And he wants to know about more leasehold abuses: mark.atherton@thetimes.co.uk
Mark Atherton, the investments editor of The Times, described in the newspaper last week how he defeated MB Freeholds Limited and RMG (the Residential Management Group) over an insurance dispute.
The case came before the Upper Tribunal last November and concerned whether the leaseholders or the freeholder placed the insurance contract for Albion Court in Sutton, south west London, a site of three blocks of 27 flats.
Insurance commissions are a huge revenue earner to speculators in residential freeholds, paying out bumper commissions that are unknowable to leaseholders who are not part of the contract.
Leasehold property headaches continue
This week Barclays Bank reignited the debate about unfair leasehold practices when it refused to lend against a high-profile development in Stratford, east London, because it was concerned about the underleases that Taylor Wimpey, the developer, was selling to prospective buyers.A bill to ta
The practice of padding the insurance is routine in the sector and in a complete reversal of the role that Parliament intended for it, the taxpayer-funded Leasehold Advisory Service hosted a seminar where freeholders were advised how to cheat leaseholders over racked-up insurance costs:
Mr Atherton recounts the leaseholders’ “two-year gruelling battle” to stop MB Freeholds Limited and RMG imposing “its insurance arrangements on us”.
Mr Atherton writes: “The problem began after MB Freeholds acquired the freehold of our building from the original builder.”
FM Freeholds Limited is owned by Mark Hawthornthwaite with Ben Ogunby owing 45 per cent, and it declared net current assets of £134,000 last year.
Mr Hawthornethwaite is also known as Mark Hawthorn, in one of the name gymnastics so widespread in the leasehold sector. Based in Bolton, he is known to leaseholders in the North West, where he owns numerous freeholds to flats and houses.
As Mark Hawthorn, he heads the Landmark Investments Group, which appears to be a one-man band. He wrote about the effects of Brexit on ground rents on LinkedIn:
Brexit and the Ground Rent Market…
Following on from recent events we have had a number of developers and lenders seek our advice on the future ground rent pricing and demand. Ground
Mr Atherton writes: “We had been insuring our flats for years and the previous freeholder had found nothing wrong with the cover we took out. Yet MB Freeholds found a clause in the small print, which allowed it to take over arranging the insurance on the basis that we were not insuring our flats properly.”
In the first year of MB Freeholds ownership, the insurance cost was only £1,263.
But this leapt upwards, ostensibly because rebuilding costs were too low at an insured sum of £591,860 and needed to be £3,725,848.
The Upper Tribunal noted: “The cost of the insurance in the year from March 2015 was £6,162, more than a four-fold increase on the previous year, while for the following year the cost was £8,367.”
The rises prompted the leaseholders to go to tribunal, where they were twice defeated. This reduced their number from nine to only three.
“We had already spent £100 [each] and a lot of time and effort on the case and seeking permission to appeal would incur further costs — of close to £1,000 — and time,” Mr Atherton writes.
“Armed with a 200-page document I had spent months preparing, I was up against a barrister and a representative from RMG.
“The case boiled down to two points. First, was MB Freeholds entitled to make use of a proviso in the lease to take over the buildings insurance for our flats if we were not insuring the flats in the joint names of ourselves and the freeholder, as the lease specified? It was.
“And second, did the lease proviso equally require MB Freeholds to do the same if it wanted to take over our insurance?
“After several weeks’ deliberation the judge decided that MB Freeholds should also have insured in joint names and its failure to do so meant that it lost and we won. MB freeholds was given time to appeal, but didn’t.
“All those hours spent sifting through documents and tapping away at my computer had been worth it. MB Freeholds appears to have gambled on the fact that we would not have the motivation, knowhow, or the money, to challenge it in court. It gambled badly.”
The tribunal also ruled that MB Freeholds could not claim its legal costs.
The full ruling is here:
Related posts:
Regis Group’s rip-off insurance bill cut down by two-thirds at tribunal
Rich should buy freeholds and cream commissions, says Sunday Times
Leaseholders pay up to 60% more for buildings insurance because of secret commissions, reports The Times
Freeholders’ ‘cowboy’ insurance commissions at leaseholders’ expense attacked in The Times
Housebuilders ‘pimp their profits’ by selling freeholds, says Financial Times columnist
Is the Bank of England pandering to freeholders over punitive lease valuations?
Insurance commissions have long been a huge revenue earner to speculators in residential freeholds. In the past Peverel/Firstport received commissions of 33.05% paid to a sister company who only acted as an intermediate, who then employed a broker who also received a commission of circa 6% and then a further commission was payable to the to the actual Insurance Company who insured the development.
These commissions were not stated in the Service Charge before 2012 and now they show 14% commissions are paid. This along with the other commissions together make circa 25%. If the insurance premium as seen in the UTT for the premium of circa £6,000 then the commission would be £1,500, nice little earner.
The practice of revaluations, allowing padding out the insurance is routine and common in the sector. This has been a complete reversal of the role that Parliament intended for, the taxpayer-funded Leasehold Advisory Service (LEASE) hosted seminars where freeholders were advised how to cheat leaseholders by racking up insurance costs.
a.] managing agents FirstPort for block of 39 retirement development will not produce receipt for the
last insurance premium as provided in lease schedule 7 para 1 nor will they declare commission
received by any party
b.] my shower screen shattered 21 December 2017 eventually A.J.Gallagher issued a cheque to the
development manager made payable to the contractor 9 April 2018 & said that the £100.00 excess
would be collected from FirstPort by borderau. I refused to pay the excess unless they referred to
lease or condition in the policy as I was the only beneficiary. I appealed to A.J.Gallagher who issued a new cheque & sent it to me when I instructed the contractor to undertake the work . original cheque was cancelled & FirstPort have ignored any communication since 9 April & have refused to refer my complaint to stage 1 of their complaints procedure work was undertaken 9 July 2018 could you please advise me what my next step should be.
At 91 years of age & considered a carer for my wife who has vascular dementia causedme a greatdeal of problems
Thank you
E.L.Williams
Your wisdom would be appreciated
Emyr,
You are entitled to see a receipt for all the Insurance Premium as provided in your Lease schedule 7 para 1.
Firstports commission for the Insurance is to be included in the Service Charge under a heading:
NOTES TO THE ACCOUNTANTS: for the period **/**/***
On a sheet which should be included on the back of the
Income & Expenditure Account for Year Ended **/**/**** or the Balance Sheet as at **/**/****
These should sent to you within 6 months of the end of your financial year with a heading of:
ANNUAL ACCOUNTS FOR *************
The commission shown on our Firstport (FP) NOTES is 14% but this figure does not include the commission paid to AJ Gallagher circa 6% or the circa 5% paid to the actual insurance company who insures the development, total can be 25% or more?
The Excess of £100 should be shown on the Service Charge – INCOME & EXPENDITURE ACCOUNT – under the heading REPAIRS & MAINTENANCE and not paid by you unless the insurance was for your Home Contents.
AJ Gallagher bought out Oval and have been known to be very crafty in how it deals with claims. Also check if the actual cost for the replacement shower door has not shown up in another heading.
Stage 1 Complaints lead to Stage 2 Complaints and are headed by an internal panel who after a very long period inform you your complaint has not been upheld.
Admin has my contact if you require it.
It would be great if Mark Atherton and the Times starts campaigning for reform/abolition of leasehold and serious regulation of service charges to protect leaseholders. What a nightmare using the Tribunal system and the managing agent still asked for his barrister’s fees to be charged to the leasholders. The risk is too great for most leaseholders
Dispatches on Channel 4 July 17th exposed the rotten state of housing associations overcharging for services. Housing associations being charities often refuse to give lessees information using the Freedom of Information Act exemption and Data Protection rules as an excuse.
An example is L&Q refuses to give invoices for services like repairs and cleaning because they say their own employees do the work and it is a breach of Data Protection to give the cost per hour for labour (c.£30ph we guess) and overheads (cleaning manager’s salary).
L&Q has cleverly found ways to avoid giving invoices and there is no regulation or regulator to help despite what LEASE says.