Martin Paine, embedded management companies, LKP … all raised in Queen’s speech debate

These issues were raised by Sir Peter Bottomley in the Queen’s Speech debate yesterday

Let me turn to other issues that come up for Back Benchers. I pick up causes, one of which came about as a result of an incident in my constituency regarding leasehold, when some elderly, frail and poor people found themselves paying for something they should not have paid for. They tried to go to the lower-level property tribunal, but found that those representing the freeholders managed to spin the issue between different courts, keeping the case away from low-cost dispute resolution. With the help of the Bar pro bono unit, it took one barrister one day to cut through all that, and my elderly people were paid a rebate of £70,000 without further court action.

That case led me to meet people in Leasehold Knowledge Partnership, now a charity, which was created, and is mainly supported and led, by Martin Boyd and Sebastian O’Kelly, who I think give more advice to more leaseholders in trouble than most people who do the same thing professionally—and they do it without pay. What they have achieved is remarkable.

We need to respond by making sure that Parliament recognises the 6 million residential leaseholders in this country, who can often find themselves exploited. Why is it that people who buy a retirement flat find that when they try to sell it, or their executors do so after they have died, it is worth so much less? There is something wrong with the system. As it happens, the Chancellor loses out because lower property values mean that less is obtained through stamp duty when new buyers come in.

Another problem is caused by court-created law. I cannot explain this issue off the cuff because it goes beyond me, but I can refer to a recent upper tribunal lands chamber decision, whose neutral citation number for 2016 is UKUT 0223 (LC), case Nos. LRA 20, 21 and 35/2015. The case was between the trustees of the Sloane Stanley estate and Adrian Howard Mundy; between the trustees of the Sloane Stanley estate and Arnaud Lagesse; and between Sophie Nathalie Jeanne Aaron and the Wellcome Trust Ltd. A decision of 160-odd clauses was reached about the value that applies when people are trying to get a leasehold extension.

We all know that George Thomas—Lord Tonypandy—a former Speaker, came to public notice when he fought for leasehold rights for south Wales residents. We now need to do the same thing again. As I understand it, the judgment has transformed the valuations of expiring leases. No consideration was undertaken in Parliament, yet this upturns what was believed to be the way to approach these valuations for the last 10 years, so it is time that we got Departments—whether that is the Ministry of Justice or the Department for Communities and Local Government—to come together and, perhaps after putting it before a Select Committee first, assess whether Parliament needs to take formal action on this issue. Otherwise, we are letting a judgment go forward regarding three cases that have been argued by lawyers at great length in a way that few of us would understand. Indeed, I challenge most people to look through the document and find the actual judgment—I tried to do so in 10 minutes but could not; it took me 20 minutes. This is wrong.

When it comes to leasehold, we need to say what is right, what is wrong and what we can do about it. Martin Paine has interests in leasehold at a different scale—not the high-value area. That relates to the Wellcome Trust buying the Henry Smith properties and turning them into an investment trust. The Wellcome trustees should start looking to see whether what they have done is fully justifiable. I am not making an accusation, but asking for their interest.

Returning to the Martin Paine issue, it applies where a young person or couple buy a low-valued flat and have the lease checked by their lawyers, but later on discover that Martin Paine has informally rewritten the terms of the lease—extending it but, for example, doubling the ground rent every 10 years. That situation might be difficult in itself, but the greatest difficulty comes from the way the lease is written, as lawyers do not normally spot that the ground rent has been doubled back to the time when the lease was originally granted.

Let us say the lease was originally granted in 1959. The first ground rent demand could be not the expected £15 but, say, £2,000. That would mean that the rent would increase to £4,000 in 10 years’ time, and then later to £8,000, £16,000 and so on, so the flat becomes worthless. I understand that if enough fuss is made or enough publicity issued, Martin Paine will offer to buy the property back. He sometimes appears to remarket it without drawing the attention of the potential auctioneers or the potential purchasers of what those buying it will be letting themselves in for.

It is not for me to judge whether that is criminal, but doing this on an organised basis certainly demands attention. I ask the Competition and Markets Authority, the Office of Fair Trading or the police to check this and stop it. I warn the solicitors that their indemnity societies mean that they should be looking to see why this is going on.

I could provide a number of other examples that I would not suggest are necessarily criminal, but they are certainly odd. I mention embedded management companies, and I would ask some of the major developers to check whether there are clauses in their leasehold agreements that make clear the right of leaseholders to come together to buy their properties or to take over the management company. They need to make sure they are effective, and if they are defective, they should be made to put it right at their own cost. We should not ask the victims to pay all the costs and take all the risks—especially of going to court—to get things put right.

Related posts:

Martin Paine demanded ground rents of thousands from two London leaseholders LKP meets Roger Southam and Taylor Wimpey over embedded management companies Southam sells Chainbow to Savills, so who owns the embedded management companies now? Should the chairman of the Leasehold Advisory Service be the owner of embedded management companies? Spreading Paine: the freeholds owned by Martin Paine and his wife (Margaret) Anne Kirmond