The property management company RMG wrongly increased pensioners’ ground rents by 59%, which would have trashed the values of their homes.
The error was spotted by the eight leaseholders at The Old Sidings, Foulridge, Colne BB8 7GQ, which is in the constituency of Andrew Stephenson, Conservative MP for Pendle.
Had it gone unchallenged, the error would have permanently affected the value of the flats and given a huge windfall to the freeholder, Holdmanor Limited, which is owned by London-based residential freehold speculators the Bleier family.
LKP asked for an explanation from Hugh Mcgeever, the chief executive of RMG – the Residential Management Group, which itself is part of the Places for People housing association.
The complaint was not worthy of Mr Mcgeever’s attention, and a response was received from an RMG employee that the “error occurred purely as the result of a very rare human error during the calculation process”. Further, that “we are satisfied that this matter is resolved”.
Leaseholders at The Old Sidings are furious at the response.
One told LKP:
“RMG’s reply has dismissed our concerns as mere trivia, not worthy of their time … It’s a sign of their lack of respect that a letter addressed to the Managing Director Hugh Mcgeever, has simply been passed down the line.”
LKP has now escalated the complaint to David Cowans, the group chief executive of Places for People, and copied the correspondence to Communities Secretary Robert Jenrick and the Competition and Markets Authority.
The complaint is extremely serious.
RMG, which has managed the site for little more than a year, was instructed by Holdmanor Limited to establish the five-year increase in ground rent which rises with RPI.
The directors of Holdmanor Limited are given as:
Between the five years 2014 to 2018 the ground rent was £116.75, but under RMG’s calculation of RPI meant it then leapt to a demand for £185.82, a 59% increase.
The figure was completely wrong, and would have meant that the pensioners would have paid £2,142.40 in wrongly calculated ground rent for the next five-year cycle.
Far more important, the error would have permanently altered the value of these properties to the commercial advantage of RMG’s employer at the site, Holdmanor Limited.
The ground rent would be the basis for calculations in lease extension and enfranchisement (freehold purchase) by the leaseholders.
RMG has now come up with a revised figure of £132.26pa – an increase of 13.2% – but it does so on the basis that ground rents at The Old Sidings were £120.23 for the period 2014-2018. In fact, the ground rents paid were £116.75.
If the revised calculation is based on error, how can the leaseholders be assured that the new figure is correct?
This question is unanswered by RMG.
This extraordinary error also calls into question whether other sites managed by RMG are similarly impacted. This question has not been answered by RMG.
It needs to be.
Leaseholders at The Old Sidings told LKP:
“We have every reason to believe this was not ‘a rare human error’ and the spreadsheet used is universal across RMG’s ground rent calculations, where RPI is the denominator.”
This means many more sites may have had their ground rents wrongly increased by RMG.
RMG is a large block managing agent in the leasehold sector, although it is unclear how large. According to RMG’s website, it has a “portfolio spanning over 110,000 households”; according to the Places for People website RMG “is responsible for managing around 80,000 properties for a range of clients”.
Leaving aside this further example of casualness with figures, we can assume that RMG looks after quite a lot of leasehold flats.
Has its error-prone approach to RPI and ground rents devalued them? If so, how many? And what is it going to do to make things right?
The following documents show RMG’s ground rent workings, including errors:
RMG statement to LKP in full, which also addressed concerns about increased service charges and lift maintenance:
It is accepted that a mistake was made when initially calculating the yearly ground rent at the figure of £185.82, and once noted we offered our apologies to the leaseholders.
I would like to assure you and the residents that there was no attempt to provide the Landlord with a commercial advantage, and this issue occurred purely as the result of a very rare human error during the calculation process.
The revised figure is now set at £132.26 and we are satisfied that this matter is resolved. The decision to appoint a contractor was taken due to site visits confirming that certain communal areas were not being cleaned sufficiently.
Externally, there were areas that also required maintenance, and it is our role as the Managing Agents to ensure that these areas are properly maintained. We believe that it is in the best interests of the development for the duties be completed by our appointed contractor, so that maintenance can be properly monitored, the correct risk assessments are in place, and so that additional works can be identified and completed, in order to prevent any deterioration to the building.
The distance that the contractor is based from the development and their travel costs has no bearing on the costs incurred by the leaseholders. The contractor’s tender was based on service they provide once on-site.
Since our contractors have started to maintain the communal areas, we have received positive feedback from some residents. An in depth response regarding lift maintenance has already been provided to the leaseholders, which I am in agreement with. ARMA’s guidelines recommend that a thorough lift examination regime is adopted, and that generally lifts in common areas of buildings fall under LOLER. The LOLER report is therefore completed for the health and safety of everyone using the lift, and the LOLER inspections will continue to be implemented.