in ‘making every decision about care a decision about housing’. The measures and funding announced alongside the white paper recognised the substantial role councils have in shaping the current and future supply of housing in their areas. However, we are disappointed to hear that Government may not deliver the £300million Housing Transformation Fund, whilst still expecting councils to develop joined up strategic plans across housing, social care, and health. There may be some opportunities as part of the new Supported Housing Bill to address this and ensure that strategic plans meet local needs, but Government must recognise the substantial resource and capacity concerns expressed by councils.
The crossover between leasehold reform and older people’s housing is not insignificant and comes with its own challenges. Older people can currently experience escalating costs, reductions in service provision, a lack of opportunity to influence the management of the scheme and the diminishing value of their investment as the lease expires. The LGA welcome the Leasehold Reform Bill to restrict ground rents and make leasehold ownership fairer and more affordable for leaseholders.
Councils have a significant role to play and it will be vital that new burdens funding is provided to support the proactive work that will be necessary. This will enable councils to ensure compliance through supporting freeholders to understand and comply with the new requirements.
Without upfront funding, the delivery of provisions in the Bill will require local government resources being diverted away from other council departments which could impact service delivery.
Councils will also require clear and timely guidance from the Government in order to enforce the legislation effectively. This will help them bring about a consistency in enforcement across the country, ensuring that there is a level playing field for freeholders and leaseholders.
With an ageing population, older people are now key players in the wider housing market. Councils are well placed to exercise local leadership and take a greater strategic approach to enhance the housing and lifestyle choices for people in later life.
Legal and General supports reform of leasehold which fails the retirement housing sector and ensures uncertainty for elderly residents
By Ben Rosewell, Legal and General, Head of Investment Later Living Business
We entered into the senior housing space in 2017 when we established a group called inspired villages. That today currently comprises eight operational villages across the UK, with about a thousand units.
We have four village under construction and another 16 sites in the pipeline, some with planning consent, and we’re looking to grow that platform to about 35 villages. Our co-invest is NatWest pension fund.
Why did we invest into that space? It’s no surprise. Retirees are at the heart of Legal and General’s wider business.
Before we made investment into the sector we had a long look at it and, as has already been clearly articulated today, there’s two different aspects to this.
There’s development model and an operational model, and we very quickly set it on an operational model.
This is because our focus is on the long-term relationship and management of the schemes. It’s not just about the real estate, it’s about the communities that we build and everything is associated with the community …
We currently using utilizing leasehold structure as when we acquired the group we had six legacy villages, which are all leasehold and they have some legacy ground rents in them. But ut we immediately made the decision to have no ground rents going forward. So the seventh village, which we opened last year, has no ground rents …
“But we’ve seen the headlines around falling unit prices on resale. And our focus is on trying to provide the residents with as much safety and security as possible. So we have amended the leases so that we, the operator, takes on the capex and liability of the units going forward. So all the worry and concern about that now sits with us in return for a deferred management fee.
“In New Zealnd a Retirement Villages Act was introduced in 2003, and as a result this is a very established sector. Compared with the UK it is booming, with most villages operating in a similar way. It is a very regulated sector, with a different form of tenure to leasehold that creates a lot more flexibility.
“The interests of the resident and the operator are very much aligned and this enables operators to adjust and suit services to the resident.
“You have to remember that inside our schemes we have communal clubhouses, a restaurant bar, swimming pool and so on. There could be a cinema. These are significant pieces of real estate that would require a lot up-front to build and then, over the long term, they will require significant capex.
“We are also looking into taking on the internal refurbishment of residents’ apartments, because a key point in the resales as that a unit needs to be refurbished and put back to its original condition.
And we then ensure that units in the village are not suffering from falling unit prices, which will impact the next unit. So we take control of the resale of the units to ensure that the units going up in price, they’ll be put back the best position and unit values are being held and maintained.
On leasehold reform we wholeheartedly support it. We’re all about greater disclosure and customer protection, which are the center of all that we do. We are trying to create the best life for those residents for the last years of their life.
And that’s very difficult under the current regulations.
- Inspired Villages charges a 10-20 per cent deferred management fee on resale
My path to right to manage at a retirement site
By Dan Healey, director of the Woodlands Court RTM
Right to Manage – The Road to Independence
My name is Dan Healy. I am a Director of the Woodlands Court, Alderley Edge RTM Company. I retired as a Chartered Civil Engineer and a Chartered Member of the Institution of Environmental Management in Engineering Consultancy in 2015. I have had 40 years’ experience with major engineering companies, both overseas and in the UK, covering the planning, design, procurement, financial control, construction and commissioning of both minor and major infrastructure projects.
• Had I not had a commercial background and an interest in the way the development was being managed (as well as assistance from a fellow resident with an accounting background) the outcome to this story may have been very different. • Had I known prior to purchase, what I know now about Leasehold Retirement Developments and Management Agencies like Peveril [renamed FirstPort after the Cirrus scandal], I would not consider buying a leasehold retirement property and I wouldn’t be sitting here today.
This begs the question; what happens to those Retirement Schemes that are not so fortunate? How many elderly and vulnerable leaseholders are still being financially disadvantaged, ignored and lied to by unscrupulous MA’s?
I have been invited to speak about Right to Manage and why the residents of Woodlands Court started on this journey back in 2018. As you know, the Right To Manage (“RTM) was introduced to give leaseholders the ability to take over the landlord’s management functions in respect of their building, without having to buy the freehold. It is a “no-fault” right, which leaseholders can exercise without the need to prove a complaint against their landlord or managing agent.
You will hear about our experience of being managed by Firstport Retirement (FP) and our findings from just 20 months of investigations into their management style including their contractors AHR Building Surveyors, Aston Environmental Services and Firstport Surveying Services. Just as importantly, you will hear about the lack of support from organisations which are there to uphold standards like the Royal Institution of Chartered Surveyors (RICS) and The Property Ombudsman.
It was some 3 years after I retired, in April 2018, when I realised that something was seriously amiss with some of the charges applied to Woodlands’ Contingency Fund. After reading the Section 20 Estimates for Fire Detection Works, I knew straight away we were being charged for items that were not required but were implied as statutory requirements by FP. I was appalled at this attempt to deliberately charge us for unnecessary works; from this point I took it as my mission to challenge FP on recently completely works and on virtually every aspect of their management service until we achieved RTM in June 2019.
Fortunately, my ‘fellow Leaseholder in crime’ was able to obtain copies of bank statements and together we were able to identify areas where we may have been overcharged for services. We used a two-pronged approach; I scrutinised every item of work proposed by FP and their Contractors based on need and cost, and my leasehold partner scrutinised the accounts.
Our first mission was to stop the proposed Fire Detection works which to our mind was approached in a duplicitous manner, and secondly to educate ourselves on Leasehold regulations.
We used the Leasehold Advisory Service, LKP site, activist web sites and the Association of Retirement Housing Management (ARHM) Code of Practise to help us determine principles of good management, correct procedures and behaviours, and how to rid ourselves of FP.
Hearing of similar stories up and down the country; we soon realised RTM was our only option. The consequences of not moving to RTM were stark – FP could completely deplete our Contingency Fund and we would then have to deal with substantially increased service charges.
In other words, we could be subject to nothing short of ‘Legalised Mugging’!
Effectively a lack of regulation allows unscrupulous MAs to use the system to overcharge leaseholders for services and works, in particular elderly and vulnerable leaseholders and in doing so, line their own pockets.
It also meant we did not have powers to take them to a criminal court. I and many others in the same situation, were convinced that some of FP’s actions against us could be described as fraud.
Myself, and my fellow leaseholders often dreaded the next opportunity for FP to raid our Contingency Fund, charging for work where no ‘Need’ had been established and or the proposed works by their Contractors would not be ‘fit for purpose or defective’. I must admit that at times, we felt helpless, like lambs to the slaughter.
By gathering robust information highlighting the discrepancies in procurement and charging practises we were quickly able to gain the trust of virtually every leaseholder at Woodlands Court, we were able to lead a rebellion against FP and to start promoting the potential benefits of RTM. (For a list of selected failures of FP and their contractors , see Appendix 1).
As well as specifically promoting RTM, I made sure that all Woodlands’ leaseholders were made aware of FP’s shortcomings in legal, technical and financial services. I did this by making sure that:
• I copied in Leaseholders to emails challenging FP’s on everything from their lack of communication, failure to comply with regulations and their tendering procedure – residents soon picked up that FP were not responding to me and ignoring us. • I demonstrated that FP were not treating us with respect, honesty, or with integrity. • They were failing to comply with legal requirements and did not act with transparency. • They were taking financial advantage of vulnerable and elderly Leaseholders. • Regular meetings were held with our Leaseholders and Family members.
Our managing Agent was clearly a risk to our health, wellbeing and pockets.
Having gained the trust of Leaseholders and my newly acquired knowledge of Leasehold, I arranged for a Leasehold Advisory Service expert to give us a talk on our options. It was clear that RTM was the only way to go. I reviewed prospective local/ regional MAs to take us though the RTM process, we then selected two MAs to make presentations, submit their written replies to a series of questions we had issued and to respond to Leaseholder queries during their presentations.
The locally based Jones Associates (JA) were then selected by the Leaseholders to take us through the RTM process and then continue as our MA. Leaseholders agreed a fee of £5.5k to fund JA to undertake the process, not an inconsiderable sum for a small development but it was the best £5k we have ever spent. The RTM process supported by JA went smoothly, it certainly helped having 95% of Leaseholders in support. How long did it take – well 9 months from start to finish for a straight forward process. We did not have any of the usual delaying tactics from FP, I think they realised that they were history.
We did encounter one stumbling block, as we were about to formally commence the RTM procedure, at the request of JA, the Leaseholders collectively approached our Landlord/Freeholder to formally dismiss FP as our MA. They refused and I am sure the likes of McCarthy & Stone would react the same way. We were advised by the Landlord that FP would now act in a proper manner or words to that effect. It only took 2 weeks for them to revert to type and by this time we were already well on the way to becoming a RTM company.
As Leaseholders, we felt thwarted at every turn; in particular we were badly let down by RICS and The Property Ombudsman and this is probably the case for many other leasehold developments who have gone down the same route or are battling for justice against unscrupulous MA’s. It seems to me and from the experience at Woodlands; RTM is the only option open to Leaseholders to ensure a more carefree and healthy retirement.
The benefits of RTM were immense. We had a MA who cared about our well-being, treated us with honesty and respect, listened to what we had to say. At a basic level we were happy, we could look forward to retirement without the spectre of our savings being severely depleted.
Jones Associates were comfortable in regularly addressing the Leaseholders collectively, both informally and formally. They dealt promptly with any emergencies at the development, we felt secure, and really nothing was too much trouble for them to handle.
Jones Associates provided positive tangible human and social interactions for us. They also managed the procurement of practical improvements to the Development to safeguard H&S matters and building improvements. Soon after they took over Covid hit, but that was managed effectively with the health of Leaseholders being at the forefront of their actions.
It is nearly three years since they took over and we have had; new warden call system with a linked smoke detection system in our homes, new Fire Panel, new Lift control panel and electrics, resolved the issue for replacement of our double-glazed windows, undertook external decoration to the Conservatory and Entrance Lobby, provided a more cost effective Laundry system, improved the emergency lighting, managed a programme of tree surgery that was desperately required, replaced defective roof guttering, and are now planning for the Residents Lounge redecoration.
We have had all these improvements, yet we still have a healthy balance in our Contingency Fund.
Of course, we do have differences of opinion, but they are resolved in an amiable manner and always in accordance with the Lease.
Having achieved RTM, my reflections turned to the complete lack of support we received from RICS and The Property Ombudsman. We had exhausted the FP Complaints procedures. We thought it was a farce, a whitewash, but we had such a wealth of evidence against FP, we expected RICS and the Property Ombudsman to see that they were not achieving even minimum standards in terms of best practice. We were bitterly disappointed with both bodies on the outcomes of our formal complaints to them. Perhaps we should ask – why did they appear reluctant to take action against FP and AHR? Was it a case of self-interest? Clearly professional bodies receive fees from companies like FP.
It is extremely tough for Leaseholders in Retirement Developments to go RTM when they do not have colleagues with the knowledge, skill, determination, tenacity and good health to face up to the likes of FP and their Contractors.
How can Government help Retirement Developments? I agree with the findings of the Law Commission (2020) in particular the recommendations to:
• Introduce reform and legislation to make the RTM process simpler and expand the scope of Leasehold properties, particularly for Retirement Developments, for RTM eligibility. • reduce the costs of making an RTM claim, and give leaseholders more control over those costs • make the process of claiming the RTM less complicated and less likely to be frustrated because of small procedural errors.
It might be controversial but I also think that legislation should be introduced such that that the excesses of Directors / Senior Managers of MAs and Contractors can as individuals face criminal charges, be prosecuted and receive custodial sentences.
That appears to have been an excellent APPG meeting.
Thanks for that detailed and interesting article showing the progress we have made in recent years. I can remember writing to Grant Shapps in June 2010 after he stated that the Leasehold Sector is quite capable of regulating itself. How wrong he was but what a long time it has taken to convince his colleagues that he was.. I doubt he is convinced yet.
The next move must be to get all ground rents scrapped in Retirement Complexes, (eg. those charged by the likes of M&S, Churchill and some Developers of retirement villages).
Have Exit Fees been scrapped for all types of Developments, we leaseholders still pay high charges at our Social Housing complex, but the money does go into a Sinking Fund. A Sinking Fund that we never seem to benefit from.
On the subject of Social Housing, did this get discussed at the last APPG meeting, because we do need a lot more Regulation as at present there is no control over the companies who act as Landlords/Managers.
Their complaints systems are useless, the Housing Ombudsman has no powers to enforce his decisions, MPs have no authority, local Councils don’t want to get involved and the current regulations do not get observed although they are pretty useless anyway.
It’s not really a satisfactory action to take, but no wonder some residents are resorting to rent or service charge strikes.
Congratulations to Katie Kendrick on her election as a Councillor
On the whole that appears to be another productive and largely successful meeting. I am very disappointed that the archaic Leasehold / Freehold racket is not yet being abolished entirely and replaced by Commonhold, the Government have no acceptable reason not to do so in my opinion. The political consequences of failure to keep and deliver its promises could be devastating.
I read with particular interest Mr Dan Healey’s experiences of going RTM, and I must say it was quite astonishing to note the similarity’s between his findings and our own. It would seem that FP literally have a check list or work to a script in applying various ways to Legally exploit Leaseholders, and in the certain knowledge that If they are found out the overall gains more than pay for the losses several times over. And is it any wonder when one glances at the workings of the FTT which I view in legal terms as a knowingly loaded dice that is inherently in favour of the Freeholder because Feudal Archaic Leasehold / Freehold law is embedded in its very core.
We recently received a credit from our supplier of communal electricity of £ 4,911.33, we budgeted £ 10,000.00 for the financial Year ending 31st March 2024, and anticipate we will come in under budget. We received another credit from the water supplier of £ 4,723.43, we have budgeted £ 2,500.00 for the financial Year, and expect to come in on or under budget. We have been repaid £ 9,634.76 in total so I suggest that those who and or are considering going RTM take note of your communal meter reading (s) and take photos if you can for obvious reasons.
Those rebates were achieved by this RTM Company after we challenged the opening meter readings (s) on the day we went RTM. The opening figures the supplier (s) had proved to be incorrect and were put right without hesitation by both firms.
From our first meeting to receiving word that FP would not object to our RTM application took less than three Months. In less than fourteen Months we have reduced the service charge by more than 39% without compromising service or standards. I have only limited experience in property management along with my fellow Leaseholders and can see of no reason why others cannot achieve the same or better, we found the process of going RTM fairly straight forward and were forewarned of how FP would react to our application and the likely actions they would take. Those “actions” clearly did not work except for actively encouraging myself and many, many others into spreading the word about the benefits of RTM, and the utter futility of staying with a MA that you had imposed on you.
Under the current system many managing agents could not care less what it costs to manage any development, because its not their money they are spending its the Leaseholders. Add to this fees and commissions the bigger the bill the bigger the commission or fee, its a self fulfilling prophecy and a win win for the Managing Agent / Landlord and continued misery for Ye Poor Old Feudal Leaseholder (s).
But at least the tide is turning largely thanks to LKP with its relentless exposure of wrong doing and highlighting the breath taking arrogance and stupidity of certain Freeholders, who in my opinion “could not run a bath” never mind manage the communal areas of a residential apartment block. We have proved that, the figures will be audited and will not be subject to audit exempt – “we have nothing we wish to hide”
The cost to achieve Right to Manage worked out, from memory, at less than £ 100.00 per apartment and is a one off cost, this Year every Leaseholder in this residential apartment block is better off to the tune of £ 936.00 per annum it really is a “No Brainer” We have a say on how our money is spent, what on and who will carry out the work, its our money and not the MA’s. This Company’s reserve fund has increased significantly since going RTM, it never did prior to this, and we all know why because money was often spent on goods and services that “we did not want, need or ask for”, does that sound vaguely familiar?
In my opinion for the foreseeable future we are not going to get Leasehold replaced with Commonhold.
At present I believe our efforts should concentrate on getting better regulation of Landlords/Managing Agents, making Right to Manage much simpler and purchase of the freehold much cheaper.
Even this objective will not be easy with the current Government and lack of interest among many leaseholders, especially the very elderly.
And let’s not forget those in Social Housing which includes many leaseholders who also can receive poor management and excessive Service Charges.
Dear Mr. Holland’s,
I believe the total abolition of Leasehold & Freehold Law is the ultimate solution, and not tinkering about with this, that or the other, it has not worked in the past, present or in all likely hood ever will.
Common hold is the only logical remedy, in my humble opinion.
That’s probably realistic. LKP has spent years patiently explaining the issues of leasehold and persuaded the Law Commission, the officials, MPs and finally even the ever-changing ministers that reforms were needed. The reforms are ready and waiting, and have been for months. We are now in the last months of a government that next year must present its achievements to the electorate. Commonhold probably just isn’t going to make it. I am afraid I think we are atrociously governed at just about every level, and at huge expense.