(And what will new chairman Roger Southam do about it?)
The Leasehold Advisory Service is recruiting two new legal advisers this month, with special emphasis on developing the quango’s commercial activities.
The posts are for a senior legal advisor, a barrister or a solicitor, and a legal advisor, who will also require a legal qualification.
But the news release here adds: “LEASE is developing a growing commercial offering and experience of developing the delivering relevant products will be an asset.”
LKP has expressed concerns about the corrosive nature of the quango’s commercial enthusiasms, which are more likely to serve the interests of the leasehold sector, and professionals in it, rather than home-owning leaseholders.
The Leasehold Advisory Service required constant prodding over eight months to dump the advertising in July last year of property manager Benjamin Mire, of Trust Property Management. Trust is now up for sale.
But of particular interest to the new chairman of LEASE, Roger Southam, will be what we regard as the nadir of LEASE’s commercial activities.
These were witnessed at the 2010 annual conference when Gary Murphy, the vice-chair of the RICS auctioneering group, gave a presentation titled “Why Invest in Ground Rents?”
He demonstrated how freeholders of a site could help themselves to up to 50 per cent of the total insurance premiums in commission, and – best of all – leaseholders would have no legal right to know the level of payments.
This is because they are not the customer with the insurance company, the freeholder is. Leaseholders simply pay the bills.
Insurance commissions are one of the most blatant abuses in leasehold, which have been repeatedly criticised at Leasehold Valuation Tribunals.
Should this presentation have been made at an event organised by a taxpayer-funded body?
It is a particularly relevant question to put to Mr Southam, the founder of property management company Chainbow, as he was a speaker at that year’s annual conference.
Also, he had exposed rip-off insurance commissions in 2007, according to the Evening Standard.
When the freehold of Boardwalk Place, in east London’s E14, which his company was managing, was sold to Vincent Tchenguiz in September 2005 insurance demands came to more than £100,000.
“I went to a broker and got a quotation for £60,000, including a 20 per cent commission for the agent or freeholder,” Mr Southam was quoted as saying.
He felt sufficiently strongly on the subject to add on his blog:
“We have also hit the headlines with the Evening Standard on the topic of insurance commissions and transparency.
“This is an area where the Royal Institution of Chartered Surveyors (RICS) pledged to investigate this issue but have done nothing to date.
“So the Chainbow Crusaders will keep plugging away on this as well, while the freeholders and agents maintain their cloak and dagger existence … ”
All this is music to our ears at LKP. But how are Mr Southam’s public views of this sort going to square with LEASE?
Specifically, how can LEASE engage in commercial activities in a rather squalid sector such a residential leasehold and not become tainted?
There are plenty of other quangos that do not feel this obligation to engage in money-making initiatives, and for very good reasons. An example is the Intellectual Property Office.
In fairness to LEASE, politicians at the DCLG have been pushing the quango to engage in some money-making to mitigate costs (even though public entities unfailingly fail at this sort of thing).
But it is also plain wrong. LKP has provided an abundance of evidence that things are none too savoury in residential leasehold. So have the courts, and the CMA.
Obliging the supposedly impartial consumers’ quango to swim in these shark-infested waters is self-evidently not a good idea.
If LEASE cannot survive without toadying up to commercial interests – as has been argued – then private sector methods of providing advice would be preferable.
We have already seen examples of this with ALEP, the Association of Leasehold Enfranchisement Practitioners. It provides advice on lease extensions directly to consumers (with half an eye to getting the business, obviously).
Response from Roger Southam
Thank you Sebastian and I am happy for you to reproduce the whole of this response, please do not cherry pick quotes from parts of sentences.
As I have been in post all of 5 days it seems a tad precipitous to think I can be the saviour of the leasehold market and the transparency issues you have been lobbying on, although if I could I suspect I would quickly be summoned into the Foreign Office for my next assignment.
Life has moved on a long way from 2010 to now and the article you present seems to mix up a number of different areas, attributes, impacts and effects. The challenge for any Government department or quango is how to achieve the maximum impact and effect for the minimum of expenditure. There is nothing wrong with commercial ventures as long as the core ethos is enhanced and maintained.
It is interesting you approve of ALEP when clearly their members desire is to be engaged and appointed – hardly unbiased? Yet you say that is okay but for LEASE there should be no commercial activity? Always such commercial activity would be without any favour or toadying as you state, LEASE will always remain impartial and a free service to leaseholders.
You want commercial companies to give impartial advise? And why would they want nothing when you seem to say LEASE does? Surely the other way round.
If your supporters in Parliament are happy to assist and lobby to get the funding needed for LEASE without commercial activity then we would be delighted to receive it and run as an advisory body without any commercial activities. Being realistic however that is sadly not going to happen.
I am still as much opposed to excessive insurance commission as ever I was and it should be acknowledged how much the market has changed. There will always be a small minority who want to push boundaries but on the whole it is getting better as the CMA acknowledged in their latest report. We should not lose sight of the bulk of the market and the work being undertaken.
Obviously we have an interesting ride ahead and if we can agree one thing at the start of my tenure, it is fine to reference history but please do not try to imply nothing has changed. The residential leasehold world has changed and continues to change for the better, but there is more to do. There will always be some wanting even more but everything takes time to the frustration of all concerned.