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:
Norman Bleier
Benjamin Bleier
Janet Bleier
Joshua Bleier
Miriam Bleier
Ian Mett
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.
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Telegraph reports ‘marketing cobblers’ of 999-year ‘virtual freeholds’ with lethal ground rents
Pensioners in former pit village fight ground rents rising from £10 a year to £1,100pa (after a demand for £2,450pa was rejected)
Pensioners hammered with 88% rise in ground rents, says Better Retirement Housing
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As a Chartered Surveyor I have long warned clients of this. It is so easy to “miscalculate” ground rents at review, and so easy to miss the mistake or find that it is too expensive to operate the mechanism to challenge the rise.
And you know what, in my experience the “mistake” NEVER involves the freeholder underestimating. Never.
Thanks for your very interesting insight into this.
LKP has made a blunder too: the name’s MCGEEVER. But it’s about time that the crimes of RMG were highlighted – we’ve been under their tyranny for seven years, seven years in which they’re ruthlessly taken as much money as they can from us and for almost nothing in return. RMG are a fake management company running properties down and need a full independent investigation. I’m one of the administrators of the anti-RMG group, which has over 1700 members.
Thank you. Corrected.
Like RGM, our error resulted in an increase, but in our case only the number of letters not in quantum owed.
Hi Dr Shaw,
As a fellow sufferer under RMG I am interested in the Anti RMG Group.
There is an interesting story in how the development I live in have recently escaped RMG’s clutches. Yipee.!!! Don’t know if our escape strategy would be of use to anybody else.
Fell free to contact me by email veloce001@virginmedia.com
Clearly an error has taken place. A property company the size of RMG would not have a policy of deliberately making errors for financial gain.
I do feel it is somewhat of an exaggeration to suggest that the value of these ground rents – a figure when stated to be £185.82 would have “trashed” the value of their flats. The annual MOT and a service on a basic Ford Fiesta is about that sort of figure yet does not “trash” the value of a car costing a fraction of the value of these flats.
Just before the lockdown I bought some items from John Lewis and I was charged twice for an item, on returning home I discovered the error and the matter was dealt with immediately. I would not have expected the CEO of John Lewis to write to me personally on the matter.
Clearly there are issues surrounding leasehold that need to be addressed but clearly errors of this nature should be capable of easy resolution (which clearly did happen in this case) and is not evidence of the failing of the leasehold sector
Not sure whether disingenuous or naive.
This is not comparable to being overcharged by John Lewis.
It is a permanent devaluation of a property throughout the lease term, perhaps 999 years.
All future ground rents would have compounded on the basis of this failure. It is more akin to a bank getting compound interest wrong.
For it to be a permanent devaluation it would need to meet the following TWO criteria
Firstly, the error in the rent would have to be permanent and not capable of being amended notwithstanding that subsequently it can be shown to be erroneous. There is no evidence whatsoever to suggest that the ground rent of £185 would have stuck with the lessees as a result of that error.
Secondly, and more importantly is it really the case that a rent of £185 would have a ruinous effect on its value. If it did, I would venture to say that the near hysteria generated over ground rents (aside from the 10 year doublers) making some lenders introduce arbitrary levels of rent which if exceed they decline to lend on has played a big part in the problem
Again and again I make the point that if the Net Present Value of the rent was clearly shown next to the premium then no rent, however unusual it may be, would blight the value of the flat because the value of that rent would be taken off the premium sort by the developer/freeholder. So even a 10 year doubler doubling a ground rent of £350 every 10 years for 60 years has a NPV of £35,000. So, if a flat worth £300,000 with a nominal rent is sold for £265,000 with such a ground rent the lessee can hardly advance the argument later that his rent is onerous
This is feeble.
But to take it gently … If the pensioners decided to challenge the ground rents (within the following six years), and it were not acknowledged to be an error, they would have to go to the property tribunal at their expense. And, naturally enough, risked picking up the legal costs of a landlord who might have disputed this proposed reduction in his income.
As ever in leasehold litigation with the unbalanced cost regime, it would have been a challenge to get others on side for this.
Fortunately, revulsion to ground rent speculations is widespread across the political spectrum, and addressed by the Secretary of State last week.
However repeated your arguments, they have not been persuasive. And, hilariously, the developers themselves do not advance them.
With the greatest respect disputes over ground rents aside from those pertaining to valuation on enfranchisement are not dealt with by the FTT
They would have to go to the county court – I cannot imagine a company such as RMG would wish to defend an arithmetical error and risk all the costs – far easier to put your hands up apologise and reissue demands – which in fIrness they have done
With no less respect, within the six-year litigation limitation period neither RMG nor this particular freeholder may necessarily be at this site. Historic unfairness, after a freehold has been sold on, is very difficult to resolve, in LKP’s experience.
RMG’s reference to ‘a very rare human error’ would be laughable if it weren’t so serious. Over the years we have discovered many financial errors, some accidental, some deliberate, but all inevitably in favour of this shambolic company. It is wholly inevitable that such ‘errors’ mentioned above have affected other tenants regarding ground rent. (We once received an estimate for over £30,ooo for unspecified ‘essential repairs’ to six flats, but although they were sent to us the addresses were for somewhere else in the country!)
Hi Dr Shaw,
As a fellow sufferer under RMG I am interested in the Anti RMG Group.
There is an interesting story in how the development I live in have recently escaped RMG’s clutches. Yipee.!!! Don’t know if our escape strategy would be of use to anybody else.
Fell free to contact me by email veloce001@virginmedia.com
I cannot help but feel that Stephen works for RMG or an associate company. I fought RMG for seven years before eventually managing to get enough people on the residents association to meet, vote and get rid of them. They routinely over-charged us for works carried out elsewhere, inflated electricity bill and bills for another development added in and even in the last case had charged for the cost of grit for the car park when we didn’t even have a grit bin. They defended all of these arithmetical errors all the way to a tribunal, which is obviously where the county court refers these cases in the first instance and then back to court. Even when they lost at the FTT they tried to apply for a CCJ against my wife for £6,000+ when the figures showed she should be in credit. They rely on apathy of owners to get away with this. To everyone out there keep fighting and good luck