[pro_ad_display_adzone id=”11520″ popup=”1″ delay=”7″ exit_popup=”1″ popup_opacity=”0.3″]It is not just Blythe Court … two London leasehold owners also faced demands of thousands of pounds in unexpected ground rents after purchasing flats in different parts of the capital.
The leaseholders came forward following the publication last month by the Leasehold Knowledge Partnership of the issues at Blythe Court.
Both bought flats in sites where the freeholds are owned by companies controlled by Martin Paine and / or his wife [Margaret] Anne Kirmond. Deeds of variation had been introduced to the leases that meant thousands of pounds a year were owed in inflated ground rents.
Like the flat owners at Blythe Court, the London flat owners took legal action against their conveyancing solicitors to extricate themselves.
This is a course of action that is encouraged by Martin Paine, as correspondence at Blythe Court demonstrates.
Both the London leaseholders decline to be named at this point, but LKP has discussed the issues with them and their solicitors.
One of the London leaseholders bought his flat in Nunhead, in south-east London in August 2011. The site is two converted flats, with the freehold owned by Chamber Estates, whose directors are Martin Paine and F.t.z. Limited, of which Mr Paine is the sole director.
The site is managed by Mr Paine’s Circle Residential Management Limited.
Preliminary research in the Land Registry suggests that Mercia Investment Properties, whose directors are Martin Paine and F.t.z. Limited, own the freeholds of 73 properties. F.t.z. Limited may own a further 19.
As part of the purchase, the London buyer’s conveyancing solicitor sort to extend and vary the lease.
At some point in the negotiation, Mr Paine inserted a ground rent review clause that was not picked up by the conveyancing solicitor before the document was signed and contracts were exchanged.
“The clause effectively increased the ground rent from £300 per annum to the amount of £6,932 per annum, something I only discovered when Martin Paine sent me a demand for this amount later in 2011,” says the lease owner.
“Not being willing or able to pay this amount I had to make a professional negligence claim against the solicitors, an outcome Martin Paine had clearly designed and which he actively encouraged me to pursue
“The whole matter was finally settled in June 2014 at huge cost and with Martin Paine being paid a significant sum to agree to revert the ground rent to the original amount.
“As you can imagine this was extremely stressful for me personally.
“I wouldn’t wish this experience on anyone and I feel for the other people who have suffered but I am also grateful that this has been brought to light by LKP.
“I kind of regret I didn’t do anything to escalate this at the time, but as I’m sure you can imagine a situation like that can make you feel rather helpless and that the odds are stacked against you.
“At the time I wasn’t aware of any suitable recourse, so in that sense I’m glad to have come across your articles and website and I have nothing but admiration for you bringing the issues of Blythe Court to light.”
The other owner signed confidentiality agreements as part of the settlement and, as a result, does not wish to be named. However, LKP has discussed the case with the both the conveyancing solicitors, and the litigation solicitors who had to sue them.
Only after a substantial claim was made against the conveyancing solicitors’ professional indemnity insurers was the matter concluded.
The leasehold buyer did issue the following statement to LKP:
“My wife and I bought a flat in London in 2010 on the assumption (confirmed by our conveyancing solicitors) that the ground rent was £150 per year.
“The previous leaseholders had negotiated an informal lease extension to 90+ years with Mercia Investment Properties, via their agent Circle Residential Management (both of whom, of course, are in effect Mr and Mrs Paine).
“These previous leaseholders then sold on to us and, once we started to have the problems outlined below after the sale, refused to enter into any further correspondence with us.
“The deed of variation extending the lease included onerous ground rent clauses to which our conveyancing solicitors did not alert us.
“These included a doubling clause dating back to the start of the original lease in the 1970s, and a minimum ground rent provision linking the ground rent to the “rentable value” of the property.
“We received a demand for ground rent, several months after buying the flat, for c. £8,000.
“When we queried this with our conveyancing solicitors, it became apparent that they had not read the relevant portions of the lease extension properly, nor even forwarded this document to us before we completed our purchase of the flat (the terms of the lease extension would have led to a ground rent of over £600,000 before the expiry of the term).
“We then began legal action against their firm for professional negligence, with the aid of new solicitors.”
Martin Paine was contacted for a comment before publication of this article.
Well well, so it seems that this is a common practice for Mr Paine and his companies.
If I had a few minutes spare, I would buy the land registry data for all of Mr Paines’ property portfolio and write to the leaseholders and ask them if they too have fallen foul of this practice and if so, I would recommend they all get together and speak to a solicitor as a group and ask what can be done to rectify this issue.
There would be quite a few good solicitors practices who would love to take this case on I am sure on a no win no fee basis!
This sounds to be a very cleverly thought out racket, Is it legal and does Mr Paine have a solicitor who coludes with him..
I wonder if Mercia Investment Properties will be applying for ARMA Q, and how many years it would take them to consider his application.
No surprises there. If there is a good loophole in the system, one may as well make the most of it. The only solution is for the leasehold system to undergo radical reform, finally eliminating “opportunities’ for the freeholder. The freeholder (and the entourage of managing agents, solicitors, accountants etc) can do this full time, since it’s their job. Leaseholders have limited resources and time to spend on this, since most of us are not “professional leaseholders’ we just happened to buy a flat and we need a fair system to protect us.
The elephant in the room here – which nobody has identified – is the failure of the solicitors to pick up the Deeds of Variation.
If I was entering into a contract of any kind and employing a lawyer to deal with this and to advise/protect my interests I would be extremely angry if they failed to pick up changes which cost me thousands of pounds.
What is the point of employing them if they fail in their basic duty to their client?
Surely this is an issue for the Law Society?
The issue of insurance has been a key point in these cases. A number of conveyancing solicitors have had to make major claims on their insurance in one case we understand over £100,000 was paid out.
As we have mentioned the problem is the wording of the critical words in the deed of variation are obscure which is why it keeps being missed.
The issue is also with the Law Society who will be warning their members to look out for this sort of clause.
This seems a to be a reply by someone with a vested interest.
Of course the real issue here is not the solicitors but the inclusion of clauses in Leases which are manifestly wrong. Why are they being included in the first place.
Lesson! Never skimp on the cost of a solicitor when purchasing a property, and never be tempted by the “helpful” suggestion of the vendor to use their solicitor.
Most leases are relatively straightforward. In these cases they appear to have been drawn up in a way that disguises their true intent.. Fortunately, if a solicitor fails to spot this, they are indemnified against any losses caused to the purchaser.