By Sebastian O’Kelly
It was good to be able to use a small Q&A article in yesterday’s Sunday Times to offer a mini guide for leaseholders.
This is the sort of thing the Leasehold Advisory Service should be putting out, if it were not in thrall to the commercialisers in the sector.
Indeed, it was an opportunity to remind the wider public that this organisation has been rebuked by ministers and told to do its job properly.
Until its monopoly position as the taxpayer funded “support” service is ended, it is simply an impediment to reform.
Did it alert government to doubling ground rents? No. To the mushrooming of leasehold houses? No. Is it responsible for the civil service and Law Commission examining this sector? Not to the slightest degree.
All the reforms currently being considered are despite the Leasehold Advisory Service, not because of it.
On the other hand, has it hosted seminars advising freeholders how they can scam leaseholders with insurance commissions of 50 per cent? Yup.
Has it honed up the skills of freehold speculators such as Martin Paine – who lands ordinary families with ground rents of £8,000 a year? Yup, a second time.
Is it keeping its fingers’ crossed hoping that the current wave of leasehold reform fizzles out? Almost certainly.
And so it goes on …
Sunday Times article below (click image to expand).
Please feel free to add other points in ‘comments’:
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Sebastian,
How right you are regarding the sort of thing the Leasehold Advisory Service (LEASE) should be putting,
How have they been allowed to continue now they have been outed as Not Fit For Purpose and as you say rebuked by Ministers. Telling them to do the right thing after so many years is a waste of time, they should be replaced by LKP..
As a monopolistic organisation, Tax Payer Funded they should be shut down and allow Leasehold Professionals to provide the assistants.
Funny story. Our original freeholder – also developer – not once but twice offered all flats chance to buy freehold. Leases were then over 80 years so cost light. Numerous meetings revealed owners were appalled at notion any of them should have to become company directors.
Freehold went to auction and owners refused RFR offer for same outrageous suggestion.
Freehold sold for 2% of total value.
Now all owners are also outraged at heavy loss in asset value and cost to extend.
Still no sign of willingness to volunteer even to keep so far successful rtmco going. RTM likely therefore to die too as I would like a life.
No law can prevent collective stupidity. Many still think the “landlord’ pays bills. Far as I can tell, nobody reads any media on subject.
Fools and money easily parted.
All these folks apparently bought homes oblivious then and still to context.
After recording that LEASE chair Southam had made a complaint about 2 of the co-Chairs of the APPG and about LKP the July 2017 LEASE board minutes go on to record this wonderful PR plan
“In future, should BBC programmes, such as You and Yours, air a piece on leasehold but fail to contact LEASE then the Chief Executive should contact them to explain that we are a specialist, and publicly funded body, who would like the opportunity to let listeners know that there is free advice for them”.
I can empathise with your position and feelings having experienced similar obtuse behaviour in a loosely comparable situation. I wish you the very best and I expect that you know what the obvious solution is to the problems.
Only two things are infinite, the universe and human stupidity, and I’m not sure about the former. Albert Einstein
I would have to agree with Paddy, the biggest problem with leasehold is the apathy of the majority of leaseholders.
LKP mentions Resident Management Companies but fails to mention that the running of such companies would come under the Companies Act 2006.
Leaseholders would therefore need to understand their obligations not only under the Articles of Association for the company but also under CA2006 (or any previous version) if considering becoming a Director.
They would become double-hatted if the lease is tripartite. They would have rights as leaseholders under L&TA 1985 but should also have rights as shareholders under the companies AoA or CA2006.
I do not see that the article goes far enough because the flat I purchased in 2010 has a tripartite lease, there is an RMC present, however it fails to function for the benefit of all shareholders. Problems that can easily arise is the aforementioned apathy of leaseholders (shareholders) which is again multiplied when the development is over 50% BTL and the occupants of the flats are not the owners,
My main priority now, after studying the lease for Ground Rent increases throughout the life of the lease, would be to find out how many absent leaseholders there are (BTL) and ensure that the RMC acts in accordance with it’s AoA., these can now be obtained free of charge from Companies House and I would also ask to see the minutes of previous AGMs.
When I purchased my flat in 2010 I knew none of this and I did not receive the RMC’s AoA, but then again at the time I did not know they existed!
RTM accounts lodged at companies house often show no information at all
As the cash received from lessees is money held in trust for them the company is not the beneficial owner so the company quite correctly records nil assets
I would have thought the legislation should be changed so that an RTM company must file a director report which would set out the monies it received in trust from lessees and show how it is expended and how much is in reserve- even if the RTM appoint a third party to manage it for them
Thank you, I was referring to the Articles of Association of the company that will set out how it is run, how directors are appointed, minimum required, etc.
As you correctly state most file dormant accounts that will provide nil information for the buyer. I am not in favour of this unless the formed company is for a small development/house where all have an input into the running and maybe even all are Directors.
As for legislation requiring an RTM company to file a Directors’ Report, I took this to Ombudsman Services Property as I had not received the statutory accounts including the Directors’ Report as a member of our RMC and requests under section 423 CA2006 were continually ignored by the Director and the MA (acting as company secretary). They found that I was entitled to receive the statutory accounts but not to a Directors’ Report because it was not filed at CH.
,
Funny story or two… I insisted our RTMC always issues a directors report to all flats whether in co or not.
All flats get all data and invited to AGM. All rtmco members get proxy voting.
Some folks attend an AGM, agree the budget, and go off and dont pay.
No agent used so far – 4 and counting – has ever bothered to issue statements of balances, and the present lot made it impossible for the directors to see any financials. Those seen before this cunning change were always wrong. If you don’t know accounts you’d never keep them agent types in order.
Me, I’ve resigned myself to fact an RTMC can’t work unless all agents are sacked, and that would be too much work for this old fool now.
Bit much mind, legally requiring the “Dad’s Army” directors to file annual reports when their agents have no legal obligations to their client that I can see.
Ask questions and they sulk or threaten to resign.
There’s more, but I need my medication now.
LEASE should be advising the leaseholders NOT the freeholders. Its a disgrace.
But the legal firms in the country are not doing their job either. The Council of Mortgage Lenders in its Lenders Handbook requests their instructing solicitors to consider and if necessary report to them any likely (GR) increases of potential concern to them. And a conveyancing solicitor acting with the care and skill expected of them should report to their purchaser client and the lender any passages in the lease providing for ground rent increases. This would have warded off any onerous terms in the first instance.
@Paddy Unfortunately, many in retirement housing just want a peaceful life and aren’t in a state of mind or health to rock the boat. They do not want the burden of the administration of the RTM. The developers and freeholder know this and it plays into their hands. This is where protection for these residents and regulation of the managing agents should be held to account. To challenge charges means a LVT often beset with punitive charges for the leaseholder in costs.
There is no recourse for the residents who have bought in at high sales prices to find the market now worth £100k less then when they paid. If your left with £75k going into care, after two years in a reputable nursing home the money runs out. Who is left to foot the bill? The local Authirity or ultimately the local council tax payer. Whilst the developer has pocketed the £100k and long gone from the scene.
So many leaseholders don’t understand Leasehold as it has been so poorly and deliberately badly explained to them by all those who are supposed to help them buy their property.
Many still believe that a leaseholder owns the building but not the land – we don’t own anything other than the right to live in the building for the term of the lease.
A leaseholder is a tenant. I’m one of the 57% that regret my purchase. I love my home but am saddled with doubling ground rent and fighting a feudal system where so many people with interests have money, power and influence that making change happen is nigh on impossible. Isn’t it about time we stopped using terms like “home ownership” and “help to buy” and “buy” for Leasehold properties???
It is scandalous that LEASE has and continues to do so little for leaseholders, whereas LKP, the APPG on Leasehold and commonhold Reform and the National Leasehold Campaign keep the leasehold scandal in the public eye with such limited resources.
It’s thanks to the dedication of people who understand how outdated and abusive this system is that we have finally got some traction for change.
Government now has to listen to leaseholders and do the right thing, which will be difficult in the face of expensive lobbying from those that make money at our expense.
LEASE needs a complete makeover with new blood and if it was really in the side of leaseholders it would be working closely with LKP and NLC to fight to get Leasehold abolished.
This is only too true.
The Leasehold Advisory Service is a disgrace that impedes reform of this sector.
Admin, you campaigned to end the chairmanship of Roger Southam, and eventually succeeded. It appear that you are now openly campaigning to end LEASE – “reform”, in the context of leasehold, is a word I am uneasy with, for that reason I do not say reform LEASE.. May your efforts be as successful as your efforts to unseat dear Roger.
How does the Leasehold Advisory Service impede the reform of the sector?
Over the past 3 years I have received informative information from those at LAS, at the same time you have continued to criticise LAS and even lobbied for leaseholders not to take part in the survey they carried out. I was one of the leaseholders persuaded not to take part.
I am aware of the great work you at LKP have carried out but at the same time you ignore the problems that leaseholders, who belong to RMC and RTM developments continue to face. If these developments are leaseholder managed then there may be the satisfaction you have spoken about, but where the management of the development is passed to a Managing Agent this sadly is not the case.
Leasehold reform will only happen with unity not continued division.
N J Shingler,
You should get out more.
I cant agree. The vast majority of clients of LEASE are leaseholders. I dont agree that the system is necessarily unfair. The leaseholder’s contribution to marriage value is 50% however his (or her) ownership might have only been short term whereas the landlord has often been involved in assisting the leaseholders for decades. I know it makes good copy but LKP always paints the landlords to be dreadful demons and the leaseholders to be put upon; but it isnt always so. Many well run blocks are run by the leaseholders through their ownership of a management company and often the landlord will be generous with their help and advice to such a company
In the next instalment it would be good to warn prospective ‘buyers’ about mixed-use developments. Think having some restaurants, bars, shops or a hotel in your building is a good idea? Think again as it may take up over 25% of your building meaning you have no Right to Manage (RTM) or opportunity to buy our your landlord (enfranchisement).
It would also be good to warn prospective buyers that if your landlord is a Housing Association the leaseholders will never have the right to manage.
HAs are unaccountable and should have their charity status removed.
HAs are now acting like private developers- collecting doubling ground rents and building homes sold off privately. Affordable homes are not really affordable at all.
Has LKP ever featured or warned of the problems of Ground Rent exceeding £250.00 per year outside of London and therefore becoming an Assured Shorthold Tenancy (AST) if you are a leaseholder.
The danger here is forfeiture of the lease, without the courts being able to grant relief if the arrears are paid off, which would be the usual outcome.
With reference to Paddy’s first post: EXACTLY the same happened where I live! I live in a leasehold flat, there are 4 blocks of 4 maisonette type flats, and about 25 years ago or so, the freeholder was agreeable to selling us the freehold. The cost per leaseholder would have been around £1500 including legal fees. However, 4 or 5 very vocal leaseholders did not want to buy the freehold, and said that they preferred having an “external” freeholder and managing company. Some of the reasons they gave were: they thought the freeholder/landlord fixed any structural problems or other problems with the blocks; they didn’t want to be co-directors of our own management company as they thought all that might be too complicated with filing, and also open to abuse by other neighbours (??!!) and also they feared falling out with neighbours over financial and maintenance matters. So we didn’t buy the freehold at that time. Then about 15 years ago, a leaseholder in one of the maisonettes tried again, and got the same response from the nay-sayers, so that was dropped. Result: now in 2018, those nay-sayers have either moved away or died. Most of our maisonettes have just under 50 years left on the lease, and will cost at least £40,000 to extend, so we really missed the boat there. So angry!