Today sees the launch of an 8 week Law Commission’s call for evidence as part of the reform of Commonhold legislation.
In much the same way the new Housing Minister has made clear the government is intending to introduce legislation to ensure all new ground rents are set to no more than a peppercorn the Law Commision sets out that that leasehold is now on “borrowed time”.
The Commision sets out that commonhold has a number of advantages over leasehold
- Ownership doesn’t run out – leases expire and as they do extending them can be costly.
- Standard rules and regulations apply – which should make conveyancing simpler and cheaper
- Having a stake in the wider building – instead of being managed by a landlord, owners run shared areas together.
The Law Commision is asking for views on
- What the difficulties in creating or converting to commonhold are
- What issues make commonhold unattractive to homeowners
- What issues make commonhold unattractive in the wider property sector
- You can read and respond to the 12 questions set out in the call for evidence here.
Related posts:
48 hours to go: LKP advice on responding to the Law Commission consultation on commonhold
Enfranchisement, commonhold and managing agent regulation are first up for the Law Commission
APPG members list – current membership 162
‘The time is right for commonhold,’ announces Law Commission. (Pity the government doesn’t agree …)
What does LKP think of ARMA reforms, we were asked. As the annual conference begins in London today, here we go …
Martin Paine sells on Blythe Court, where ground rents reach £8,000 a year
Is the legislation relating to new peppercorn ground rents to be retrospective?
Very heartened to read that Leasehold is on “ Borrowed time”.
I could be cynical and say yadda yadda but I choose not to be.
I honestly believe meaningful change is coming and the property spivs (bottom feeders) and their Venal Managing who have fed off innocent leaseholders for years will be much much poorer as a result.
This is the time for leaseholders to intensify ( c’mon NLC) their campaigning to ensure Freehold and it’s tentacles is crushed in body and spirit. NO dying embers left to smoulder………..
Edit.
“ Property spivs and their Venal, nefarious little helpers ( Managing Agent et al) who have fed off leaseholders for years will be much poorer as a result”.
In other words , I hope they are reduced to not having ‘ an a#se in their trousers’ ,which is probably how they began….
Commonhold would provide renewed vigour, fresh impetus and play into the hands of all those cowboy managing agents, their superior landlords, myriad cosy family and other partnerships, the ‘award-winning’ ambulance chasing lawyers not to mention the rump of sadly gullible do-gooders who provide an opportunity to circumvent whatever rules are put in place under the new system of Commonhold tenure.
Some of these are undeniably bent operators for whom the management of property in multiple ownership is an easy target and easy pickings for upstart entrepreneurs, some of whom have been mentioned in dispatches by LKP, one or two of whom have raised my ageing eyebrows as to their true nature and intent noting the growing links between LKP and some parliamentarians.
The benefits of Commonhold referred to above are:
– removes the need to renew the lease that leaseholders face in order to protect an otherwise diminishing, potentially unsaleable, asset.
– ‘standard’ rules …. to make conveyancing ‘simpler’.
– owners have a stake in the building; instead of being managed by landlords, owners ‘run shared areas together’. (How sweet, in theory!).
Of the three listed ‘benefits’ to leaseholders, the only TRUE and sustainable benefit is that ground rents and the need to renew leases is abolished, toute suite, forthwith.
The SECOND listed benefit suggests that standard rules will make conveyancing simpler. This is a nonsense. First off, ‘simplicity’ is a word that sings to the cowboys ‘easy money, chaps.’ Simplification is regulatory avoidance by another name.
Sadly, politicians love deregulation because it increases the flow of revenue into the state coffers. Conversely, tight regulation (as opposed to self-regulation) is funded by taxpayers and, thus, empties the State coffers.
But someone alway suffers as a result of deregulation and in this case it will be the leaseholders who, even with all the so-called ‘protection’ of the current rules (which may we’ll need revision) – ie statute, regulatory compliance (RICS’ Code of Practice on leasehold management) and guidance in the form of good practice from the accountancy bodies ACCA/ICAEW as to financial transparency – are now and will alway be vulnerable to the sector’s cowboy operators, regardless of tenure – freehold, commonhold or leasehold.
Talking of the RICS Code, I got the impression at the disciplinary hearing yesterday 21 Feb that whilst giving evidence Warwick Estates’ Karl Ardern missed a golden opportunity to touch his forelock with timely reference to that Code – a Code enshrined in law as the bible for ALL leasehold property managers whether or not members of RICS.
When invited by the Panel Chair to provide an update on his firm’s approach to regulatory compliance in the context of the accidental death of a leaseholder at a property managed by Warwick, Ardern waffled on repeatedly about RICS’ annual inspection of its member firms (which focuses solely on a firm’s accounting procedures), and further irrelevant waffle about the trade body ARMA having a part in the annual inspection.
It was a chance to show RICS and the six leaseholders who turned up for the hearing that Warwick Estates understands the one and Olympic regulatory mechanism that encompasses everything a property manager needs to know in order to operate effectively in the sector, especially in relation to health and safety matters.
Ardern, whose firm he told us proudly, manages some 30,000 leasehold units in England and Wales affecting the lives of many more individuals on some 600 estates, never once mentioned the RICS Code neither in the context of regulation of the sector he operates i nor in the context of the hearing as it related to public safety. It isn’t that firms don’t know about the Code, because they will use it as a stick to beat leaseholders in Court or elsewhere. They just don’t acknowledge let alone observe those numerous, substantial clauses that apply to property managers – most pertinently, to health and safety.
Let’s hope the RICS’ decision yesterday – details yet to be published with full press disclosure – will be a salutary warning to managing agents that regulation, whilst light of touch, exists.
Adhern, his boss Dr Stevens PhD (mathematics, they say) who swans around in a pale blue Ferrari – and indeed recently appointed super-boss Sir Rod Aldridge of CAPITA infamy whose Aldridge Capital Management Ltd now has a controlling interest in Warwick Estates’ Property Management umbrella company United Companies Ltd – should please take note of the disciplinary ruling and the Code.
The aim of ‘new rules’ is surely not to simplify conveyancing, for goodness sake? How ignorant is that of the seriousness of the underlying issues those present leasehold rules do address that are systematically ignored by property managers like Warwick Estates, with potentially gross outcomes?
The THIRD listed benefit is spurious and a non-starter. The idea that individual owners with a stake in the building can collectively ‘manage’ the common areas – and common interests which extend, of course, to all the same issues that relate to multiple occupancy including leasehold – may work in a small block in Spain. But …
But on the whole, as many flat owners have found, self-management of the many disparate and conflicting interests of multiple occupancy doesn’t work here in England without outside ‘professional’ assistance, currently taking the form of the commercial managing agents.
They are rules that give owners in multiple occupied buildings very good control over the way the buildings are managed including Right to Manage legislation. But, as LKP should be aware, RTM Is open to the type of abuse exercised by fly operators, as witnessed at the deeply troubling development at Century Wharf, Cardiff where leaseholders are trying to free themselves from the tyranny of rolling contracts for managing agents that circumvent the requirement in LT statute of consultation with leaseholders.
Under statute (‘the rules’) leaseholders are also entitled to buy their freeholds, something we did soon after buying our flats, thus ensuring we paid little or nothing for the actual cost of the freehold benefit. Two out of the seven blocks at Mill Quay enfranchised.
But what difference does it make that we are the freeholders as well as being the leaseholders? It hasn’t made any difference to the daily management or alleviated any of the problems commonly associated with the management of buildings in multiple ownership and occupancy. On a typically large estate, we still need the services of a commercial managing agent.
Don’t be deluded. By tweaking ‘the rules’, Commonhold won’t change the things that matter to owners of flats. What matters to us owners is being able to rely on the managing agent to do what they are paid to do, have signed up to do, and pay lip service to doing – which is to manage on the basis of being experienced professionals, in a competent, effective and transparent way, within the law, regulations and accepted good practice.
If managing agents were to behave in such an acceptable way, there would be no need to reinvent the rule book, renaming it Commonhold.
That’s what I’ll be saying to the Law Commission if I get the chance.
Dear Sue,
I believe commonhold and very strict regulation for managing agents is the only way forward.
Of course there will be squabbles between Leaseholders as unfortunately it is human nature. However, the leaseholders will still have to adhere to the terms of their individual occupational leases and if in true breach of the lease action should be taken. This is where Managing Agents that are Strictly Regulated come I to play,as they will be obliged to adhere to the lease terms, not try and play ‘ both ends against the middle” and turn leaseholders against each other and divide and rule – it’s an old trick used by scuzzy Managing Agents.
With respect the exsisting “rule book” needs to be chucked out and one that gives “ commonholders” rights as well as obligations put in its place.
That is what I shall be saying to the law commission, as well as urging them to remove that nuclear weapon used by unscrupulous Managing Agents. “ FORFEITURE “. And before anyone asks how do we get rid of naughty leaseholders “ Forced Sale”.
Well, Kim, I think you are hoist by your own petard and argue my case quite effectively when you say “leaseholders will still have to adhere to the terms of their individual occupational leases …” and, later you say “managing agents .. Strictly Regulated … obliged to adhere to the lease terms …”
Fuzzy logic, don’t you think, when you continue to refer to Leasehold whilst uptalking the benefits of Commonhold?
If you and Sebastian, aka Mr Commohold himself, are saying we need a system that takes the best from Commonhold and Leasehold, then I think you both have a point.
It’s similarly illogical to argue., elsewhere, that because Scotland enjoys a form of Commonhold, as do other countries, that we in England and Wales should necessarily do the same – in my view, that would amount to gesture politics; m]nor should we argue that Leasehold is feudal, outdated and ripe for replacement.
The English legal system adopted by many other legislatures is based on the English feudal system that in turn became common law. Leasehold law is no more outdated than the rest of our legal system, however arcane it may seem. It’s not the ‘what’ of tenure but the ‘how’ that it is implemented that’s at fault.
So why do we look with envy over the border. Well, do we? Or anywhere in the world for that matter? I would argue that it is not the system of tenure but the implementation we should address. This is recognised by the Commonhold & Leasehold Reform Act 2002.
A simple answer may be that England – London and the southern counties in particular – are a magnet, a honeypot, attracting property investors worldwide. Scotland is presently less attractive. If things there were to change, then I’m sure Scotland, with its different system of tenure, would suffer the same problems of single-mindedly aggressive property management that we face south of the border.
Nor is it the lack of regulations but the lack of enforcement that jeopardises owners of units in multiple occupancy.
Government is reluctant to regulate because it costs tax payers money. Self-regulation is therefore the order of the day. There is a system in place but it isn’t working.
The Royal Institution of Chartered Surveyors, RICS, has quasi-government responsibility enshrined in legal instruments approved by the Secretary of State. Its Service charge residential management Code and additional advice to landlords, leaseholders and agents, 3rd edition effective 1 June 2016, is readable, accessible and informative, providing a compendium of everything anyone involved in leasehold management and ownership needs to know. So you would abolish it whilst insisting that regulation is strictly necessary?
Why isn’t self-regulation working? Because of commercial conflicts of interest. RICS, like ARMA, uses fees collected from managing agents who are their members to do many good works. The good works should include regulating managing agents who are its members. They don’t.
In particular RICS with its responsibility to government for regulation, should promote its Code more widely and use its disciplinary powers to ensure that managing agents who are members are compliant, regardless of the fact that compliance, as it stands, is advisory not regulatory.
Yet RICS has been known to expel a member for failing to keep his/her Continuing Professional Development qualifications up to date. Perhaps compliance with the RICS Code should be upgraded to CPD status so any managing agent who is a RICS member who fails to show compliance with the Code should be expelled from membership?
When carrying out its annual inspection of member firms that are managing agents, RICS should extend its remit from purely financial concerns of whether or not the member firm is treating its client money account properly. It should carry out a rigorous examination for evidence of failure to comply with the service charge code.
As we learned at the disciplinary hearing, neither the firm (Warwick) nor the RICS Panel referred to the Code in any context at all, the most glaring omission being in the context of public safety, for which purpose this hearing was held.
Mr Jones who died when he fell from a poorly maintained lift in a block managed by Warwick would NOT be alive today if Commonhold was in place when he fell. The system of tenure would not have saved him. But observance by Warwick of the RICS Code of Practice almost certainly would.
I note that breaches of health & safety legislation resulting in a death are no bar to Firstport Retirement being accelerated To ARMA-Q, nor apparently are breaches of health & safety legislation resulting in a death a bar to Warwick Estates being ARMA-Q accredited?
If the actions of two of the biggest property management companies in the UK lead to two of their residents deaths and ARMA still believe them suitable for ARMA-Q accreditation, what is the point of ARMA?
Sue.
Commonhold and share of freehold works everywhere else in the world, Why not England and Wales. I don’t hear Scotland shouting to go back to leasehold.
You are proposing yet more tweeking of a failed system. Not good enough. Leasehold law is a dog’s dinner that is failing the people who pay -tenants.
Your reasonable soothing language in defence of leasehold is akin to hiding the wolf in sheep’s clothing. A softer version of the silver fox, Roger Southam but only does harm
Dear Sue.
I do not think my logic is fuzzy or that my pertard has been hoisted. you and I will will have to agree to disagree on this subject. Time will tell…..
Perhaps you and others gave
Excuse the typo.
Perhaps you are an expert on leasehold law, Joe.
I am a leaseholder and the system hasn’t failed me. The managing agents who swan around in their pale blue Ferrari’s aren’t interested in the laws and regulations that protect leaseholders. They have failed me.
Commonhold won’t fail me; but the same managing agents will fail me.
As to Roger Southam, I’ve had heated exchanges with him in days gone by long before he chaired LEASE. I’ve challenged his views over transparency of service charge accounts and lobbied the Law Society and others on that front.
I will continue to do so because, whilst the system might get a new suit of cloths, the players won’t change.
Abolition of Freehold and strict regulation of managing agents is the only true and just way forward.
Please sign the online petition started by Katie Kendrick of the NLC. If you have not already done so. We are almost there folks and we will be victorious in abolishing this Feudal system.
POWER TO THE ‘TENANTS!!’
Dear LKP, my fingers are worn to the bone replying to leasehold reform consultations.
I thought Mr Rainer QC nailed commonhold issues long ago?
What he said.
My view:
A Parliament that cynically required 100% vote AND the freeholder to agree was no accident. Collective smirks broke out when that legislation was passed I fear.
Will the Law Commission even read the average Clapham Omnibus user’s wittering? Not just another opportunity for industry coordinated excuses?
Can I crib orf LKP?
Philip Rainey, Sorry. I’m sure Mr Rainer is an erudite silk too whomsoever one is.
The law commission site says: “The Law Commission is asking flat owners, housebuilders, mortgage lenders and lawyers to help shape a law which could help people own their flats outright.”
So that’s good. Us minions can have a say too.
Inevitably loads of articles on this call. Linked to one from twitter (lost link) where some industry person was apparently saying that commonhold will merely involve changing managing agents?
How so? Very far from so. Not so.
As a present leaseholder (helping run an RTM for years) still facing a wasting personal asset and no means to ‘self manage’ without engaging as doing in collective cooperation with other leaseholders, I cannot see the arguments an informed leaseholder would make against converting to commonhold if adequately informed?
It avoids a wasting asset (hardly a minor factor) or the endless need to renew leases (hardly a minor factor) or putting up with spurious consent requirements or outrageous privacy invasions from an external Lord of the Land (hardly minor factors).
It enshrines commonhold ownership in successive unit holders, but as presently written and for no logical reason I can see also uses the weaker guarantor model of company membership which permits resigning and a danger of wasting away over time (shareholding built into the title would ensure that membership was always 100%). Wonder who came up with that model and why?
Yes, it inevitably requires unit holders to work together. Of course it does. We are talking about communal premises.
The alternative at present to working together is no control whatsoever over predatory external trough nuzzlers of all titles.
The problem at present is that leaseholders are suckered into thinking they are becoming home owners and therefore why should they put themselves out to work with neighbours for a common good. Not the English way. I’ve had neighbours demand to know why the ‘landlord’ is not paying for X or Y.
Ordinary people can sincerely be rendered stupid when they buy leasehold.
The whole point, as I see it, is that the landscape would radically change. Commonhold would enshrine unit ownership as a market asset that does not waste by virtue merely of the clock ticking, and with guaranteed control over the communal costs.
Yes, many commonholds might well find it impossible to self manage without relying on the property agent ‘profession’, but this profession would be (a) regulated, and (b) have to get used to being instructed by unit holders.
The ‘codes’ would have to be statutory and not advisory or ‘best practice if you feel in the mood’. Just as Sue above seems to say?
Time and again I find leaseholder run companies – including ours – patronised by an industry that is high on public relations but low on respect or delivery on client instructions.
Basically you can write anything into the contract, they will agree it, and then ignore you. What are you going to do? If you push back they can resign and walk away leaving you in the doo doo trying to find the next in line who will repeat the experience. They all know the common dilemma: the devil you already know is probably better than the guaranteed new devil you do not yet know.
Sue above leaves me confused as to the overall thrust of arguments against or for? All the stated obstacles exist already but with far worse financial consequences for leaseholders. Structural issues are the ripe area for reformers to fix, not abandon.
The existing commonhold law is flawed. Lords of the land will never vote for loss of revenue. The present law gives them a veto. No surprise it never took off. That has to change.
It is not ‘gesture politics’ to introduce long overdue reform just because another country already has got there first?
I hope they give ‘Mr Commonhold’ a blue plaque over the first newly converted commonhold.
Paddy, you aren’t the only leaseholder in the whole wide world who’s served time and jumped through hoops to right the wrongs of leasehold management.
Many of us have. Those six of us who – let’s acknowledge the fact – who actually bothered to take time out of busy schedules travelling from far and wide to attend the RICS hearing of the Warwick Estates’ disciplinary matter have all shared your experiences.
We’ve all done time, rallying troops, organising EGMs, recruiting like-minded leaseholders, leading freehold acquisitions, attending Court and other hearings as observer, lobbying the Law Society and accountants bodies, reporting fraud to the police and Companies House (who do take action), witnessing abuse of the system where it suits them by leaseholders themselves as well as by managing agents; and incurring legal and other costs.
My own personal efforts in this regard go back to 1998.
What struck me at the RICS hearing is that none of us are alone in our individual and specific efforts to redress the imbalance between landlord and tenant (to overly simplify that relationship).
What also strikes me, whilst engaging with other leaseholders on the LKP website, is how easy it is to ruffle feathers. The same is true when engaging with leaseholders in the running of an estate.
Big egos are at play with many disparate ideas and personal ambitions. As leaseholders, we ARE the problem, if you think about it. Will being a Commonholder change things to our mutual benefit?
Managing agents – and we will always need them regardless of the form of tenure – take maximum advantage along the lines of ‘divide and rule’. It is no exaggeration to say that MAs are on the lookout for potential personality clashes to foster to their advantage. Thus they will rid management boards of any ‘trouble makers’ leaving behind a manageable rump of perhaps three leaseholderse who haven’t the will or the wit to naysay them.
You must have seen something of this during your time with the RTM?
What we can say for sure is that, as leaseholders, we have thus far been outmanouevred -by our own foolishness., perhaps Will Commonhold redress the balance? I say not that it won’t but that it can’t.
What will make a difference is enforcement of such rules that exist to protect all owners in multi occupied buildings. That requires enforceable rules and an effective enforcer.
RICS, wake up.
Sue,
One important consequence of commonhold is as you rightly say is that the current leaseholders would have a stake in their building.
If the “same old, same old” managing agents are appointed to manage and they operate in the “same old same old” manner, then little would appear to change as far as the management of the building was concerned.
However, what it would stop is companies buying up large swathes of freeholds across the country and either effectively appointing themselves as managing agents or possibly accepting”incentives” from unscrupulous managing agents in order to “encourage” their appointment as managing agent.
Under a system such as commonhold as opposed to leasehold would it be less likely that a company such as Peverel/Firstport could have grown to the size that it has?. .
Michael, sage as ever. You may already know this. You mention Peverel in the context of acquisition and market domination. As you say, they aren’t alone in this tendency and I wonder if, with such powerful forces at play, Commonhold
On the Aldridge dot UK dot net website, under the headings ‘Investments, Property Management, Warwick Estates Property Management’, it reads:
“Warwick is a property management service provider operating in the residential sector
“We are implementing a buy & build strategy to acquire other property managers in the sector to take advantage of the fragmented market. Integrating the newly acquired businesses with Warwick’s outstanding infrastructure and ethos to generate synergies that will not only create value but greatly improve the experience of the end users.”
The rest of the world may not agree – indeed, it is said that they are disliked to put it mildly, even within their own world of managing agents – but Warwick seeks to perpetuate a myth – even whilst it is being sued right, left and centre including by the family of a diseased leaseholder – that it’s “outstanding ethos … will greatly improve the experience of the end users.”
I guess you know. Sir Rod Aldridge is the major shareholder in United Companies Ltd, umbrella for Warwick Estates PM.
Sir Rod is a force to be reckoned with. He was knighted in 2012 for his charitable works and services to education including startup Academies, having resigned in 2006 from Capita, the company he founded over a loan of £1m to the Labour Party, controversial since Capita still provides services to the public sector in a diverse portfolio that includes assessing claimants for PIP. He is also involved by invitation with the Prince’s Trust.
In parallel, we find that Warwick has borrowed £2m from post Brexit startup OakNorth Bank (former CBI DG Adair Turner serving briefly on the board), to assist the firm in its ‘buy and build’ strategy.
This strategy, focussed on small/medium size firms managing up to 10,000 units, is in full swing. In September, Warwick acquired the ‘award-winning‘ Base Estates Manchester, fixed assets in property investment worth £995k etc (see Companies House). This will strengthen Warwick’s presence in the northeast said MD Craig Stevens, speaking to newsontheblock (online publisher, organiser of various Award schemes).
Co-director Karl Ardern told the RICS disciplinary hearing on Wednesday that his firm manages 30,000 units across 600 estates; Stevens boasts 700 and growing.
At this point, it is worth reflecting on just how far north Warwick’s ‘manor’ will extend. Will Commonhold discourage Craig Stevens with his illustrious contacts from straying into Scottish territory?
I don’t think so. The reason Warwick is less likely to boast a Scottish office has little to do with tenure, more a reflection of the gravitational pull to international investors of England, London and the Home Counties. There’s nowhere comparable, certainly not in the USA. People go there, not to invest in property but to live in it.
It’s true that the devolved areas are catching up with England. In advance of Brexit, Warwick could set up an Irish office; Stevens with a separate company is, I’m told, already established in the property management sector in Spain (AZIBI, ie Ibiza in reverse; commonhold, presumably).
I’d put my money on Commonhold if it deterred those managing agents who swan around in pale blue Ferraris, smiling through gritted teeth, telling us what they think we want to hear, scheming and plotting behind our backs as to their latest acquisition.
Far from reigning in the sector, I think it’ll do the opposite, providing the self same operators with renewed incentive to expand their empires with new money-spinning activities aka ‘services’ to deal with Commonhold – all with the claim, to quote Warwick, that “it will greatly improve the experience of the end user”. That’s you and me.
No I won’t be signing any Petition. I’ll soldier on, trying to improve what we’ve already got through transparency, accountability and enforcement of rules, where necessary.
Read all about it folks!!!
Radio 4 has just announced that Fairburn ( Persimmons) is “ giving up” 25 Million of his 100 milllion bonus and will give the rest to “ charidee”. Awwwww.
I fail to understand why the existence of crooked, self-dealing managing agents constitutes an objection to Commonhold. They are separate issues.
However, the fact is that the absence of Commonhold is what enables the agglomeration of freeholds by landlords looking to monetise their freeholds beyond collection of ground rent. That is the game these days: skimming service charges, collecting commissions and kickbacks, charging for permissions, and collecting fees for everything, including fees for late payment of fees.
If Commonhold were the default, the commonholders of each building could choose their own managing agent and could require them, as we do, to agree to manage on the basis that their sole earnings shall be from their management, except as and where agreed in writing in advance, and subject to punitive recompense for any breach.
RTM alone (our development has it) is not sufficient. It affords no protection against many abuses by the freeholder, including, e.g., seeking planning permission to redevelop a site in which he has but a minuscule interest in terms of monetised ground rent.
When Mrs Thatcher said
She didn’t mean feudal landlords. She meant the freeholder whose home, however humble, was her castle. Unfortunately, the Conservative party is in hock to the former who donate large sums of money to it to do nothing that would disrupt their corrupt business model. It remains to be seen if it will change or if the latest consultation is simply a means of appearing to do something. Surely we need have little doubt where the Downton Abbey wing of the party stands.
It is truly pitiful how many leaseholders think that the landlord merely owns the land, and this is some arcane technicality (even a feudal tradition to be proud of!). Complicated lease documents written in legalese are part and parcel of a culture of effective non-transparency and disempowerment that lies behind the UK’s groteseque inequality (consistently the worst or 2nd worst in the EU).
http://www.doteveryone.org.uk has just published a report on “People Power and Technology” which features a section on “Digital Disempowerment”. Some figures relevant to leasehold:
58% of people sign up to terms and conditions for services without reading them. 51% can’t understand them when they try. 43% don’t even bother to try to understand them because they feel service providers will do what they want anyway. 89% say that terms and conditions should be written so as to make them understandable and clear.
The power asymmetry in leasehold, between landlord and tenant, exists to a significant extent because of deliberate efforts made by freeholders, with the connivance of the legal profession, to make leases unclear. It’s understandable, given how often people are asked to agree to T&C’s online, that people simply don’t have time to read them (or in some cases see how they’ve changed since last week), even if they have the expertise. It’s also understandable that in the case of leasehold people have a very reasonable expectation that their paid legal professional will protect them from future harm, from such things as onerous ground rents. Sadly, that expectation has turned out to be unfounded in many cases.
A great many freeholds are effectively owned by banks that have been bailed out by the taxpayer. The govt could simply call in the loans, and turn the freeholds over to a national asset management agency to unwind them as commonholds over time, removing the parasitical rentiers seeking to suck whatever they can out of leaseholders using borrowed taxpayer’s money as their stake.
The longer the Conservatives take the more disruptive what follows will be for some of their very good friends.
Change is surely coming, one way or another.
Sue,
You describe my leasehold life with scary accuracy. Yet I reach the opposite conclusion as to the advancement of commonhold over leasehold. Either way the problem will remain, I agree, of eradicating the cesspit of the professional managing agent as they currently exist.
I also agree that, given Sajid Javid’s performance at the last ARMA conference in calling them ‘the good guys’ without offering any evidence, it seems more than less likely that whatever reforms arrive, the lucrative industry of trough nuzzlers will be left unscathed in the main. Parliament is no stranger to shameless behaviour.
You give me an excuse for a timely vent.
This week our RTM Board received a polite contact from the senior director of our new managing agent. Polite but clear: we were being chastised. Told not to ask any more questions and not to query book keeping errors. Give them time to ‘review’ the history. It seems that not one but two senior block managers ‘ran to the headmaster’ because they could not cope with our requests for information?
The ‘review’ ought to be interesting.
Our bespoke contract requirements, which we sensibly had entered as a schedule to the agency contract to stop any more misreading of advisory codes, lays out our expectations as client (i.e. principal party to the contract). None are outside codes and standards, let alone laws, but having them in the contract avoids confusion. That was the cunning plan. Funny enough, new agents lap them up and comment how professional they are, only too happy to agree, etc.
So the’review’ must start from the agent handover last year, which was also the start of our accounting year 2017-18:-
We are a modest RTM company managing two dozen flats. Nothing complicated. Been around a few years. Solvent at the date of handover. Net equity/reserves to bring forward. No arrears at all. All contracts in place. No creditors. Only the unavoidable accountancy accrual. Advance SC receipts nicely in the bank.
Because of the new agent’s suggested timing of the handover we (a) calculated the budget, (b) issued the AGM calling papers, and (C) chaired our AGM well in advance of needing to issue the first 2018-19 invoices.
Our new agent popped along simply to observe us chickens as we self-congratulated our success and listen quietly as we all agreed what we wanted to achieve in 2018-19. After all, we are an RTM company. We get to make these decisions now. Grand, isn’t it.
In advance of handover we supplied our new agent file copies of all contact details – as some flats reside off site. Most flats have email contacts as well. Naturally we want invoices and reminders to go where they can do us most good, where the lessee actually lives.
We paid extra for this first year of course. Managing agents charge ‘set up’ extras to put new client’s on their accounting system, the basic tool of their trade. Like a plumber charging you extra on the bill for his need to use a blow torch.
We might have hoped being charged for set up would have ensured a seamless service.
We were wrong.
Our bespoke contract schedule is explicit that the RTM board must receive regular cashbook and other basic financial reports. You can’t manage what you can’t measure.
Naturally we also wanted sight of the handover files as we ( okay I ) carefully keep a running cashbook record since the start of RTM with separate ledger files for each flat. This lets me run cashflow projections to help us decide what we can safely spend. And keep an eye on debt recovery.
We were promised online access to a ‘portal’.
Month spassed in silence. No portal. No news at all.
Two months into the new year we figured that it would be good to know how much money we had. We asked politely.
Agent came back with disturbing news. Just by email. No spreadsheet, no financial portal access.
Third of flats in arrears. Most non-resident. One extra snippit: “We do not have email contact details for the flats. Thinking of asking them. What do you think?”
Hang on, we sent you a spreadsheet file of all alternative addresses and email contacts before the first invoices had to be issued. If you still have no email details, where is that file? Where did you send the non-residents their change of banking information, invoices and reminders?
We said, “It is not in the RTM company’s interests for invoices to be issued only to flat addresses where alternative contact details are available as this is a common cause for arrears in leasehold.”
This was one among other issues too painful now to recount.
Reply came back from block manager: “Sorry we need a couple of weeks to answer your questions”.
Two months letter came the reply: “All service charge invoices/were issued and arrears letters sent to those who haven’t paid.”
Quite. But not the clarification we wanted. Where did these go and when did the reminders expire and what happens now?
You might find the ARMA guide from 2014 on service charge arrears interesting at this point.
Finally in mid July we were given access to the promised portal. Most of it was password blocked so minimal information to see, excet for loads of uncollected service charges. No debt recovery report or recommendations.
Meanwhile our contract specifially required the first draft accural accounts no later than the start of Q2 to give three months to sort these out – always seem to take ages.
Funny enough, service charge book keeping is the simplest there is. No credit cards, no cash in hand to record, no depreciation, no cost of sales malarky. In the average tyear with two dozen flats paying twice and average expenditure, the book keeper has literally an average of a dozen postings per month. I know. I keep records.
The accrual accounts are also the simplest around being usually findings of fact rather than audits. ICAEW make it even easier with an example.
Our year now went down hill.
We also noticed all the flat b/fwd credits (that I knew from keeping records from before handover) had not been b/fwd. Asked why.
“Sorry, the handover files were all hard copy only and were sitting in a parcel on a desk. Short staffed, you see. We just sent them to your accountant for him to work out the opening balances.”
What the? The accoihntant does the annual accounts. You charged us extra to set up your book keeping. You do understand book keeping as a managing agent?
We had to contact the accountant and request he scan the relevant data and send to us. We analysed the hand over files and confirmed the b/fwd balances did exist, and the cash transfer etc. We forwarded our analysis to the agent and requested they update their files before the second invoices were issued.
Discounting other issues, we got really worried by November. We’d heard nothing about the annual accounts overdue for last year. So we started to chase these directly with the accountant.
We had been unable to spend any money. We could not incur expenditure on our long term planning for the year. We had seen no site visit reports. We had received no debt recovery reports. The ‘portal claimed that only a few flats had paid in the second half year. I was a debtor. My bank disputed this.
So we sent an urgent request for reports. Anything at all. We asked about any debt recovery suggestions.
Nothing. Silence. It’s as if just ignoring queries will make them go away.
By December our RTM company had literally changed a few broken light bulbs. One other task instructed in the summer was not done right. That was the sum total of our year. Still is.
In January Companies House threatened legal action for no accounts filed. Agent said these were for the accountant as he had to complete the service charge accounts. No we said, you need to file company accounts. We explained how to find examples for free on CH for RTM companies.
Coming up to this year’s AGM we started to sweat. What can we tell the leaseholders? How do you manage while having to reveal you are not managing?
Our contract expressly requires that the AGM is prepped eight weeks before. The Gregorian calendar takes no account of the RICs advisory codes and we no longer lived under those anyway.
New year: 25 March.
Invoices issued: 11 March
AGM to approve budget: Before the 11 March
Calling notices: Two weeks minimum
Therefore, have all prep completed mid February.
Agent simply had to prepare the budget. Didn’t. So I prepared one and asked that they amend it. Sent them a template for the calling notices and proxies, with directors report etc.
Meanwhile we got the overdue accounts back, approved them and asked if the agent would sign as approved or we would do this. They said they would, said they had, but they were issued with the AGM notices (five months late) unsigned. Just a blank signature line and a date. That’s a first for us. Even the worst pre RTM agent signed the blessed accounts when they eventually got around to serving them years late.
Agent now assured they would bring all outstanding answers (urgent from November last) to the AGM.
No, we said. Let’s not expose our backsides in public. We want to turn up looking as if we are a half competent ‘landlord’ and manager. (Look up meaning of ‘manager’).
We said we would not permit verbal reporting by the agent of anything the Board should have received long before an AGM. Such as debt recovery reports. It is not for the AGM to approve debt recovery action we said. That would be quite novel we said.
This was when the two block managers ran to their headmaster.
We end the financial year with huge uncollected arrears, no debt recovery discernible, and literally only a few light bulbs changed.
All process, excuses, talk, managament fees, and no results.
Should make for an interesting ‘review’ when we get it.
Sue, if you have kept faith with this long rant, I totally accept what you say about managing agents. I cannot see how my having commonhold would make my life any less a nightmare, but would at least protect my asset and keep me sane on that score.
Is this company one accredited by LKP and if not why did you choose such a company?
None of this really has anything to do with commonhold. On the continent and elsewhere the other co-owners of the building can take proceedings against service charge defaulters in quite a straightforward way.
It seems you should fire your new managing agent.
NOBODY should allow the managing agent to serve as their own accountant. Insist on the appointment of a 3rd party accountancy firm experienced with estate accounts. LKP can point you to one. You may want to request an audit of the expenditures.
Paul, “LKP accredited managing agent?” A leaseholder from Wales who attended the RICS hearing told me they were using an LKP accredited MA as replacement for Warwick Estates.
The bad new is that said MA is incompetent, relying heavily on the directors to carry out everyday functions – and that on a very sizeable estate.
Let’s end with good news. The said MA admits its shortcomings and, best of all, is HONEST :)))
Paul, “LKP accredited managing agent?” A leaseholder from Wales who attended the RICS hearing told me they were using an LKP accredited MA as replacement for Warwick Estates.
The bad nexw is that said MA is incompetent, relying heavily on the directors to carry out everyday functions – and that on a very sizeable estate.
Let’s end with good news. The said MA admits its shortcomings and, best of all, is HONEST :)))
Sack them. Can you not name this outfit? They clearly adopted their best Sunday Chapel behaviour to get the gig in the first place.
Unfortunate for them that you and your fellow directors have got the smarts and have seen that the agents rancid slip has begun to show!!!
This behaviour is far too common amongst Managing Agents. strict regulation must be introduced without delay. These individuals cannot be trusted with leaseholders affairs.
Paddy, I must print out your comment to be able to take in the points of detail.
Surely, we can now all agree that managing agents are (a) necessary and (b) evil? OK, I exaggerate to make a point.
I see that Managing Agents have their own heading in the Law Commission survey. When I reply, I’ll focus on these so-called service providers, noting that in spite of the comprehensive regulations (statute/case law, a Code of Practice dedicated to leasehold management, accountancy bodies’ guidelines, etc), managing agents operate below the radar and their activities go largely unregulated.
I will put it to the Law Commission that the best use of taxpayers’ money would be a full scale investigation into the way that managing agents operate, noting a worrying trend towards market domination through acquisition. In the context of competition rules, I’ll how this benefits the 4 million (need to check the figure) flat owners in England and Wales who, through statutory service charges, pay the fees of these managing agents but have little or no real voice in how they operate.
The system that makes managing agents answerable to boards comprising leaseholder directors – or, alternatively, Right To Manage boards – is flawed.
It is a fallacy that these boards represent the interests of a typical residential leaseholder – they don’t. A large number are property investors who buy leasehold property to fund pensions. As such, their interests are more closely aligned with the commercial interests of the managing agents they appoint to manage their investments in leasehold property. Managing agents are thus appointed by, and to serve, the narrow interests of property investors.
The average residential leaseholder has little say. He or she can join a board in the expectation of making a useful contribution but will be frozen out if that contribution is, typically, unwelcome because it doesn’t represent the narrow commercial interests of the managing agent and the other board members.
How will Commonhold ensure that managing agents operate within the law and regulations designed to protect the average flat owner against the raw commercial interests of the managing agents and estate management boards who appoint them? How will Commonhold prevent infiltration and dominance of management boards by property investors with their narrow focus on margins?
Hi Paul, taking your four paragraphs.
We once used a now accredited agent. Awful experience. Would need even longer rant. Few operate in our location when queried.
I was responding to Sue to -in effect- agree with you re commonhold and agents.
Ahead of you there. See earlier comments under other articles. each time gets harder to be hopeful or trusting, like recovering from shock of divorce.
We use our own accountants. Got that teeshirt. Accountant is at the mercy of what the agent instructs under Factual Finding procedure, though I have never seen one of those ICAEW Tech 03/11 written instructions. far too rational for the real world of agents. Only reason we got any accounts was we can ring him up and he deals with us. Agents we found cut that route off with their own in-house or ‘favoured’ variety.
Interesting as to audit. Having found invalid backdated deletion of receipts, duplicate postings of expenditure, and even a ludicrous £800+ debit to the cashbook trying to enter b/fw flat credits which have nothing to do with the bank account (i.e. should post opening balance as receipt to Accounts Receivable for the ‘customer’ doubled to an Equity Opening Balances account for the purpose), we asked for copy bank statements for our dedicated trust account. Repeated requests never acknowledged. Not even a “we’ll get back to you after we review”.
Been wondering how to get the bank statements. TAs can order an audit. Seems overkill for the RTM members to incur the expense of one? Hardly a recharge cost.
Interesting dilemma. Industry requires agents hold the client account purse strings even for an RTMC. You’d think, as the client account is in the name of the RTMC, the RTMC could require the bank to send it copy statements if their agent is being silly. Grey area.
I haven’t heard of an audit of a development’s accounts that failed to MORE than cover its own cost, so I would entirely discount the idea of it not being a chargeable expense. First, I would guess that getting audited accounts is well within the discretionary powers of the directors. Second, whenever we have had any doubt about any such expense we take legal advice. The chances are that the legal advice would cost as much as the audit so in this case I’d skip it, provided you have, as you ought to, Directors and Officers insurance.
All in all, it’s a sad story and these kinds of things need to get out.
Paul, it’s chargeable if the Lease contract makes provision which any properly drafted lease does.
The accountants’ bodies ACCA/ICAEW produce guidelines for practitioners TECH03/11. Appendix A – or is it E? – setting out a model for statutory service charge accounts, with worked examples. It deals with the relevant laws particularly in the context of Audit, providing clarity on the meaning of the word audit often abused by managing agents to argue an audit isn’t necessary.
The guide is approved by all relevant bodies inc RICS, ARMA, Law Society, LEASE etc.
Bad news – the ACCA/ICAEW guidelines gather dust ignored, like the RICS Code, by managing agents who find regulation inconvenient. If managing agents fail to brief the accountants on Audit required by a lease, it doesn’t get done.
Hi Paddy,
Your posts are spot on.
After reading your dilemma It sounds as though you are describing the behaviour of most of the managing agents in this country.
It “all went wrong” when you had the knowledge and audacity to “want everything as it should be”‘ You naughty boy.
Hear hear. We must rid ourselves of these vermin who masquerade as ‘Managing Agents’.
Most regular posters must be aware that I am being sued for “Defamation ‘ Harassment” by a Managing Agent in My employ. Newspapers have been notified of this action and are most interested as the Agents in question are prolific ground rent acquisitors who have been severely castigated by many Tribunals in the past.
This is going to be a very costly case and the winner will take all. I believe it was brought about because I thawrted these individuals from snaffling the Freehold of certain premises in central London from beneath the leaseholders noses,………..EVIDENCE
The joy on the leaseholders faces when I gave them EVIDENCE of their appointed managing agents associated history was / is enough to make this bloomim assle worthwhile. It was as though I had handed them the holy grail.
I also believe that the trial ( If it goes ahead) could possibly result in a prison sentence of the individuals in question- and not before time in my opinion..
Incidentally, is it a criminal offence to give false information to companies house?
Just asking….
COMPETITION AUTHORITY and COMMOMHOLD
BIG IDEA: to Lobby the Competition Authority to look into and decide on whether or not competition – and the availability of choice to ‘leaseholders’, tenants or whatever you wish to call them – is being systematically withdrawn as a result of aggressive acquisition practices in the sector, notably by some firms of managing agents for whom acquisition and market dominance is policy.
Lobby the CA/government to outlaw such practices that leave leaseholders with little or no choice.
This would deal very specifically with Michael Epstein’s point about market dominance being the scourge of leaseholder interests, a point that could be lost in more general Commonhold legislation.
BACKGROUND, you may know: in 2016 the CA updated its 2-year governmental study into leasehold. It produced yet more guidance for first-time-buyer-leaseholders through the likes of LEASE ; whilst RICS updated its Service Charge Residential Management Code which, obligingly, puts a duty on the Property Manager to implement “the rules” – ie mumbo jumbo to you and me. In theory, great if the Code is enforced. In practice, rubbish.
Two problems: LEASE is discredited for getting into bed with the other side. RICS, similarly, opened its doors to AssocRICS status for all those managing agents we’ve ever had good reason to criticise.
Worst of all, nobody takes any notice of the RICS Code – not even RICS (except for those who wrote it). Then there’s our Lease Contract Document; but the Code covers that, too.
[I admit it, I now know my way around my Lease contract document, the RICS Code and the ‘industry good practice’ guides published by the accountants’ bodies ACCA/ICAEW (these also referred to in the RICS Code) – being a leaseholder director, I felt the need.]
COMPETITION amongst service providers to the leasehold property sector is fierce- think east end gangsters, manors, molls – you’ve got it.
COMMONHOLD The first requirement, and one I fully support, is to abolish ground rents. When you can spend £1,000,000 on a flat, why suffer the ignomony of being treated as ‘tenants’ – to use feudal terminology – by semi-literate upstarts who swan around in their pale blue Ferraris at our expense? Why hand over yet further substantial sums at intervals to freeholders to ensure, as the years roll by, that your £1m investment doesn’t become a £0 investment? Not fair – inequitable, as the law should see it.
Hurdles? Remember the fierce opposition notably from the feudal landlords aka the late Duke of Westminster and others including institutional investors (family trusts, pension schemes etc) when the government introduced the Commonhold & Leasehold Reform bill, to become law in 2002?
The Competition And Markets Authority has already examined aspects of leasehold property management (in 2014). Did you notice any worthwhile action was taken by the govt?
I’m didn’t (I’m open to correction; maybe something significant escaped my notice).
Until recently the mantra has been more deregulation. Presumably you are aware that a Conservative group (Red Tape Initiative) was due to meet on the morning of the Grenfell tower fire to have a discussion about a bonfire of building regulations. That symbolises the context, which is nothing less than institutionalised unfairness and injustice (see https://www.youtube.com/watch?v=hNHvwcpHmys&feature=youtu.be)
Have a look at the conduct of the FCA in its regulation of RBS. Turning a blind eye, in effect, while its Global Restructuring Group took control of and reportedly looted the assets of over 16,000 small and medium-sized businesses in order to repair its balance sheet. The reckoning for this hasn’t begun yet. And who may get stuck with the bill? The taxpayer. Again. (And that’s saying nothing about a bill due in from Uncle Sam, but that’s another story, except of course that the taxpayer may be on the hook yet again).
Or have a look at that of the SFO in dealing with Peverel/Cirrus, to well known here to rehearse again. Suffice it to say that taxpaying leaseholders were screwed and offenders given a mild rebuke.
The corruption, incompetence and the inter-connectedness goes all the way to the heart of the establishment in the UK.
The incoming chair of the Financial Conduct Authority, Charles Randall, is a man recently in the news for using an egregious tax loophole to attempt to save himself a fortune, at HMRC’s (i.e., the public’s) expense, and was, by the way, a former board member of Enron Corporation, responsible for one of the greatest corporate frauds in history on his watch. Just the sort of guy to regulate crooked banks? I. Don’t. Think. So.
The terms of reference of investigations by such bodies such as the CMA are often drawn up carefully and deliberately to constrain what they can examine and make recommendations on. This was very evident in, e.g., the recent investigation into exit fees in retirement housing by the Law Commission. The FCA prevented the public disclosure of information embarrassing to RBS (and to the FCA) until it was leaked a few days ago.
All along we are supposed to believe that fraudsters responsible for the Cirrus scam turned themselves in, when in all likelihood they got a tip off that they needed to do so. It wouldn’t do to have money that could be given in political donations paid in fines for ripping off vulnerable elderly people, would it?
What will move the needle and compel change is public disclosure of information that others want to keep hidden (which is one good definition of journalism). And it’s why this site provides an invaluable public service. Leasehold is not an anomaly. It’s part and parcel of an economy and society rigged by and for the 0.01%.
Paul Joseph. Well said.i was beginning to lose the will to live reading the verbosity of other commentators on the the “ Commonhold versus Leasehold issue. I find your intervention most welcome. Who was it that said “ brevity is the wit of man” / or woman of course.
Much can be conveyed in 2 paragraphs.
Before anybody comments. YeeessIbknow Mr Joseph’s comment was more than “2 paras”!!
But his comment was so damn good it didn’t seem like it.
Paul,
There is no doubt in my mind that had “Peverel”not turned themselves in admittedly after their conduct had been reported to the SFO and those that had reported them had been threatened with legal action should they publicise Peverel’s actions and the story had been reported in the Sunday Times there would have been severe financial consequences which the government wanted to avoid.
Any meaningful fine which should have been imposed, would have led to the immediate collapse of the Peverel group. This in turn would have led to the immediate collapse of the Tchenguiz property portfolio((this happened at a later stage) Any such collapse would have dumped 1% of the UK’s property portfolio on the market as part of a fire sale.
Banks such as HBOS and RBS who were particularly exposed to loans granted to Tchenguiz to purchase the property portfolio on terms that were said to be “well outside the normal pattern for lending criteria”. Those banks (In the process of being rescued) stood to lose many more billions of pounds. In fact so great would have been the scale of the additional losses that they would have rendered HBOS and RBS beyond rescue..
And that is why I truly believe a “deal” was done.
Incidentally to this very date,Peverel/Firstport have never repaid in full the money they cheated residents out of as a result of their price fixing (though that appears to be of no concern to ARMA?
Master Epstein
There is a piece about the Tchenguiz “ West end Landlords” on daily mail online today ( just read it)
It is rather salacious but such fun!!! I think it might give you a giggle on a sunny Sunday morning.
The whole sorry price-fixing episode really does stink of Establishment cover-up. The deck was stacked from the start.
The story was already in the public domain (in The Times).
And not only had the Serious Fraud Office already been contacted, a formal complaint had also been made to the Monopolies Commission before the press article, that the Consensus Group (ie Tchenguiz) was abusing its monopolistic power in the marketplace. The Monopolies Commission was not prepared to investigate, and passed it onto the OFT, for the ‘lesser charge’ of price-fixing to be looked into.
So it was an expedient hair-splitting device for the Office of Fair Trading to maintain Peverel were first to ‘alert’ them to the situation.
And the OFT then added insult to injury, by not only wasting the time of the Carlex Three & an excellent pro-bono lawyer, but also threatening prosecution if the investigation were publicised before it was concluded. A process which, under the circumstances, took an unbelievably unacceptable length of time.
RIP OFT. I wonder – is the Competition & Markets Authority any more effective?
Through income tax, we pay the CMA to get on with it, don’t we?
Having read the summary of the consultation I would be interested in feedback on whether these statements by the Commission exaggerate the problem or are real issues.
“…the key difficulty in converting to commonhold at present was that most people who owned an interest in the land must consent to the conversion; for example, to convert an existing block of flats from leasehold to commonhold, the consent of the freeholder and all leaseholders owning a lease which was granted for over 21 years would need to be provided. Additionally, it would be necessary to obtain the consent of every lender who had a mortgage over any of the flats in the block.
Concerns to be addressed if commonhold was to work well for those owning commonhold units as their homes included:
• the level of complexity in how a commonhold was run
• a lack of consumer protection for homeowners
• difficulties in changing the rules which applied to the homeowners
• a lack of flexibility in how the costs of running a commonhold were shared.
There must also be a more effective way for disputes to be resolved within a commonhold and that homeowners risked becoming responsible for all the commonhold’s debts if it came to an end.”
1…For considering conversion from block of leasehold flats to a commonhold block , the “leaseholders side ” would not object to :
1a. stopping annual ground rent and
1b. taking legal ownership of a unit in the block
1c. savings benefit from not having to seek statutory 90 years extention.
1d. .more retention of their own income in the leaseholders family savings bank account. .
whereas
the “freeholder side ” would object to
1e. loss of his ground rent income and
1f, loss of his building.
1g, loss of lease extension income.
So when the lawmakers change the commonhold laws to make it work, they have to make the conversion possible and remove the freeholders objection and reduce the leaseholders qualifying
numbers from 100% to 51% .
2. For new developments , the developers can sell new property under any property title to maximise their profit :.
2a. When the developer sells property under freehold title, there is one payment at completion date of sale . and no payments required after the sale completion date.
2b. When the developer sells property under a long leasehold title, a Lessor entity is created in the Lease to receive the first payment for the lease ( called premium ) followed by annual ground rent and maintenance service charges for next 125 years and at reaching expiry date of lease, to take back the property.
The irony of the current system is that Governments are voted into office by the current buyers but the laws and rules are drafted to protect the interests of the future freehold reversioner which gets back the property at end of the lease. in 125 years at the expense of the voters and buyers.
Odd how law requires 100% lessees and all other interests including the postman to LEXIT but only 1 vote majority needs for the UK to BREXIT. Contract rights are FLEXIT?
I thank you.
Leasehold or Common hold?
People should not forget the “ground rents to zero or peppercorn values” and “plans to make it cheaper and easier for existing leaseholders to purchase the freehold on their property” .that are being introduced is a huge step forward. IF they come into law that is.
The next step is to have this made retrospective on all GR monies due, including the retirement sector, which people like Tchenguiz feed on.
Government should legislate to make the monetising of leasehold as difficult as possible, making it far less attractive to sell on the leases after development or to other GR speculators.
The above proposed legislation was mosttly due to the CML refusing mortgages on onerous GR terms. In fact, all leasehold and all leasehold retirement flats wouldn’t qualify for mortgages under their existing GR terms, if mortgaged. So rather than some act of kind gesture toward leaseholders, more akin to avoiding national embarrassment of mortgages not being approved on new build developments!
So Leasehold or Common hold? I want to see individuals having the most control over where they live, regardless of the legislation of the type of tenure. Will not one just create another pitfall over the other? What about large developments? Forfeiture is a strong arm tactic that ensures people comply with maintenance decisions. How do you regulate 200 individual flat owners on important decisions without a freeholder? Will landlords find some other legal way of extracting money inder common hold, say through property managers?
Making leasehold as least profitable as possible is the start at least.
Well, I led the freehold purchase of a large block here at Mill Quay, back in 1998. Today in 2018 the remaining five blocks have not enfranchised.
Commonhold didn’t help me to enfranchise – the legislation that existed back in 1998 enabled me to do so.
I can also say from 20 years’ experience of being both a freeholder and a leaseholder on the same estate here in E14 – just down the road from the global financial hub of Canary Wharf – that the benefits of enfranchisement are limited, largely illusory and appeal to more to vanity than provide any tangible fianancial or other benefit.
I wholly support the idea of getting rid of ground rents and with it, the need to extend leases. But why would any institutional or commercial landlord agree to it? And how would you enforce it? Would you confiscate their land? I’ve heard talk of ‘bandits’ here on this thread.
I’m very much in favour of reform but I think it’s simplistic and don’t believe that changing the names or the rules of ownership will change the experiences of so many flat owners.
Changing the rules of engagement between flat owners and their service providers (managing agents) could make a difference, but only if those rules are enforced. Trouble is, there are too many fingers in the pie, including government, making enforcement difficult.
Chris,
Commonhold can cover all the issues that leasehold was “supposed” to resolve.and remains the sole justification for the continuance of leasehold.
Under commonhold an errant flat owner who had failed to pay service charges could still have their property forfeited as a final sanction.as part of a normal debt recovery procedure.
Unlike leasehold only the debt can be paid off from any forfeit with the balance going back to the former owner. At present a leaseholder may owe £5,000, have his property valued at £250,000 forfeited and the freeholder keeps the entire £250,000!
“At present a leaseholder may owe £5,000, have his property valued at £250,000 forfeited and the freeholder keeps the entire £250,000”. My education continues, I really did not know that – is it not good that we live in a country where banditry has had its day and the rule of law reigns supreme?
For the life of me I cannot understand anyone who is currently a leaseholder not wanting commonhold. These people looking for issues with commonhold remind me of the disillusioned revolutionaries in Animal Farm who appeared to want Jones (the farmer) back. “Surely you don’t want Jones back?” they were asked. No they didn’t, they just had to learn that with freedom there are responsibilities and new problems. Anyone who owns a property has problems and issues, and neighbours. And very often the problems and issues relate to their neighbours. Far rather a problem neighbour(s) than someone else owning the freehold.
Animal Farm. Or Watership Down?
Any leaseholder who is phased by the threat of forfeiture probably has a fundamental problem of comprehension.
I’d counterclaim for failure to account properly for service charge as required by the law and my lease contract. Almost certainly, any landlord or managing agent who threatens forfeiture will themselves be in breach of the contract they are trying to enforce. A counterclaim is a powerful weapon if you know how to use it. It would certainly stay the landlord’s action for forfeiture.
Commonhold won’t stop the managing agents and their legal advisers from trying it on.
Farmer Jones will continue to have a field day ripping everyone off for years to come with a raft of higher fees associated with Commonhold. He will welcome the distraction from his own nefarious dealings in the marketplace. But it won’t make any difference that Freehold is now called Commonhold. Farmer Jones will press on regardless, ruling estates with an iron rod, abusing whatever new regulatory processes are introduced, to protect his bottom line.
Regardless of any change of tenure, we leaseholders – as individuals or collectively -need the means to control the managing agents and bring them to book, if necessary.
It means that the ‘enforcers’ – notably RICS – should enforce ‘the rules’ whatever those rules may be. They don’t. Managing agents use the post nominals AssocRICS as a marketing tool rather than a high accolade of professionalism. But, then, AssocRICS members pay RICS’ fees.
I don’t need to learn that ‘new responsibilities bring new problems’. I know that Farmer Jones won’t change his spots. And that we must all continue to rely on Farmer Jones.
The advantage of commonhold is that it removes the insidious poison of an agent working for two masters and one of those masters often being there to make profits from the leaseholders while the “master” paying is not a master at all but someone who is told what to do.
In a commonhold world, the agent works for the unit-holders so its far better for everyone except those landlords who will no longer exist. If the agent is not up to the job they get fired.
Of course there will be problems but we might finally move on from the world where both the agent and the leaseholders see the other as the cause of their problems.
Farmer Jones by the way is very worried about the loss of all his subsidies. He has to learn to be more efficient and so will managing agents.
Martin, a very suitable reply to Sue. Might I add this, “If you want something doing properly, do it yourself”. Are managing agents, particularly if they are so troublesome, really necessary?
Sue,
Indeed a counter claim is a powerful weapon if you know how to use it?
But crucially, the average leaseholder is scared stiff of threats of forfeit, court proceedings and the associated costs.
Remember, you are asking an ordinary person (with no legal training) to stand up against some of the sharpest legal brains the freeholders can employ and use threatened costs as a weapon
Michael, holed in one. I’ve had excellent advice on, wait for it, ‘the mechanism of the lease’, provided by those sharp legal brains at Iliffes Booth Bennett, Uxbridge.
Over the years, for a one-off payment, it has stood me in good stead, serving to stay proceedings of whatever flavour. BUT that doesn’t resolve the underlying issue of rogue managing agents.
There is nothing more debilitating, more poisonous that a failed system that grinds on, regardless.
My advice to leaseholders is, in the first instance, to be bold. Believe me, I’ve sweated buckets. Don’t tell them to bugger off, that would be tactless. Just think it. Say you will counterclaim for breach of contract over the accounts, no need to give details at this stage. Say you think mediation is . Push, push, push. Get them on the run with your persistence. Try to involve their solicitors which will cost them money, not you.
You will arrive at a position where they give up at least for the time being. The way to deal with cowards who are bullies is to be bold.
Sue Stuckey,
Not all leaseholders are made of stern stuff. I am currently being sued for non payment of what I believe to be ,”Unreasonable” sums for the major works sinking fund.
The surveyor involved has admitted that the fees associated with his 12/15 year “ forward planning schedule” are at least 50% too high”. Independant contractors who have viewed these figure concur.
I have been threatened with Forfeiture yadda yadda for the past 3 years. The works in question are due March- May 2018. The subject building is in good condition ( Surveyor s conclusion) and has been well maintaned in accordance with the occupational leases.
A Tribunal hearing is due to be heard next week. My fellow shareholders ( yes we shared Freehold) cannot be bothered to argue and state that “ we’ll get a refund if the works cost less” . Ha ha!!!
It is important I state that prior to the MA being appointed our building was managed “ In House” the last 19 yrs by me ( up until 2014) and was by concensus was one of the most well maintained attractive buildings on the Avenue. No serious disagreements with neighbours, No Tribunal hearings , No thousands spent on” legal professional fees”.
I can fight this bully because I am not “ phased” by its threats of Forfeiture although many vulnerable leaseholders could be.
Unscrupulous MA’s use “ Forfeiture “ as a nuclear weapon at the first opportunity.
Most leaseholders will believe the threats these chancers.
I do not believe that it is as simple as them having a “ fundemental problem of comprehension”.
I believe it is because they feel intimated and are scared sh#t#ess
We who are strong must fight to end the tyranny of Freeholders and their scuzzy associated MA’s.
ABOLITION OF FREEHOLD/ STRICT REGULATION OF MANAGING AGENTS. NOW!!
I must edit the above:
1.;” Because they feel intimidated and are scared shi#less.
2.Most leaseholders believe the threats of these chancers ( Managing Agents)
It is most important Managing Agents are very very Strictly Regulated.
I like to think of myself as a pretty savvy smart woman who takes NO bulls#it
Howevever, I had the wool pulled over my eyes by a managing Agent for a full 8 weeks until the rancid slip of the Agent became visible……….
Sinking funds in the hands of the property manager ie managing agent, most likely are being abused under the terms of a lease contract. Typically, the requirement is that the funds are allocated to specific heads of expenditure covered by the general terms of the lease. Our lease requires that the sums so allocated are updated every three years. That means the lease requires management to analyse anticipated capital costs – typically, because it’s so complex especially on a large estate, to involve professional quantity surveyors.
That costs a lot of money. To avoid costs, management will ignore the requirement of the lease not to mention other regularly requirements as to sinking funds. As such they are in breach of contract and the law, too, probably.
I feel sorry for your dilemma and experiences because I’ve been that way myself.
Currently, the management here at Mill Quay are claiming from me £10k in arrears of service charge. This has been going on for seven years. I’ve said I don’t owe service charge until they account properly for expenditure in accordance with statute and my lease.
Most recently I’ve been dealing with their solicitors Brethertons (a firm with the reputation which I’m sure must be wholly untrue, that they are ambulance chasers).
We were getting near to a settlement agreement at the end of last year (whew, at last) when I learned that the management company to whom
I am supposed to owe service charge has been disbanded. In their wisdom, the directors – advised by managing agent and company secretary Warwick Estates (who have just been disciplined by RICS) together, it appears, with Brethertons – have not only changed the name but also the constitution of the management company, the purpose being to exclude a constituent block of flats at the request of that block.
Never mind that the constitution of the original blocks’ management company requires ALL leaseholders to be members for so long as they are owners of flats in qualifying blocks.
I’m revisiting the question of alleged service charge arrears, post Christmas. Brethertons said they are no longer instructed In the matter but will pass on my letter to their client, for comment.
As you say, managing agents hold all the cards, they are too powerful and threaten a return to the scams of the 1960s when landlord Peter Rackman turned swathes of London into miserable slums. It’s in danger of happening here I. Tower Hamlets.
ps: counterclaimed actions fall outside the remit of the tribunals. Also, if the arguments are complex as they can be with accounting issues it could go to the High Court. This can be a disencentive to management, especially if you can point out that the Lease expressly disallows High Court action as a costs against service charge. Costs could be awarded against the directors.
Sue
1. Our lease dictates that the “ landlord” ( our company) can demand “ reasonable sums from time to time for future maintenance of the building”.
2. We have always adhered to this and the building has been maintained to a “ good standard” on a 7,000 per annum reserve fund major works fund. . ( 7 flats) major works every 5-7 yrs.
3. MA appointed and reserve fund goes from 7,000 pa to 35,000 pa. based on extortionate costs that the surveyor appointed by the MA admitted in August 2014 were at “ least 50% too high” we were also told that they are bring “ works forward to save us 37,000?
4. Surveyor has apparently left the company but this may or may not be factual.
5. I have sourced 3 separate estimates from independent highly regarded contractors. All are more than 50% less than surveyors discredited figures.
6.MA has not provided 1 comparable estimate and cancelled an AGM scheduled for Dec 2015 whereby I had intended to declare alternative. estimatesThe AGM has not been rescheduled despite repeated requests by me.
7. It is most telling that the MA witness statement for the tribunal gives the subject building address as their address and NOT the name of the Agency???? I have of course mentioned the Agency at every opportunity in my statement and provided the Tribunal with a “ Dossier” detailing the history of the Managing Agents complete with Past tribunal case hearings against them……. grim.
8. Finally the board of directors ( appointed in 2014) have in my view been utterly negligent in allowing the MA to push its agenda forward and my lawyer will be asking that they cannot claim the legal fees ( 9,000) through the service charge.
Monday 5th March 10 am is the Hearing. London FTT 10 Alfred Square. Everybody welcome!!
How is this for an address given for an invoice for services received?
Near Junction 11, M1?.
Surely not valid? I came across an invoice when inspecting the accounts in 2015/16. The address on said invoice was inconsistent with the company name and the telephone number was out of use . How convenient.
After some investigation ( by me) it transpired that the company went into liquidation several months after carrying out probably unecessary works in breach of the s20 Consultation.
It is also my belief that the company was associated with the managing agent. Incidentally it was incorporated around the same time as the Agency. Very easy to find stuff out if one is dogged enough.
It is my belief that the “ puppet directors” real job was that of a bailiff. I did ask if this was the case but received no reply………who cares. I have other fish to fry!
I will be replying to the Law Commission request for evidence. There will be powerful forces trying to influence this process away from the desired result. The desired result is commonhold. All leaseholders need to respond to this call for evidence to make themselves heard. As a leaseholder the unfairness of the current system needs to be swept away whether this takes two years or two decades.
Hear Hear. We must stand together, Fight and fight hard to crush the toxic element in our society that is “ FREEHOLD”.we must crush this travesty in body and spirit. If we allow a dying ember to smoulder then we can be certain it will reignite to bite leaseholders on the A#se.
Let us NOT accept bread and circuses from the establishment.
C:mon people, we have very nearly reached our goal. Let’s push and O’Shea hard to achieve victory.
WE ARE MANY THEY ARE FEW. ( Always remember that)
You mean the travesty that is LEASEHOLD? To win a case you need a cogent argument. Epithets distract.
Sue Stuckey
Surely you understood wot I was tryin ta say didn’t ya?
You say that to win a case you have to have a ‘ cogent argument” ,I know that and so does my lawyer!
Sue I could spend minutes correcting your verbose comments….. I won’t bother cos I knows wot yer is tryin ta convey. Geddit?
A word of advice sue . Keep it simples! In my view Verbosity equals dull.
ABOLITION OF LEASEHOLD / STRICT REGULATION OF MANAGING AGENTS & FREEHOLD IS A TRAVESY. Oooops meant LEASEHOLD IS A TRAVESTY????
All better Sue?
in addition to my above comment.
Sue i did not mean to be harsh. So please don’t take my comment as such.
Contributors to this site are mainly all on the same side and Fighting for Justice. We must not waste our words correcting the grammar/ misuse of words of fellow posters. It futile.
Kim, when your case comes to court, put away your street fighting boots and be more lady like. And remember “cogent arguments”.
Ooops “ O’ Shea” hard?.Where did that come from? . Either a typo or Freudian slip.
Sue Stuckey presents very valuable points and experiences, and her debate should be understood, not dismissed.
There is nothing fundamentally wrong with the feudal system of freeholds and leasehold per se. It works. Everyone understands it. Don’t forget that Freehold is itself a form of property tenure – [infinite] leasehold – in fee [feudal] simple [no conditions]. The ultimate land owner is still the Crown.
With any degree of Common Areas, you must have to have some form of lease-type structure. Commonhold is a form of leasehold, by combining freehold.
It is the way that developers, freeholders and property managers have run amok and taken unfair advantage that is wrong. We all agree on that.
If you had a 999-year lease, with a peppercorn ground rent, auto Consent to Sublet/Assign, and a low £25 lease sale/subletting Registration fee, you would not complain. Would you? Be honest.
Commonhold (origin CLRA 2002) is a great idea to remove ground rents, high enfranchisement premiums and excessive Consent Fees, and remove ‘big, bad freehold landlords’. But Sue is saying pragmatically that compulsion will not solve all problems, and that it is not – and should not be – the only ambition.
It could work for new builds, agreed. But will a new statute be fully compulsory and infinitely retrospective? How will the freeholders be persuaded to give up their assets? Do you realise how incredibly complex and expensive that retrospection would be?
Our family owns property on various tenures, but unsurprisingly not Commonhold as there are only a handful – 50? – of such developments in England & Wales. In 16 years. Excluding our freehold houses, the favoured tenure in all our views for flats is Leasehold, BUT with a share of the Freehold.
There, we have no ground rent. We pay no Consent Fees. We are not under threat of forfeiture. We are in charge. We control all money. We all now have 999-year leases. As good as Commonhold. In practice, from the tenure perspective, as good as pure Freehold. QED.
But we still need a Managing Agent as there are some 200 units on the development, and there are not enough Philanthopic Lessees to do a direct management job. We found a good local, small, professional agent, who cares. And we also have a good Board of Directors for the Freehold Company and the Estate RMC. Utopia.
But what if some bully-boys got onto the Board? There would be grief, no doubt. Exactly the same applies to Commonhold. You have to have a ‘Commonhold Association’, with Articles (‘Commonhold Community Statement’) and a Board of Directors. The same risk of ‘bully boys’.
Also the same risk of dirty managing agents. Property managers to better label them, because the ‘lower end’ certainly do not understand the Law of Agency, nor seem to be aware of it. The same risk of ‘losing control’, and having the same disputes and arguments – often between neighbours. No big, bad landlord then to blame other than yourselves.
By all means, lobby hard for Commonhold new build compulsion, but also understand Sue’s points and lobby equally hard for:
1) reduced, reducing or extinguished ground rents;
2) Statutory control of Enfranchisement Premiums so that this option becomes de rigeur;
3) Statutory Scale of (low) Charges for FH Consent and Admin Fees; and, as a priority
4) SOMEONE to have teeth to properly control and chastise ‘cowboy’ property managers on their ‘pale blue horses’.
I reckon this would have more chance of success.
Izaak, You appear to want most all (if not all) of the aspects of commonhold without the label of commonhold – . “the favoured tenure in all our views for flats is Leasehold, BUT with a share of the Freehold”. What precisely is the difference between commonhold and your “leasehold with a share of the freehold”?
Have to say that leasehold should be abolished. It is feudal (pejorative word, there is nothing that isn’t pejorative about the word “feudal) and a vehicle for those who would be slavers if it were still legal. This opposition to abolition (of leasehold),, even if those who oppose it do so for what they believe are good reasons, play into the hands of the gangsters, and government – I do not for one moment believe that government would act against the gangsters unless there was pressure on them to do so.
Izaak your points 1-4 are underway. In Australia, its been a 50 year move over to commonhold.. Fixing key problems in the leasehold sector will be as important as getting commonhold right.
Where I would disagree with some posters is their view on managing agents. For any large site they are essential and even for smaller sites they need the backup of some of the technical expertise which on compliance with the latest regs.
Commonhold will not solve all the problems in living in flats but it does take away a number of the conflicts. The data in Australia suggests the number of disputed has declined over the years relative to the growth in the number of homes. As I explained at an IRPM conference the other year’s car park disputes is now their biggest issue. One well know surveyor was keen to point out that we also have that problem over here.. That’s of course true but I would guess an awful lot of leaseholders would be very very happy if their biggest concern was the carpark space?
Sorry Izaak, There,is something fundamentally wrong with the feudal system of freeholds and leaseholds, as has been acknowledged by every country in the world save England & Wales.
And who benefits from leasehold? It certainly is not the leaseholder is it?
The notion that a 999 year lease solves all is put about by freeholders as a “last throw of the dice” initiative to preserve their assets(which they should never have been allowed to own)
The point of commonhold .is that it takes away the exploitative profiteering motive for buying up freeholds. It takes away the practice of corrupt managing agents becoming “entwined” in the lease agreement (thereby making it all but impossible to sack them).
Why should a third party (often domiciled in an off-shore tax haven) have any role in the ownership of a property?