The All Party Parliamentary Group on leasehold reform today calls for leasehold houses to be banned and for end to onerous ground rents.
This follows the work of the APPG and its secretariat the Leasehold Knowledge Partnership in exposing the scandal of leasehold houses.
Today, Taylor Wimpey undertook to spend £130 million to address the issue after selling houses and flats with doubling ground rents between 2007 – 2011.
The report urges that commonhold tenure which was introduced in 2002 be to made to work or be abandoned.
Commonhold, which was introduced with the Commonhold and Leasehold Reform Act 2002, is the form of tenure arranging the ownership of flats which prevails in the rest of the world.
Only England and Wales persist with leasehold, a long tenancy, which puts home owners in a position of vulnerability in relation to the freeholder, or landlord.
Considerable powers are vested in the landlord – to appoint the management of a block, to collect ground rents, obtain loaded insurance commissions – even though the freeholder is invariably a minority shareholder in the block.
A freehold might only be worth five per cent of the collective value of the leases, yet has the preponderance of power.
The APPG rejects the Law Commission report on “event fees” – exit fees payable on resale of retirement flats. The Law Commission supports these deferred fees, provided they are transparent.
The APPG argues that they should be for the provision of a service.
The APPG urges the end of lease forfeiture, as recommended by the Law Commission in 2006.
With lease extensions costs, the APPG recommends that the cost of enfranchisement and extension be based on a formulaic model that does not require the mediation of tribunals.
Property tribunal upholds lease extension ‘scandal’ that pays millions to freeholders
The APPG wants right to manage to be simpler, and to remove the bar on RTM if 25% is commercial property.
With tribunal costs, the APPG argues for a simpler and fairer cost regime.
Consideration should be given to how the cost balance might be changed such that a landlord faces the same prospect of the leaseholder’s costs as the leaseholder might face against the landlord were it not for the cost advantage given to the landlord via the terms of the lease.
In conclusion the All Party Parliamentary Group argues for:
Government and parliament can act and have to act to reform leasehold.
Developers have to rectify the impact of their past behaviour on innocent leaseholders.
Owners of the freeholds of residential leaseholders have to end exploitation.
Unfair leasehold terms should be declared void.
Residential flat and house leaseholders deserve fair treatment.
Excellent report and all credit to LKP for its tireless campaigning, but can’t help recalling how helpful (to lessees) elements of the 2002 Act were never implemented even though that statute passed. Sort of makes you wonder who really pulls the strings?
I bought leasehold 20 years ago when in a time-bind having been gazzumped by only £2K for a nice little freehold terrace in a neighbouring street. Now my lease is 67 years and my pension wont let me extend it any time soon. My property is now a cool £40-50K less valuable than that row of terraces. I meanwhile pay annual service charges and ground rent, I organised RTM to release us from a very cynical regime at the time, and now help run the estate voluntarily. I can’t remember when life was normal! Even with RTM, the industry’s managing agents refuse to co-operate even with contractual terms, so we’ve had to change them almost annually. At least we can but it is a weird world of so-called ‘professionalism’. I never find bookkeeping errors that benefit the service charge account and I find loads of basic errors. These people don’t seem able to do even basic bookkeeping no matter what accreditation they claim.
It is a scandal. And why do residential owners have to get accrual accounts? The ICAEW Tech 03/11 confirms the law does not prescribe that accrual accounts meet the requirement to account to leaseholders: more suited to organisations that control their own chequebooks and bookkeeping during the year, not like pensioners in retirement homes who just pay out sizeable sums on demand.
Even with notes these accrual accounts are obscure and can be very misleading documents, if you know your way around a trial balance. I have yet to find accurate annual accounting checking the background ‘workings’ as part of a ‘client’ RTMCo. Poor standards are rife. Leaseholders are sheep to be fleeced at every turn, it seems.
If I see any of these recommendations in the next Queen’s Speech I’ll eat a ripe banana or two. But I like bananas.
I would like to report on the replies I have had to a question I asked both the Conservative Party and Labour Party
Question. Will you be included something in your manifesto about Lasehold Reform.
Answer from the Conservatve Party
This election is about the strong and stable leadership the country needs to serve us through Brexit and beyond. So the choice is between Theresa May and a floundering, weak and nonsensical.Jeremy Corbyn propped up by a coalition of chaos.
So not interested in leasehold . I give them 0 out of 10 for completely goring the subject.
Answer from the Labour Party
Theresa May has no answer to the housing problem.
Labour will build over a million new homes in 5 years with at least half being council or social homes. They will introduce rent controls.
Labour do not seem interested in Leasehold but I give them 1 out of 10 for mentioning housing..
Still awaiting a reply from the Liberal Democrats
The Liberals are probably too busy trying to work out if gay sex is a ‘SIN’. Bunch of eejits.
If leasehold is reformed, which I hope it is, what about all the mugs like me , who paid a serious amount of money to extend the lease, in order to protect their asset. Yet again the freeholder will have won by keeping the money for an extension that might not be needed if common hold is adopted as the norm. I know I sound bitter and twisted but you can’t help feeling that way, I’m just an average person who could have spent that money on something more worthwhile instead of lining the freeholders pockets. Que sera sera.
When slavery was abolished the government paid compensation to the slave owners for their losses. Would you really leaseholders to be compensated? They will grandfather it to avoid that and someday simply outlaw new leasehold.
Who “they” is remains to be seen, but it will happen eventually. Certainly, I don’t see the govt being in a position to offer compensation to anyone.
Anyone in a position to extend their lease should do so and not wait for slavery, (sorry I meant leasehold) to be abolished. When and if, that happens compensation will be offered to the freeholders – and I for myself would pay anything to get rid of their hold over me. Please, yes abolish it and give us the right to manage our homes.
Leaseholders, you have the right to mange your home. RTM. Go for it!
Yes Leasehold is crap. However flat leaseholders agreed to the terms when they signed up to the bloody lease on purchase.. (1) I agree that new build flats should be commonhold. (2) Leadeholders who have alreaddy purchased their flat and are unhappy with the managing agent should (1) purchase the Freehold (2) apply for ‘Right right to manage’. (3) stop whinging and up with it!! I mean c’mon people , step up to the plate – DO SOMETHING.Too much apathy.
I practically single-handedly acquired and now help run RTM for my block. It is not as simple a process as some might claim (just organising the other flats), and the personal abuse that comes back from under-threat managing agents is a sight to experience.
Even getting RTM is no protection. Self managing is not easy in organisation terms, even if like me you know the law as well as most, and accounting and so on. Not unless maybe you are lucky to have a block full of people used to working professionally as a team.
So what do you do? You appoint ‘professional agents’ to cover your back. No such animal in my experience so far. We have had to sack almost one agent a year to stay solvent because they treated our management team with contempt once they sussed out the lack of collective expertise (inevitable sadly), ignored written contractual obligations (just getting compliance to the RiCs code is a hoot in practice), went on unauthorised spending sprees, and failed to provide cashbook records to their RTM client with the seeming attitude that leaseholders should just sit back and take it as ever before. Don’t play-act at managing.
The agent holds the purse strings and knows this is the real power.
No idea why the ‘industry’ requires an RTMCo to allow the managing agents to hold the trust bank account, rather than the RTMCO hold its own service charges on trust in its name and mandate its agent to sign off spending after approval? At least that way RTM directors might once in a while get to see a real bank statement. We lost track of our true verified bank balance years ago no matter how often we have complained. Promises of financial web portals are made and forgotten.
Read a few of the horror stories in the courts and notice how often lessee-run companies (RMCs or RTMs) had ‘professional agents’ working for them and still ended up in the legal mire. Guess who pays the piper? Not the professional agents.
After five years RTM I can safely say there are many ways an RTMCo is unable in practice to exercise the right to manage. No matter where the appointed agents may be found to be accredited as ‘helpful’ to leaseholders.
Paddy you are walking the walk and good for you. RTM is not the holy grail but it’s better than not having RTM.. self managing is not easy but Is it not difficult either. I did it for 17 yrs in a block of seven ( shared Freehold) and it worked well. I suggest you call a meeting and ask fellow leaseholders if they wish to purchase the Freehold or self manage. You should have at least 3 who will be willing to manage the block. Ask your fellow leaseholders if they are willing to reduce the service charge for the In house management team by dividing the commercial agents annual fee between them to prevent martyrdom or resentment of the the new team! In the meantime keep the service charge ‘reserve fund’ ‘Major Works’ fund to an absolute minimum that way they have less of your money to steal. GET RID Paddy!!!
Five years after RTM we have had a different experience. We have a good LKP-accredited managing agent. Our property manager is first class (we have discussed raising his authorised expenditure limit, currently £1,000). We have had no questionable expenditures by him, ever. Our first new managing agent was ethical (also LKP accredited) but with a weak property manager. His lack of initiative and general disorganization caused us to change. We are still chasing an insurance claim that he didn’t follow up on as he should have.
It still astonishes me that the meanest little cafe and bed and breakfast has online ratings but ratings for managing agents are essentially non-existent. ARMA membership is almost a disrecommendation so unreliable is it. LKP accreditation I would summarise, with apologies to LKP, as “Some good practices and no known thieves”. It doesn’t mean that the company has scale, has a wide panel of contractors, has universally competent staff or an ability to cope with staff turnover (we chose our first managing agent in part on the basis of a strong interview by someone who left within a month of the company’s appointment). It doesn’t mean the company won’t stretch the property manager’s time across additional developments, or that it will ever account for it.
We still don’t have a real-time view of our financials with integrated commitment accounting and I don’t see much prospect of it. At least one LKP-accredited managing agent does offer this but in other respects we judged it too small for our development, sadly.
I can’t agree with keeping the reserves to a minimum unless you are employing a company you don’t trust and plan to fire. Much better is to have controls and a contractual agreement on expenditure authorisation.
I would never buy leasehold again, but if for some reason I had to I would preferentially chose a flat with a share of the freehold and in a development with an RTM Company. I would then look closely at the annual reports and the reserves and try to assess how well the committee worked and its sustainability. In my own development we have had the same small committee since we first got organized and, given what we inherited, that’s been a burden on members. In other larger developments I know the committee is larger, and in one each position has an alternate (if the finance director emigrates to NZ the replacement steps in without a beat being missed).
Surprisingly, since obtaining RTM we have only had one prospective buyer do proper diligence on all of this kind of thing. He wanted annual reports and newsletters, in addition to building reports etc., and to interview a committee member (at length). Somewhat disappointingly he didn’t buy (he’d have been a good committee member and had been elsewhere), though he professed to be not just satisfied, but impressed.
Paul, Well done for choosing an LKP accredited Agent. My suggestion to Paddy of keeping the reserves to a minimum still stands as he clearly has not been dealing with reputable agents ( do any actually exsist) Once the agent has your money then consider it gone forever!! We have an annual ‘general reserve’ of 4000£ . Plus trillions for ‘Major works’. I refuse to contribute to the majors Works fund as as an s20 has not been carried out. And I believe the agent is trying to rip us off- they have form….Needless to say, I have been threatened for the past 2 yrs with forfeiture yadda yadda spiel. HA! Picked on the wrong gal. I contribute my proportional share of the RECOVERABLE sums due under my lease terms. Our £4000 ‘General reserve’ always manages to be spent by our agent regardless of the fact that there is nothing to spend it on.
We are in our 7th year of RTM with a different experience to both Paddy and Paul Joseph. There are 22 flats altogether and we started with 7 directors ( now down to 4! ). From the outset we chose to self manage as we did not trust ANY managing agents particularly those in ARMA.!
It has been really tough at times BUT we have complete control of the purse strings and every penny collected has been used to bring our homes back to the standard they should always have been instead of lining some ‘spivs’ pocket!!!
Unfortunately as we all know with leasehold these homes do NOT belong to us and on enquiring the cost to buy the freehold we were asked for £3-4000 first! We have not taken this any further at present.
There are still questions I want answers to re: RTM but FPRA, LEASE and Solicitors have been unable to give me the answers!
I certainly appreciate all the hard work that has been done by Melissa Briggs and now LKP in bringing attention to leasehold issues.
Lesley well done! You are clearly an organised determined woman with common sense!! The property in which I have a flat ( shared Freehold) was self managed for more than 20 yrs – 17yrs by me send a fellow director. I stepped down in 2014 , We have now directors who in my opinion who are like lambs to the slaughter in thrall to our very naughty Managing agent who was formerly a peverel/ county estate management associate director…It will all end in tears………. Good for you for making the time to run your block and get that Freehold pronto!!
If you are RTM why not just sack your managing agent, I believe you only need to give them three months notice. I would have thought just the threat of this would pull them into line. If not employ somebody else. Or am I missing something ?
Ian, it seems a majority of leaseholders are apathetic, unlike Paddy,Paul Joseph and the mighty Lesley. “Can’t be bothered to change the agent even though they are venal and useless”( how may times I have heard that) THAT is why/ how these spivvy boy and girl agent’s get away with it. SIMPLES!! Flat leaseholder had better start rolling their sleeves up and start getting involves In the management of their blocks.
It’s true that a majority of leaseholders don’t really want to engage. Many are busy. Some are old and just want someone they trust to deal with it all. Some are genuinely indifferent to being overcharged: I am thinking of
1. The Nigerian government official who has borrowed money to put into London property and which may be repaid if and when he flips it at a profit.
2. The Qatari family who employ accountants from overseas to make sure the bills are paid and don’t mind where the decimal point is. (Flat used for a few weeks during the hottest months of the year at home).
3. The offshore owner of whatever stripe (tax-dodging middle class professionals from countries with lax tax collection regimes) whose flat is owned by a British Virgin Island or other British offshore domiciled company with nominee directors. These are not all 3rd world citizens either. Many I know of are British. Some have offshore connections by virtue of employment, others as result of family connections. Some are no doubt trying to ensure that family can’t get their hands on assets in the event of divorce. There are many excuses.
4. Very wealthy people who just either don’t notice or don’t care if their pockets are picked.
5. Flats owned by UK corporations who invest pension funds in them and permit directors to use them on visits to London (e.g., to attend cricket matches that coincide with meetings).
6. The elderly person who has no fight left and whose family are not close enough to intervene (as Melissa Briggs was) if they are ripped off.
7. The student whose wealthy family have bought a flat for the duration of their studies in London but who has turned it over to an agent while they live somewhere cheaper.
8. The intelligence service professionals and others who for various reasons need never to raise any flags of any kind.
9. People using flats for purposes that are illegal or for activities on which taxes are not being declared and paid.
The classes of people individually who are relatively indifferent to mismanagement and even fraud are surprisingly large. What they have in common is that they can afford it. Consider that in Westminster 11% of flats are owned by offshore companies. These are people with something to hide. If you have something to hide, the source of your money or taxes you didn’t pay or assets you don’t wish to be discovered by a spouse e.g., being rooked on the service charges is a secondary consideration. What matters most is that you have an asset that is securely held and which can be liquidated on demand.
The person on whom the injustice falls hardest is the rule-abiding, taxpaying UK resident (Londoners in particular) who make no use of offshore companies, concealed ownership, rigged rates of interest on loans to suck profits offshore or any other legal but morally obnoxious dodges.
These people have to pay more for their home in the first place because of London’s attractiveness to global property investors, both good and bad. Then in many cases they find themselves among a minority who actually gives a fig about being ripped off. The landlord and landlord-controlled managing agent obstruct their efforts to organize owners; even finding out who they are can be a huge struggle (I speak from experience).
So, here’s our solution to the engagement problem:
1. We (the directors) provide a very comprehensive annual report and occasional newsletters, both of a high standard.
2. While we typically only have about 15% of owners attend the AGM we are fairly insistent on getting proxy votes from those not attending. They can appoint anyone they like, but more often than not the appoint a director.
The quality of our communications and the increasingly visible results of RTM engenders trust. We have always acted on a consensus basis but in the event of a leaseholder objecting later to a decision taken at the AGM two questions arise: 1. Are you a member of the RTM Company and 2. Did you vote or appoint a proxy? (People too busy to do this annually can appoint a standing proxy).
If the answer to the first is no: you may like to consider joining. If you opt not to do so you have no say in any decision of the RTM Company, end of story. Otherwise: please refer to the minutes of the AGM where the democratic decision of the attendees and proxies is recorded.
Most of our directors are resident leaseholders. None of this involves anything in the slightest underhand, quite the reverse. The passivity of the busy, offshore, non-residents, non-UK taxpayers needn’t be an insurmountable obstacle to decision-making.
We use a Google Form and URL in the form of proxy.developmentwebaddress to collect the proxy appointments.
A majority of leaseholders are in the RTM company and the number goes up every time a new leaseholder buys from a non-member so the democratic basis of decisions gets stronger all the time.
I am writing from a London perspective and I realize that there are different and probably less diverse reasons for apathy elsewhere but I think the remedy could be broadly the same, with one exception perhaps: in my experience there is a strong correlation between engagement and having an email address. We will not accept membership applications for our RTM Company without one. I don’t envy those trying to remedy injustice in developments with mostly offline leaseholders. At least in the case of retirement homes they are likely to be mostly owner-occupiers.
The last line of above LKP report says : ” Unfair leasehold terms should be declared void .”
The builder charges the market price for new build property which covers the total cost of land and construction plus the builder’s profit. .It is the same cost to build whether sold under freehold or leasehold title. .
The unfair terms in sale contract of a lease are (1) payment of ground rent for 99 years .or 125 years term with doubling over 33 0r 25 or 10years. ( 2) the value of the lease declines to zero at the end of the lease.. So its the lease itself which should be declared void.
Another issue may raise its ugly head?
Since it is very unlikely that a developer selling on a leasehold basis would sell their properties if down the road a competing developer was selling their properties freehold, could it be that the developers have colluded with each other to all sell leasehold properties?
Of course Mr Epstein. A cartel.
In my experience over years, leaseholders buy their flats to live a private life free of being ‘tenants’. They then live in denial and some genuinely seem to think that the ‘professionals’ who invoice them are experts with integrity and the law would never allow scams.
I love the meetings when someone’s light-bulb moment finally happens and they shout, “This shouldn’t be allowed!”
Quite. The ‘scam’ with leasehold is how even courts treat the term freehold ‘landlord’ as somehow bestowing more human rights than the flat owners’ have, i.e. to profit from ownership (leaseholders invest the bulk but rarely does anyone say they should see a fair return, let alone a profit).
Unlike periodic rental landlords, those who invest in freeholds pay as little as 5% in the early years (in the first thirty years the freehold is still less than 10% of the total value, according to the 2016 Savills graph).
These ‘landlords’ invest not a penny more in the premises but can apply to build on the top immediately, and lord it over the majority stake-holders living in the flats. No problem says the courts. They have human rights.
Only Brits would accept leasehold as moral housing tenure… nation of landowners after all, and those who govern tend from that ilk or can’t wait to join.
I see little in the way of proper reform ever coming about, and I expect the APPG may quietly sink when its two driving parliamentarians retire.
Parliament brought in homelessness legislation in 1977. Then promptly sold off most of the taxes-bought social housing stock for votes.
Now we have a housing crisis? There’s always been a housing crisis. You don’t need to be Marxist to see the logic why. I’m not, by the way.
PS: We gave our last agents three months’ notice. They went on a final un-authorised spending spree for their own advantage; i.e. paid themselves without seeking authority, and their contract gave them none from us as client. I fear the attitude might be, ‘what you suckers gonna do about it’? Agents know leaseholder run companies have no funds, or willpower, to chase after breached contract terms. Leaseholders just want the grass cut, the buildings maintained, etc at a fair price.
A normal kinda cove’s life.
Well Paddy the Leaseholders in your block had better get off their arses and do what Lesley had done- SELF. MANAGEMENT.
Did you take your managing agent to task for going on an “Unathorised spending spree” ? If not why not? Who the hell is in charge here Paddy? Take a leaf out of Lesley’s book!
Many thanks for your kind comments, not sure I am worthy of the accolades but thanks anyway!! It does seem a shame you have stepped down on your block as you clearly did a great job.
With regard to our freehold. I cannot think of anything else in the world one might wish to purchase where you are asked for a fee BEFORE being told the cost!!! Of course the old adage could apply here — ‘If you need to ask the price you can’t afford it’!!!
Unfortunately our freeholder Locker foundation (a charity) refuses to have any communication whatsoever with us directly and insists on still using our ex managing agent SDL Bigwood (formerly CP Bigwood, formerly Curry & Partners) who were the ones asking for the fee!! They also do not answer correspondence even from solicitors or when an SAE is provided!! So we are at a bit of a stalemate at the moment.
Lesley you deserve every accolade. I have nothing but admiration for a strong determined Woman ( or Man) who refuses to be cowed intimidated or ripped off by Rachmanist wannabe ‘Managing Agents’. Once again I say Well done you!
I misunderstood your first post regarding the purchase of the Freehold-£4000 just to be told of cost???? The ex managing agent are clearly really quite cross at being turfed out of presumably a nice little earner and the £4000 would go some way to salve their itchy little hands. Why is your Freeholder refusing to communicate directly with you? Do they have a commercial connection with previous managing agent- E.G. The charity directors are also directors of your ex managing agent? It might be prudent to do some digging to find a connection …. . Also,inform your Freeholder that you will be contacting the relevant authorities regarding their charity status….. that might give them a bit of a jolt!! Keep going until you and your fellow leaseholders purchase the Freehold at the fair and proper cost.
“These ‘landlords’ invest not a penny more in the premises but can apply to build on the top immediately, and lord it over the majority stake-holders living in the flats. No problem says the courts. They have human rights.
Only Brits would accept leasehold as moral housing tenure… nation of landowners after all, and those who govern tend from that ilk or can’t wait to join.”
If we had a true democracy this practice would be obsolete – its about time we ” took control of our laws” …
With respect it would be far more plausible if you and your fellow leaseholders took control and applied for RTM and then self managed the block. What is preventing you from doing this? Re ‘Democracy’- there is no true democracy just a pretence of one.Forget about “taking control of our laws’ , take control of the management of your block.
1) Have you applied to by purchase the Freehold?
2) Were you aware that you were purchasing a leasehold flat?
3) When you signed the lease you were agreeing to its terms.
4) Presumably you read the lease before signing it?
5) Please stop playing a victim, do something positive about turning the situation around.
6) What was the result at your tribunal hearing?
Everything Mr Paul Joseph wrote (see comment above) has also been my experience. As a Londoner I have to agree. Owner occupiers are ignored by the law in favour of tax dodgers,
Hey Paul Joseph that is a great post. I agree with you BUT the leaseholders who fall into the category of ‘eegits ‘ ( directors of freehold of property in which I own a flat) ‘eejits’ – the fit youngish leaseholders who can’t be bothered to go RTM ( Too much hassle) ‘eejits’ full stop!! Why have YOU, Paddy and Lesley walked the walk? I did too for 17yrs but when I stepped down in 2014 the 3 replacement directors chose to go with a commercial managing agent, Too gormless to run it themselves. The agent ( former peverel) has at least £80’000 of their and 3 other shareholders in ‘ TRUST’ for Major works due in 2018 on a property that has been maintained to the highest standard over the past 20 + yrs.Oh dear,….. Tears before bedtime. At least my money isn’t in the ‘TRUST’!!
Why did I do something? I suppose the simple answer is I wasn’t rich enough to have my pocket picked and to be indifferent about it. It’s one thing lose a few shillings to someone worse off, but to have a billionaire take you to the cleaners is another matter.
Second, I had no idea what I was getting into; no idea what a cesspit leasehold was. I just started and one thing led to another. However, we’ve been fortunate in having a small board with complementary skills, one that has worked well and stuck together from day one and which has had no turnover.
We use a professional managing agent. Our block — with several full time staff — is too large for the directors to manage themselves, unremunerated as we are, while holding down day jobs. I am not worried about the security of our funds. We have a good managing agent, a good property manager, and a good working relationship. And we use an independent firm for managing and reporting on our finances. They are also very good and highly reputable.
One could argue that the directors are indeed idiots to do all this work out of the goodness of our hearts. But in fact it’s not altruism. If we didn’t defend our own interests we’d suffer, and perhaps disproportionately more than others. One of the additional surprises, beyond some of those enumerated earlier, is how many leaseholders turn out to own flats in others buildings. “Oh, yes, we had that problem with one of my other flats in such and such a development” is something I’ve heard a few times. Most of the tax-paying owner-occupiers fall into the category of people for whom their property is their largest asset, not one of a portfolio whose profits are inspected in sunnier climes. But in London we’re “all in it together” as they say.
There will always be free-riders, and some will not even know or care that they are free-riders. If we work to save the RTM Company some money the beneficiaries include any anonymous tax-dodging offshore leaseholders who may have large property portfolios. That’s the game as it is but I prefer to fix the roof it leaks than to do nothing because someone undeserving will benefit. After all, I benefited from the Commonhold and Leasehold Reform Act of 2002 which I didn’t even learn of for another 8 years, long after I’d purchased a leasehold flat. We must all plant trees for the next generation to enjoy shade. If we act for the greatest common good we make the world a better place.
We do intend to own the freehold. And if I could make it happen I’d support a conversion to commonhold. Realistically, that’s unlikely unless it becomes easier to achieve.
If we acquire the freehold and become our own landlord we’ll have to comply with landlord and tenant legislation and send ourselves Section 20 notices and so on. THAT is a closer approximation of idiocy!
And the greatest idiocy of all is surely Sebastian O’Kelly’s. Is he not like that old Turk, The Hodja, who was found one day putting a spoon of yogurt into a lake. “That’ll never work” the Hodja was told, to which he replied “But what if it does!”. Either way, I am an implacable and necessarily optimistic supporter. And what a magnificent job he has done so far.
Surely the major works at your development will require a Section 20 notice and you can object if the works are not necessary? You could even obtain independent advice and share it. I have some sympathy with people who shy away from becoming directors but not a lot for people who abdicate their responsibilities. Have you inquired if they have directors and officers insurance? If they don’t they could be personally liable for a lot of money if found not to have acted properly.
PS I hope it’s clear I’m paying tribute to Sebastian’s indomitable optimism and his sense of justice not mocking his prospects of achieving results. And I include Martin in this.
Have YOU written to your MP asking for leasehold abolition to be in the manifesto? I have.
Paul love your post. Re the ‘Major Works’ in our Victorian conversion:
The Managing Agent when appointed in 2014 advised the directors to have a “15 year plan” survey carried by a surveyor who was of course known to the Agent ( He told me they go back a long way!)
The survey was carried at a cost of £1000 + and took about 5 months for the leaseholders to be given a copy? When I tracked down the surveyor ( I got his mobile number) he told me that the report had been ready for a while but “had been going to and fro between the agent and the director” who are utterly dimwitted and naive . He said that he thought the pricing of the works was “Far too high and he wished to revisit them”.
Fast forward to Jan 2015. The agent had price costed the ‘Major works’ for 2018 at £108’000 including ‘professional fees and vat” Ha ha ha . LAUGH ????. She had somehow managed to persuade the directors to bring “some work forward and move some back” HUH? What does that even mean? Said that they were saving us £37’000 by doing all the works together? Madness. I think about 65’000 of that ridiculous arbitrary figure is the agent fee!!!!
The surveyors report writes that the property is in very good condition and that there are NO SIGNIFICANT works required to the elevation over a 15 yr period apart from minor pointing.
I implored the directors to see reason ( long story) Anyhow, having been a director/ manager of the building for 17yrs organising all works including replacement Flat roof etc and run my own interiors company, I of course know the market. In 2015 i asked 2 independent and well regarded contractors who have worked on similar properties in the area what the cost might be for Front back elevation / alarmed scaffold/ possible replacement of mansard ( roof even though it has a good ten years to go) They gave me a quote and said to add 2.5% year on year. That will then give an approximate guide for the sinking fund and the monies can be collected accordingly. When the s20 is carried and a contractor has been duly selected and the works agreed we can then make up any shortfall if indeed there is any.
Therefore I have not contributed to the ‘Major works fund’ They have already costed the works , even though we have not been told what these works are and are collecting monies for it. That is in breach of the s20 consultation.
The directors do have insurance but I do not believe that it will stand them in good stead as I have been warning them that they are not acting in the best interests of the shareholders and I believe that they have been negligent.
An AGM was called and cancelled in Dec 2015 and we have not had one since. I have of course been threatened with forfeiture Yadda yadda. The directors have allowed the agent to spend north of £7000 of shareholders money on 5 factually incorrect letters from one London based solicitor £2000 for 2 letters and a Brighton based solicitor 5000 for 3. Oh dear!
Yes I have written to my MP asking for leasehold abolition to be in the manifesto and Sebastian O’ Kelly and Martin Boyd Rock!
PS . Paul I agree that Leaseholders can object to Works if they are not thought necessary , but here’s the thing- Once the Agent has the cash they can plough ahead with totally unnecessary works and say they are URGENT paticularly if the ‘Major Works’ are in progress. Are the leaseholders going to ask them to obtain retrospective dispensation???????? What do you think ?
Been fascinated by the comments to this article. Bit like a therapy corner to vent pent-up stuff!
Once you know, it is easy to identify the cesspit of leasehold -both in the unfair lease contracts (like the fact a landlord can usually contractually charge all flats legal costs pursuing s146 against one flat) and in the naked exploitation by the ‘industry’ of leasehold home owners. It is a stacked deck.
People say, “Well, you knew you were buying a lease.” Ordinary people, no doubt gullible, think laws help protect them from scams and sharp practice and gives them rights. They reasonably accept having to pay for legitimate costs for services. Usually the lease is an after-thought by the conveyancing solicitor and estate agents – was in my case anyway – which adds to the impression everything is just routine. Nothing to see here.
When you realise what a lease is, you might fairly wonder why every solicitor paid to act for a buyer doesn’t feel compelled in law to spell out in bold type at the get-go: “Do not buy leasehold! It has not real protection for you, even if things appear okay at the point of buying”.
Needing a mining or wood rot survey is, in probability terms, far less a threat than the almost guarantee that leasehold will damage the leaseholder’s quiet enjoyment of their private life.
For me, the solutions are not as clear as the problems, as I have experienced how other leaseholders can be almost your and their own worst enemy. Many can see a service charge as a ‘bank of credit’ where they can grab as much back for their own flat as they can each year, or make reckless demands cost-wise in the confidence others are sharing the costs.
In our estate, some blocks incurred very silly sums for emergency call-outs just to reset communal light timers every six months, costing more per single out-of-hours call-out than one flat was paying in service charges for a year! These hallways were served by street lights right outside their glass front door and you could see a small spider on the unlit wall at night from metres away. The residents felt they were entitled to have the timers reset promptly and would not learn to do it themselves.
What system could solve the most serious problems? Flats sell on a regular basis. Even if you start with a few stalwart residents willing, and more importantly able, to self-manage, they can be gone in a blink of an eye, and as said above, more gullible residents step up to get fleeced by predatory agents.
There are some simple remedies tight off the bat:-
Equalize rights and responsibilities in all lease contracts by over-arching law changes – as proposed by APPG. No more advantage to landlords to charge their costs no matter what.
Require transparent itemised accounting… not accrual accounts with a few vague notes which non-bookkeepers do not understand. I have found ‘bodies’ routinely buried in ‘digitally-tippexed’ trial balances from where the final accounts should emerge. The final accounts do not reveal these ‘bodies’.
The law could easily require that a full extended trial balance must accompany all year-end certifications per the lease. The government could do more to explain how to read and require a full trial balance – similar to how credit card companies, mortgage companies and utility companies usually supply ‘idiot sheet’ guides on how to read their statements.
Why are householders expected to need such guides but be expert in reading accrual accounts? I have yet to meet a neighbour who knows what an accrual or creditor adjustment is, or where to find one. Notice how nobody ever mentions that ordinary householders are fobbed off with such obscure accrual accounts every year – assuming they get any accounts at all?
The law could easily require -with real teeth- that landlords issue running balance invoices and individual year end account statements of all charges and receipts since the last statement – like a mortgage statement, utility bill or credit card statement.
Notice how service charge invoices usually arrive as stand alone debts? Agents can’t be bothered to update each flat’s ledger account, presumably preferring to be free to dump another out-of-the-blue old debt invoice when the flat wants to sell, or just after a new owner takes over?
If annual account statements were required to be accurate, complete and binding on the landlord (he should know his own bookkeeping invoicing and receipts records, after all) and matched by running balance invoicing twice a year, if that is the timescales in the lease, then the ‘old debt’ scams that arise on sale, or just after — claiming ‘unpaid old debts’ that the agent/landlord holds on file for that flat— could not arise.
Apart from this, the common ‘sales pack’ delays would be less possible as sellers would have last year’s binding itemised statement of account and the most recent service charge invoice with its also binding brought forward balance.
No chance of vagueness.
The leasehold industry operates in a unique financial cesspit that leads to the various scams and exploitation. Government could very easily sort this bit out for a start.
Why does it not do so?
Why does it not do so?
Because it’s Conservative to keep things the way they are and it suits some people very nicely?
The Tchenguiz family has been a six figure donor to the Conservative Party on a repeat basis.
Vincent Tchenguiz has employed former Chancellor of the Exchequer Norman Lamont on a retainer at £1,000/day for “advice” (on what? going broke?).
This web site has recorded the Cameron family connections with the freehold investment fund, Long Harbour: £1.2bn of Chinese money mining profits from British taxpayers via methods learned in the Tchenguiz family.
There are many more such connections between the party and those with money, some known (the recent link with £5m of dark money from HSBC) and some secret.
I’m afraid the extent of the rigging of the economy against the interests of the 99.99% will end in tears or worse. Leasehold is bad enough but it’s part of a much larger pattern.
Consider this: https://www.youtube.com/watch?v=2gK3s5j7PgA — All The Plenary’s Men a compelling documentary on systemic corruption in the banking system. See also the work of the financial journalist Ian Fraser — his book Shredded, and his more recent expose of corruption in RBS’s Global Restructuring Group — for which some people did finally go to jail.
The broader context is globalization and financialisation of the economy, which has been worse in the UK than in many countries, exacerbated by the UK having made itself (London property included) and its tax havens a preferred destination for flight capital.
People are disillusioned (http://www.politics.co.uk/comment-analysis/2017/04/10/osborne-the-city-mainstream-politics-must-condemn-this) but are being invited to blame anyone but those responsible for the fallout of rising inequality and perceptions of injustice.
In the US the likes of Nick Hanauer, an early investor in Amazon, and a billionaire with a conscience (they exist) has been warning the 0.01% there will be an explosion if inequality isn’t addressed and soon. It turns out that quite a few of the uber rich would rather secure bolt holes in NZ in case the balloon goes up (Peter Thiel among them).
Leasehold and a lot else will come to violent end with one big data leak from the British Virgin Islands.
The Conservatives and, more importantly, their wealthy donors, are willing to gamble 1.. That it won’t happen. 2. That if it does happen they will not be affected. and 3. That someone else can be blamed.
They say they want a country that works for everyone. The persistence of leasehold is evidence that this is simply not true.
Sadly, the people who are by far the worst ripped off by leasehold are Conservative voters — it’s hard to steal from those who have little or nothing, who have not worked and saved, and as David Cameron never tired of saying “tried to do the right thing.”.
This web site has documented that the retirement homes who have so often been the target of malpractice by corrupt managing agents and landlords are in Conservative constituencies. Some day the worm will turn.
All that said, I’d vote for Peter Bottomley if he were my MP. I wish the rest of his party was as clean.
Well Paddy, what are flat leaseholders gonna do about it??
Like Paddy I have also been very interested in the comments and experiences related recently as it definitely makes you feel you are not alone. I also agree with Paul as to the reasons why we went RTM. We do not have a bottomless pit of money and it actually makes me laugh that RTM is granted on a ‘no fault’ basis. WHY would you put yourself through this stress and responsibility if your managing agent was doing a good job and there was no fault!!!! I wonder how many RTM’s have actually been set up on a ‘no fault’ basis?
The last straw came for us when rain was pouring through the roof over our communal stairway and cascading down the stairs while at the same time we were being invoiced for £3,100 ( on top of our normal service charge ) to replace corroded metal balcony railings ( that had never been maintained properly ) with stainless steel and glass! We questioned the condition of said railings before purchase and were told by the estate agent they were due for painting, which we assumed ( stupidly it turns out! ) would be done properly ie: corrosion replaced or treated BEFORE painting. Didn’t happen but of course by then we were well and truly hooked!! Things just went from bad to worse for 11 yrs until RTM!! Now after another 6 yrs we are almost there with a sound building and no extra charges needed!
Kim asked why our freeholder won’t communicate with us directly and that is one of the questions I would like answered myself as my understanding of leasehold is that our contract is with the freeholder NOT any managing agent and now we are that managing agent they should be dealing with us??????
I was also hoping perhaps Paddy could answer another question as to the CORRECT procedure at handover with regards to accounts. We were told WE had to produce the accounts as our acquisiton date was a month before our end of year but how could we when we had nothing to do with that year? We had paid our service charge up to the end of year.
I also agree the immediate change to commonhold for flats would solve many problems.
Lesley you are absolutely correct in that your contract is with your lease EG your landlord/ Freeholder) and NOT the Managing Agent .Dig deep and you may find a connection between Freeholder and agent! In any case you should investigate the charitable status of your landlord. To paraphrase the bard- ‘ There is something fishy in the state of Denmark’!!
Almost inevitably all political parties will be sparse on the detail when it comes to housing issues.
What many may have missed is that leasehold has not worked well under any political administration. The ground rent problem has been ongoing for at least two decades and the issue of ground rents on houses was already active in 2006.
The developers are now rightly seen as being in the wrong but they have only been allowed to exploit weaknesses in the law becasue there were no rules to stop them. The blame is put on the politicians but they also would not have seen to detail.
The real finger of blame should perhaps be pointed at the officials responsible for this part of the law who have said and done nothing over so many years.
It was civil servants who drafted Grant Shapps comments about the system “mostly working well” and there being a need for a “balance” in the interests of leaseholders and landlords. It was also the civil servants who had told Labour Housing Ministers there were no problems. It is of course civil servants who draft any response to questions on leasehold issues.
Was it Lord Faulks idea when he was secretary of state for justice to go and speak with the Lords on the very morning of the first LKP round table on commonhold and suggest this was perhaps a “long grass” issue. Or was it the idea of the officials who had know for at least 6 years the legislation fundamentally flawed.
Was it the Housing Ministers idea that his officials should have their only meeting with the developers on leasehold matters in 2016 just the day before the APPG to consider ground rents on houses..
The recent political imitative to say things must change does not come from the advice of officials but the coverage we finally got into the national press.
The question to be asked is not which political party will change things but will any party hold the civil servants to account.
While none of is likely to be shocked to find Sir Humphreys in the civil service telling the minister for housing that leasehold reform would be “brave”, you have to wonder about their motivation.
A glance at the Wikipedia entry for Baron Faulks suggests a background of immense privilege and it’s tempting to wonder if any ground rent income paid for part of his expensive private education.
Would it be a stretch to assume that there are many like him in the civil service?
Permit me to quote Upton Sinclair again
It’s been demonstrably true when of tobacco companies and cancer; oil companies and climate change, and, it seems, both wealthy freeholders and the raft of privately educated middle class professionals who have been either dancing for coins at their feet or seeking to emulate them. Those school fees are expensive.
I am reminded of Pierre-Joseph Proudham who declined a cup of PG Tips finest brew on the grounds that “All Proper Tea Is Theft!”