But leaseholders poised to launch crowd-funded appeal
Freeholder Israel Moskovitz has won the right to charge leaseholders £30 admin fees plus VAT to send out his ground rent demands.
The owner of Avon Ground Rents Ltd, a property tribunal regular, defeated a group of 11 leaseholders of an RTM site in Stepney in east London.
Mr Moskovitz decided to deploy counsel to argue the case, in which the leaseholders were self-represented, led by Philipp Stampfer. He argued that the fee should not be paid, and questioned whether it would be levied by the RTM anyway.
It is an open question whether Mr Moskovitz gets his legal costs, with Judge Simon Brilliant ruling “It would not be just or equitable to prevent the Respondent from recovering its costs under the lease (insofar as it can) because the Applicants did not succeed on either issue before us.”
Mr Stampfer and his neighbours believe the issue is of wide significance to leaseholders. They are considering a crowd-funded appeal and seeking a pro bono barrister.
“Any limitation on these fees would be a huge political win and in line with a more consumer friendly leasehold legislation,” he said.
He has raised the matter with his MP Florence Eshalomi, and with Sir Peter Bottomley, Father of the House and co-chair of the All Party Parliamentary Group for leasehold and commonhold reform, of which LKP is secretariat.
“We are in 28 flats in two blocks which means that every six months Avon receives £840 plus VAT just for printing and posting 28 letters. This is outrageous and unreasonable.”
The ruling is here:
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This whole case rests on wording of lease. It’s clear in this lease that fee is payable and hence what would appeal help ? What wider implications? It all depends on individual lease. The costs of Freeholder when appeal is lost will be borne by the leaseholders and costs in an appeal are usually high. Not sure what effect an appeal will have, especially as the decision if it remains as is in the Tribunal without an appeal, is non binding.
Just because a demand can be produced at a “click of a button” many believe that the cost should therefore of producing a demand and gathering it in should be measured in pence. This argument fails to consider what the time and costs that are necessary to get to that position.
Many lessees who run an RTM do not charge for their services and can be very efficient in terms of running costs, working from home posting letters by hand and therefore do feel aggrieved that what for them seems like a simple exercise should carry a cost of say £30 – £50. What is overlooked is their own time that, for a variety of reasons, they do not wish to charge for (and will inevitably feel aggrieved when a neighbour fails to pay or runs vexatious arguments to avoid payment)
Leaving aside the landlords own time there are indeed costs of collection, in terms of staff, computer equipment, office costs, postage and stationary – its only when you have set up an office that you realize how these costs mount up
Third party agents will charge around 10% to 15% of the ground rent collected to gather it in assuming that the rents are not very small.
A ground rent of say £350 could well result in a fee to the landlord of some £30 to £50 per unit and if the lease terms provide for that to be recovered then as noted above it seems unlikely that any appeal will overturn the FTT decision.
Utter rubbish, these people need support from us all.
How can anyone justify a £30-£50 charge on top of a “money for old rope” ground rent?. As for comments about office costs – have we moved back a few decades?
This issue goes deep. When we dig into the grimy world of leasehold exploitation we find widespread excessive fees, strange “commission” payments for insurance/other contracts and a generally very poor deal for all leaseholders,
Come on LKP – show some leadership here.
I would certainly support a crowd funding for these people and it would be fantastic for such a move to inspire greater legal representation for everyone caught up in this U.K. leasehold nightmare.
Best wishes to all.
Surely the answer is to write back confirming payment then charge the landlord £30 for your costs.
Nice! 🙌🏻
The cost of posting a letter out should be included in the extortionate ground rent fees that freeholders are charging. Exactly what else do they do for their money?
I think it is outrageous that an administration fee is levied on top of a bill for ground rent ( and remember you get no service of any kind for paying ground rent). The costs of issuing the demand should be included in the ground rent. Ground rents- as many of us agree- are an outmoded and obnoxious way of receiving money for nothing. The very least a landowner can do is include any costs involved in sending out bills within the rent itself.
It is incorrect to state that ground rent is “for no service” – it is part of the overall sale price when the flat is sold – the flat is sold for a premium along with an obligation to pay into the future a stream of income – the purchaser and their solicitor consider the terms and seek amendments to a lease in many cases prior to signing the lease . In many cases subsequent purchasers re confirm their acceptance of the terms by entering into a deed of covenant with the landlord.
There are indeed abuses in leasehold but they do not stem from the ground rent terms (aside from 10 year doublers) or indeed the lease length but from management practices.
Most managing agents offer an option of payment by bank standing order for a regular reoccurring ground rent. There are a few people who are adamant that they will not pay unless they are sent a s166 notice. It is perfectly reasonable for the managing agent to charge to prepare and serve the notice. Contrary to what people might think, producing the notice is not straightforward, due to the provisions of the act, and has to be done semi manually on some estate management software. Staff have to be paid and the overheads of running an office are considerable. We strongly encourage lessees to pay by standing order and for that reason abhor ground rents that are linked to RPI, because a long running standing order can’t be set up. It may not be a popular decision but it is right. In general terms where a Notice has to be served on a lessee under a lease, the lessor is entitled to the costs properly incurred.
All the comments in favour of being able to charge are evidently written by people with a vested interest in being able to do so. It’s a simple fact of life that ground rent landlords have NEVER charged for collecting ground rent in the past. I’ve been dealing with ground rents for over 40 years, and I have NEVER seen a freeholder attempt to charge for collecting it.
When a developer sets up a development the ground rent is simply a bonus. They therefore factor in the cost of collection when setting the level of ground rent.
Unlike a service charge the leaseholder receives absolutely nothing in return for the ground rent, and it’s therefore adding insult to injury to charge for collecting a rent that confers no benefit.
In this case I think the applicant was correct in saying that `collection’ of ground rents means more than just sending out a demand notice, and that it was aimed at covering the costs of pursuing unpaid rent. This is because, as stated above, ground rent landlords have never charged the leaseholder for collecting the ground rent, and it would not, therefore, have been in the reasonable contemplation of the tenant or their solicitor at the time the lease was granted that such a charge would ever be made.
I also think the Applicant should have pleaded that the provision was unfair under the Consumer Rights Act 2015, as it seems to me that the term is ’contrary to the requirement of good faith’ as set out in the cases of Director General of Fair Trading v First National Bank Plc; Aziz v Caixa d’Estalvis de Catalunya and Cavendish Square Holding BV v Talal El Makdessi.
To my mind this is a classic case of a greedy and unscrupulous landlord attempting to exploit what they see as a loophole in the lease. I can only hope that it’s successfully appealed.
Michael – I wholeheartedly agree.
The landlords and managing agents are a disgrace. They prey on the vulnerable and will use any trick at all to extort extra cash from leaseholders.
I agree that posters above in favour of ground rent obviously have a vested interest. We all know that ground rents are an absolute rip off disguised as payment for use of common areas. The lessees already pay for these common areas in their managerial fee. This is all part of a leasehold system that is specifically designed to benefit landlords at the expense of tenants.
In my view, LKP need to set themselves a higher bar. At present it seems like watered down legislation will allow many unfair practices, such as this, to continue.
In the longer term I think the only language freeholders/managing agents will understand is legal redress.
Wholeheartedly agree. A lot of these charges serve no real purpose. They have no benefit for the leaseholders. They do not benefit the economy either as large amounts of ground rents go to offshore accounts.. Unfortunately there are too many vested interests, many of whom have got their tentacles into the government and the decision-makers. Often property developers are not content just to make money from building a quality property, but they have to make side money on carefully worded contracts that most conveyancing solicitors cast little scrutiny over and fail to properly advise the buyer. This is the case here. As you observe, some of the commentators are clearly on the side of these ground rents companies – a charge for billing you is absurd. Nobody would put up with that for anything else they bought in life, yet for some reason the property industry is allowed to get away with these shady practices. Peversely the government is encouraging people to buy property with things like stamp duty holidays and right to buy schemes but fails to properly regulate the industry.
My story today. I tried over the last 4 months to pay the ground rent and the phone was either not answered or I was told I couldn’t pay by card. I couldn’t get to the post office because a lot of the time I was locked in then people died here because they had contracted the covid at the post office, so I eventually got through to E and M who said all was fine my account was on hold and that I should send an email to say that I wanted to pay by instalments. This I did. When my direct debit for my management charges was not collected I knew something was not right. First Port had now instructed JB Leitch Solicitors because E and M had also taken the Ground Rent to them> My account for First Port was actually in credit. E and M have now taken it away from JB LEITCH and First Port have arranged the payments again, however all I want to do is pay by direct debit over the year and this is a ridiculous situation I still haven’t heard back from E and M all I want to do is pay The stress has been enormous I only wanted to pay.I have asked for the direct debit to be set up over 12 months but E and M are not happy to do that.