The £1.8 billion residential freehold fund manager Long Harbour has rebuked Mark Hawthorn, of Landmark Investments, for an email that fell “below the professional standards upheld and expected by Long Harbour”.
In correspondence copied to Communities Secretary Robert Jenrick and to local MP and Labour leader contender Rebecca Long-Bailey, LKP raised the issue of two sisters, who are buy-to-let investors, being charged £30,000 to vary the doubling ground rent leases on their three properties.
Owner-occupiers, on the other hand, can vary their leases from doubling ground rents to ones aligned with RPI for free.
The sisters bought the flats in 2006 at The Quay in Ordsall Lane, Salford, which have 999-year leases and ground rents that double every ten years, starting at £75.
As a result, lenders won’t lend on the properties and the now £150 a year ground rents also exceed 0.1 per cent of each flat’s value, a further disqualification to most lenders.
Guernsey-based Abacus Land 4, a residential freehold-owning entity of the Long Harbour ground rent fund, owns the headlease but Landmark Investments manages the asset and has been communicating with leaseholders.
As a result, LKP wrote to both Will Astor, CEO of Long Harbour, and Mr Hawthorn, asking why these charges applied as the freeholders’ government-backed “Pledge to Leaseholders” undertook to vary toxic doubling ground rent leases.
Both Long Harbour and Landmark Investments are signatories:
Public pledge for leaseholders
For existing leaseholders: 1. Identify leases within our portfolio which contain a clause whereby ground rent doubles more frequently than every 20 years, contact leaseholders to inform them, and offer to amend to one linked to RPI. 2.
LKP argued that the wider object was to remove these toxic leases from the property market so they are not dumped on someone else.
The Pledge includes these undertakings:
3. Assist any leaseholder who approaches us to request such a doubling clause be reviewed (or any other matter regarding their lease), even if they have not previously taken up an offer of variation.
4. Should a leaseholder with such a doubling clause approach us, we will offer to amend the clause to one linked to RPI.
In an immediate and intemperate response to Sebastian O’Kelly, LKP’s chief executive, Mr Hawthorn accused LKP of spreading “lies and and misinformation”. He copied the reply to the Secretary of State, Miss Long-Bailey and LKP’s MP patrons Sir Peter Bottomley, Justin Madders and Sir Ed Davey,
He further referenced that one of the sisters was wealthy and “looking to leverage any means to gain a financial advantage”.
The other had “a criminal record in connection with the death of an elderly lady”. This was a traffic accident involving a cyclist in 2012.
“These are not the innocent consumers as you would have others believe,” Mr Hawthorn wrote.
LKP appealed to Long Harbour for a more considered response, without the need to reference extremely painful and unrelated issues.
It replied: “Thank you for bringing this case to our attention. The “unrelated matter” [the traffic accident and conviction] referred to in Mr Hawthorn’s email falls below the professional standards upheld and expected by Long Harbour.”
Long Harbour responded in further detail to Miss Long-Bailey, who before becoming an MP was a landlord and tenant solicitor:
“We remain fully committed to supporting leaseholders through the process of varying their lease if it contains a clause whereby the ground rent doubles more frequently than every 20 years (as set out in the leaseholders’ pledge).
“The cost of such variations will necessarily vary on a case by case basis and will take into account whether the leaseholder is a home owner or an investor themselves.
“As I am sure you will understand, it is important that we secure fair compensation for our pension fund investors but we remain committed to offering variations at a fair price in all cases (always significantly below what would be achieved through the statutory route) and, in particular, keeping the cost at nil for home owners.”
Long Harbour offered to discuss the matter further with Miss Long-Bailey.
The sisters have thanked Long Harbour for intervening, as they are no longer “comfortable” dealing with Mr Hawthorn.
But they argue that the investment flats “have hardly been stellar performers, owing in large part to the doubling ground rents” and as a result there was “not much cause to treat investor leaseholders and owner-occupiers differently”.
They expressed surprise at Long Harbour referencing “fair compensation for our pension fund investors” … “because the ultimate beneficial ownership of Abacus Land 4 Limited in Guernsey is hidden and no one other than yourselves know whether they are a pension fund or not”.
Furthermore, they added:
“It has been argued that a lease with ground rents revised every 10 years in line with RPI throughout the lease term of 999 years is actually a better investment prospect for the freehold owner than one doubling on five occasions only.
“Miss Long-Bailey, as a former landlord and tenant solicitor, may well be of the same mind.”
Related posts:
Tory MP Stephen McPartland shames Long Harbour / Adriatic Land into dropping doubling ground rent leases
Gleeson tells ground rent speculator Landmark Investments to remove testimonial
Freehold for Elan Homes leasehold house doubles in price to £15,900 four months after being sold to Landmark Investments
Rebecca Long-Bailey asks Will Astor why Long Harbour is demanding £10,000 to vary toxic doubling ground rent leases
Press reports how freehold doubled in price to £15,900 after being sold to Landmark Investments
Northern mayors and MPs to join cladding demo outside Parliament on February 25
Setting aside how they can possibly be in a position to judge ability to pay and on the face of it, this looks like a weasely attempt to extract cash (apologies in advance for the insult to weasels) … if Long Harbour is looking for ‘fair compensation’ by calculating the cost of a lease variation on a case by case basis, based on a perceived ability to pay, rather than on an open market valuation, and see this as justifying a significant extra premium for leaseholders they judge to be ‘wealthy’ does this mean that leaseholders who can show they are not wealthy, e.g. with little or no savings, can expect a variation for a nominal fee? Or is that too fair?
And whether or not we believe the assertion that they are seeking to maximise income for pension fund investors (for their own pension fund possibly given the lack of transparency?) I would suggest that pension funds should not be investing in ground rents – certainly those funds serving everyday folk are simply ‘robbing Peter to pay Paul’ and should get themselves out of this racket and invest elsewhere, ideally somwhere where they can add value by investing in areas that will create wealth, rather than drain it.
So if the ultimate owners of Abacus Land (based in Guernsey) are unknown, not only would we not know if pension funds were investors, we would not know how many criminal acts the owners may have participated in? We would not know if funds are being laundered? We would not know if funds were supporting terrorist activity? I am not suggesting this is what is happening, simply that we have no way of knowing if we do not know the true identity of the freeholder? And remember, even the director of Landmark uses different names?