It will come as no surprise to leaseholders and managing agents to learn that the main conclusion of the LEASE/Brady survey is that there is a need for better education and communication, and that many leaseholders are not happy with their managing agents. Even though the leasehold system has been around for hundreds of years somehow one of the problems is that leaseholders still do not understand their rights.
The survey was produced jointly by LEASE and Brady solicitors. Unfortunately they did not consult with the sector before sending out the survey. If they had done so they would have been made aware that a number of groups were already planning a more substantial piece of work.
LKP has not been alone in its concern that some of the questions seem poorly designed, that there are many omissions in the range of questions asked.
There has also been concern about LEASE’s choice of partner in the project. Brady’s is a legal firm which gains part of its business as a debt collector for landlords. They use what they describe as a “firm but fair” approach as “one of the pioneers of the no-cost approach to recovering service charge and ground rent arrears”. They currently offer a “no recovery-no fee solution”.
The LEASE/Brady project launched inauspiciously with the Chair of LEASE making bold statements about the size, structure and growth of the sector. Unfortunately all of the figures he quoted were wrong. There are not 4.1 million leasehold homes in England and Wales as LEASE stated. The agreed DCLG figure was 4.1 million homes in England as at the middle of 2014. The geographic distribution which LEASE attribute to themselves which includes Wales is therefore wrong. The statement that “Leasehold properties are being built at close to 120,000 per year” is also inaccurate. In 2015 DCLG records that in England total residential construction amounted to 143,560 completed new homes of which 30-40% are likely to be leasehold giving a figure completion figure in the range of 43-57,000.
The Association of Residential Managing Agents, having initially tweeted the survey, then decided to untweet their message. LKP also advised its readers not to participate, given the quality of the questions and the fact that Brady solicitors were collecting commercially sensitive data about their managing agent. The survey also obliged leaseholders to provide their private contact details. LEASE, initially claimed this was not the case, but the survey continued to require email, first and last name and phone number as compulsory fields after asking for block and postcode details.
The survey sought to question both leaseholders and RMC directors. The report however failed to observe any connection between sites with an RMC and a better relationship between those leaseholders and their managing agent. Since a strong link between having an RMC and leaseholder satisfaction was found in the 2014 CMA study one would expect this survey to have produced a similar result.
What seems missing from the survey were any questions allowing participants to express a view regarding possible flaws in current legislation and regulations. Neither was their opinion sought regarding their experience of using the Tribunal or the Courts to resolve issues. There were no questions addressing potential conflicts of interest between the freeholder and the leaseholder. No questions were asked about unfair terms in leases, nor about how things might be improved. there were no questions concerning surveyors or lawyers providing, or not providing, relevant information at the point of purchase. There was also no question asking if their agent is part of a voluntary regulatory scheme such as ARMA or ARHM or ARCO.
The survey produced the depressing finding that most leaseholders (57%) regret buying their lease without asking the slightly more important question of why they regret that decision.
The survey concluded that 66% of leaseholders felt that they do not get good service from the managing agent, but again failed to ask why?
The survey findings state that nearly 70% of leaseholders do not think their managing agent could solve a problem effectively. That figure should be ringing alarm bells with almost everyone. Why is there such a fundamental mismatch between consumer expectations and the managing agent’s ability to deliver? It seems improbable that so many agents are so poor or that so many leaseholders are so misguided in their understanding of what might be possible!
Looking at a different part of the survey we find that only two thirds of RMC directors feel they get on well with their fellow directors. In terms of understanding RMC directors roles, the survey found that the most common type of director was over 65, that just less than half found the role rewarding and that most found it took up more time than they expected. 17% said they did not understand the role before they took it on. More worrying still is the suggestion that a small but not insignificant number of RMC directors felt they did not get on with the leaseholders they represented.
The survey asks a number of questions that do not appear in the report such as who arranges the insurance and who takes the commission. As with any piece of work of this type it becomes difficult to know if the reviewer has partially selected their findings without seeing all the results for each question.
One of the few bright spots seemed to be that 55% of leaseholders believed they knew where they needed to go for information and help. However, the earlier CMA survey suggested the opposite was the case and that less than half the respondents had a view on where to turn. The most common source if information was from the managing agent or property manager and the second most common was not in fact any of the official bodies but other leaseholders. According to the CMA study just 4% of respondents had contacted LEASE.
The LEASE/Brady survey shows that 52% of leaseholders were “confident” they know their rights and responsibilities at the point of purchase. LKP suggests both the question and the findings on this point may be debatable.
“I knew my rights and responsibilities when I bought the lease” was the question asked. 52% ticking the “somewhat agree” or “strongly agree” box. And yet 89% answered “yes” to the only other question on this point which asked whether they would like to know more about their rights and responsibilities.
The apparent conflict between these two answers suggests a potential error in the way the questions have been asked.
We would argue that almost nobody other than the lawyers who operate in this field should be “confident” that they properly understood their rights and responsibilities at the point of purchasing a lease. Perhaps at the point of purchase people just thought they know their rights and responsibilities and then realised later they did not? Or maybe they believed their professional surveyor and solicitor knew what they were doing and have since found out they did not?
Despite supposedly knowing their rights at the point of purchase the survey reports that 48% of leaseholders nonetheless accept that their lack of knowledge is a real barrier to changing agents.
The cynic might argue the general summary of the findings of this survey are a very useful message to government to stay steady as she goes, no need to make changes in the law. As ever, the leaseholders and the managing agents are the ones at fault.
Why these issues matter is not only because it impacts the lives of millions of people but it now appears to impact the value of your home. Last week’s Financial Times report indicates that in the past decade the value of houses have gone up 40% more than the value of flats. With some of our major developers still selling short 125 year leases with high ground rents, and others looking to sell houses as leasehold, this pricing gap is inevitably likely to grow. If we already have nearly 60% regretting buying their lease what will that figure be in 10 years’ time?
LKP is of the view that the LEASE/Brady survey and its findings have a number of serious flaws. LEASE and Brady’s should perhaps have taken the time to consult with the sector and to have considered the CMA survey findings produced by Ipsos/MORI in more detail.
The findings of the LEASE/Brady survey do not seem robust or broad enough to help guide government policy. Empty claims at the end of the report talking about raising standards through greater transparency will be recognised by many as the sort of propaganda which has appeared year after year.
Hopefully the sector including leaseholder groups will now go forward to produce a broader and more useful piece of work.