The Mail on Sunday personal finance section went over the issue of leaseholders exercising right to manage and buying the freehold yesterday.
The article can be read here
It referenced the LEASE survey that found that 57 per cent of leaseholders regretted buying their property. This is a figure quite unprecedented in other jurisdictions where commonhold flat ownership is routine.
The MoS reported that 43 per cent of new build registrations last year were leasehold, compared with just 22 per cent in 1996.
LKP is responsible for changing the ludicrous official government figure of private leasehold flats of 2.5 million – which was unquestioned for years – to 4.1 million.
This is still a conservative estimate, and we believe leasehold properties have doubled since 1997.
The Conveyancing Association pointed out last week that leasehold transactions across all UK regions have risen to 260,000 in 2015 up from 220,000 in 2011 (Source: Land Registry). It also said 57% of all transactions in Greater London and 40% in the North West are for leasehold properties. [The London figure seems low to LKP: in central London 96 per cent of new property is leasehold.)
MoS pointed out that freeholders receive no compensation if leaseholders opt for right to manage.
But – in theory – they have suffered no loss whatsoever. The only legitimate incomes that come with freeholds are ground rent, lease extensions and the development potential of a site.
Freeholders are not supposed to be profiting from the management of the site or dubious commissions for various services.
MoS also references a firm of solicitors charging £500 for RTM. That might be the case for a house in central London converted into three flats.
LKP is routinely advising blocks on right to manage and a block of 60 flats should achieve this for £2,000 – £4,000.
If the issue is heading for tribunal, it will cost more, and here it is essential that RTM directors have the option of hitting the breaks and starting another application if there are any flaws of significant changes (ie leaseholders have moved out or even died).
As we have pointed out many times, there is a cottage industry of lawyers employed in stuffing RTM, taking the most trivial defects in the application to the property tribunal.
Unfortunately, the property tribunal, especially in London, has far too accommodating to this nonsense.
MPs and regulators should be asking: why, if all the income streams are legitimate, are freeholders resisting right to manage?
In our experience, only the more enthusiastic monetisers resist RTM to the last.
MoS also considers buying the freehold.
It references a block of seven flats in Pimlico, central London, with 999 year leases which bought the freehold for £60,000.
At such a knockdown price, it is astonishing the leaseholders had not bought it years ago.
After all, if there is an attic space to convert into a £2 million penthouse, the leaseholders might as well do that themselves and have a service charge holiday for life, rather than give the benefit to some scamp who likely as not picked up the freehold with a bundle of others at auction.
Related posts:
Rich should buy freeholds and cream commissions, says Sunday Times
LKP’s essential leasehold guide in The Sunday Times … feel free to add
The Right To Manage Federation chalks up its 28th leasehold RTM success in central London … as it fights epic Plymouth RTM duel in the Land Tribunal
Mail on Sunday today: Leasehold is becoming an election issue
Change your doubling ground rents before the John Lewis Partnerships Pension Trust sells the freehold, urges LKP
Carlisle flat owners are living in the wrong flats
“MPs and regulators should be asking: why, if all the income streams are legitimate, are freeholders resisting right to manage?” Why indeed?
“…why, if all the income streams are legitimate,are freeholders resisting right to manage?”
The lure of grossly inflated buildings insurance premiums, sub-letting and other “fees”., are but an example of the many exploitative opportunities available to unscrupulous freeholders. and which are continually highlighted by LKP in these columns.
However, the question posed by Leaseholder points us in the direction of something far more serious.
Firstly, let us differentiate between legitimate freeholders [the many] and the small band of unscrupulous freeholders [the few]. who we all know and whose more often criminal activities must be exposed.
The business of the Sale & Purchase [S&P] of existing portfolios of Freehold Titles, when they are nearing the 80 year and declining mark. under the leases, and in a manner where qualifying long leaseholders [LTA87/HA96] discover after the event that a new unrelated and hitherto unheard of purchaser has been registered as freeholder, is a national disgrace and an abuse that must be urgently exposed. and put to rights [leaseholder rights]
I say, “in a manner” as the documents exist in the public domain to show that long leaseholders are quite literally being routinely robbed of their rights under part 1 of the LTA 1987 tp purchase the freehold title to their own premises.
As soon as affected leaseholders wake up and taste the coffee they more often move to forming an RTM company, and the unscrupulous few have now discovered it is more difficult to harass and terrorise an RTM company than the unsuspecting isolated leaseholder.
Better to break the RTM at the start, no doubt, and pave the way for those lucrative “informal” lease extensions that should then ensue..
Bring on the Law Commission.
Alec great post, you posted;
“Firstly, let us differentiate between legitimate freeholders [the many] and the small band of unscrupulous freeholders [the few]. who we all know and whose more often criminal activities must be exposed”.
Chas Asks:
We were offered our freehold in 2014/15 by our then freeholder Mercian Holdings under S5 Right of First Refusal only 7 residents showed any interest?
Our Landlord is a dormant non-trading Peverel Company, “Meridian Retirement Housing Services Ltd”. I mention this because we are in a situation where the Freeholder employs a Landlord who employs a Managing Agent.
We pay our Ground Rent to the Landlord, Meridian Retirement. As a dormant non-trading company, how is the Ground Rent passed on to the Freeholder?
This trio of Freeholder, Landlord, Managing Agent, causes us so many problems as we found out last year Meridian Retirement has a 125 year lease. We had a 99 year lease. The Freeholder seems to have no control over the Landlord, Meridian Retirement, who is now attempting to sell the empty Residential House Managers Flat.?
Unfortunately there used to be frequent apathy among leaseholders when they got the right of first refusal. Shrewd freeholders know how to by pass it anyway, so that’s another area that needs new, (and clear) legislation. Don’t get me started on ‘dormant ‘ companies, dodgy freeholders and their entourage of inept managing agents and corrupt solicitors. It makes the Panama papers, look like minor cases of petty theft. If any investigative journalists are interested…
My freeholder is Proxima GR Properties. Twice a year a demand for Ground Rent is issued by Estates & Management on behalf of Proxima with instructions to make payments in the name of Estates & Management.
As an “experiment” i made my payment cheque endorsed,in the name of Proxima GR Properties only.
This was accepted by E&M and my account was duly credited.
Because Proxima GR Properties are registered as a trading company, there is no particular significance in this case.
However, having established that you can make a payment direct to your freeholder ,This does have implications if your freeholder is a dormant company.
If they accept your payment, they must re-register as an active company, which means they now have to have audited accounts.
At the very least this will prove very expensive for the freeholders.
Do they have properly audited accounts, or things like ‘total exemption small’ and other incomprehensible rules?
Chas: At least you were issued with a s5 offer notice.
It seems to me that you are paying Ground Rent to a wholly owned in-house subsidiary of the Freeholder Meridian, who simply banks. it. This is similar to ourselves where we pay GR to a freeholder owned subsidiary [masquerading as an “agent”], and operating from the same address [and same desk!] who then simply banks it. It is very revealing when you find such an “agent” seeking to hide behind the Laws of Agency [i.e. acting without responsibility]
Of prime concern and a scandal is the deliberate failure of a small group of unscrupulous freeholders to issue a s5 offer notice to qualifying long leaseholders in the first place. The amendments to the Housing Act 1996 introduced criminal sanctions in order to close the loophole to which Leaseholder refers, however, this band, aided and abetted by conniving solicitors/counsel, simply circumnavigate the legislation by ignoring it completely..
Thereby, qualifying long leaseholders only discover after completion of the S & P transaction[s] the existence of a new hitherto unheard of freeholder.
The normal procedure governing transfer of freehold title to an associated company. involves:
1. The seller creates the associated company.
2. The seller transfers the land to the associated company., and
3. under the amendments to the HA96 [subj.assc. 2 yrs], the seller then transfers the shares in the associated company to an unrelated purchaser..
However, thieves can and do fall out, and by a varying the above, the seller enters into an agreement with the unrelated purchaser to transfer
1. the shares in the associated company to the purchaser and,
2. transfer the land to the associated company only on a concurrent and/or separate agreement with the unrelated purchaser that the transfer of the land is conditional on the purchase of the shares.
This means that at the actual time of the transfer of the land, the seller holds the shares in the associated company as a fiduciary agent for the unrelated purchaser and accordingly the transfer is not to an associated company.
And by this method, qualifying long leaseholders are criminally denied their right of first refusal.
Our own documentary file on this, including full copies of the sale and purchase agreements [obtained by Court order], will now be submitted to the Law Commission.