By Harry Scoffin
A longstanding Treasurer of the Conservative Party and the parents of the Home Secretary were accused of leasehold profiteering by The Times and Mirror newspapers earlier this week.
Lord (Howard) Leigh of Hurley, a Treasurer of the Conservative Party since 2000 and ally of former prime minister David Cameron, was revealed in The Times to be the joint freeholder of a site in Harrow, north-west London, where he benefited from a 67% commission on the placement of buildings insurance through the managing agent, Dennis Reed Limited, which he co-owns. Lord Leigh became a lawmaker in 2013.
Meanwhile, the parents of incumbent Home Secretary Priti Patel – Sushil and Anjana Patel – were reported in The Mirror to be freehold investors who forced at least three sets of leaseholders into dragging them to tribunal over sky-high freehold asking prices. The Patels lost, with judges ruling the freeholds should go to the tenants for £5,100 and £2,750 (down from the Patels’ respective quotes of £28,000 and £17,000).
When doorstepped by The Mirror at their north London home, Mr Patel refused to discuss the leasehold controversies and told the reporter to “get lost”. Later, he and his wife used lawyers Carter Ruck to decline the publication’s final request for comment.
These articles from newspapers representing both political traditions risk embarrassing ruling party politicians and have been widely circulated online by leaseholders angry at the axing of the promised second tranche of leasehold reforms from the Queen’s Speech earlier this month.
A treasurer of the Conservative Party has been accused of greed after leaseholders in a development he owns were being charged 67 per cent commission on their buildings insurance. Over the past decade a company owned by Lord Leigh of Hurley and his family has received fees worth thousands of pounds from residents of the site in Harrow, north London.
The Times estimates that in the last decade, thousands of pounds in commissions have been paid out to Lord Leigh and his family by captive leaseholders in their three-block, 10-unit Harrow development, most of whom have now secured Right to Manage to gain control and slash insurance costs.
Leasehold law does not ban commissions on buildings and terrorism insurance from flowing to freeholders or managing agents – although Secretary of State Michael Gove has commissioned a joint Financial Conduct Authority / Competition and Markets Authority probe into premium manipulation and leaseholder overcharging in this market. The regulators are set to publish their report containing a series of recommendations for improving the leasehold consumer experience of property insurance by the summer.
Neil Solanki, 58, the aggrieved leaseholder who convinced a tribunal to find the insurance commission “excessive”, said “he feels angry that a senior Tory politician has been benefiting from such charges when the government claims to be acting against leasehold malpractice”.
He told The Times:
“It’s so hypocritical. These people are supposed to be looking after the public’s interests, not taking kickbacks. The government has been looking into leasehold reform and how the public has been mistreated so it’s very upsetting that a prominent politician is making money out of a situation where the unfortunate leaseholder has no control. It’s just greed.”
In a story first reported by LKP in December, Mr Solanki litigated against the serial overcharging in the first-tier tribunal and, in spite of his three like-for-like quotes featuring a commission of just 20% for the broker only, the FTT determined it could not obtain refunds for him even though the commission was “excessive”.
Ignoring Mr Solanki’s rival deals and refusing to cite any case law to justify its decision, the FTT erred on the side of the freeholder, capping the commission going forward at a substantial 49% of the net insurance premium (to be divided between the broker and the freeholder’s managing agent).
20% commission might be said to be commonplace in multi-occupancy residential buildings insurance in England and Wales, but where any commission has not been declared to the paying leaseholders in advance of them paying the premium, freeholder landlords can be regarded to have enjoyed “secret profits”, an act contrary to what is expected from their fiduciary duty to tenants.
The body of case law on this suggests leaseholders can challenge validity of the entire commission, whatever the size, on the basis that these “secret profits” were concealed from them to which they could never have given their informed consent to the freeholder profiting himself whilst placing insurance cover on leaseholders’ behalf.
LKP can reveal that, despite having achieved management control and the ability to sort insurance among themselves through successful RTM claims in January, two of the three blocks at Harrow’s Trevor Close development have been told by the freeholder, Lord Leigh’s Dependable Investments Limited, as well broker Stride, that they are forbidden from leaving Stride to find their own broker and insurance product.
This is all happening even though the blocks’ original RTM claims were not resisted by the freeholder or its managing agent.
“The key point here is that while Michael Gove is making a sincere effort to sort leasehold reform, here’s a Tory milking the system. Stories like this, of a ruling party legislator ripping leaseholders off, only add to a sense that these reforms will go the same way as the others, with many exemptions and loopholes finding their way into the bill to keep certain quarters happy,” LKP told The Times.
The Times’ leasehold exposé, written by consumer affairs correspondent Andrew Ellson, ended with a staunch defence of the insurance arrangement by Lord Leigh.
The Tory businessmen-cum-politician, who in 2013 went on a business trip with former prime minister David Cameron to meet Xi Jinping, stressed that not only did the FTT refuse to award Mr Solanki his legal costs, but the insurance commission amounted to only 40 per cent of the total cost charged to Mr Solanki.
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He added: “I have reviewed the issues raised and it is clear to me that the companies concerned acted at all times within the terms and spirit of the appropriate laws and regulations, and indeed market practice.”
Martin Boyd, LKP chair, said:
“Lord Leigh’s comments to The Times seem illogical and wrong. The property tribunal does not have the power to award leaseholders their legal costs so to claim the tribunal did not award Mr Solanki his costs simply reflects how the tribunal works. The tribunal system is a one sided costs regime that allows landlords to claim their costs, but gives no corresponding right to the leaseholder. In any other country, we would call the system corrupt. The tribunal has long exonerated itself from blame for this deeply flawed system that favours landlords by arguing it’s not them who awards any substantial costs.
“Leigh claims he is in compliance with the spirit of the regulations is open to debate but there is no dispute that he follows “market practice”. A practice where landlords seek to charge high commissions which should have come under better control through the Financial Conduct Authority a long time ago. The start and end of it is that Lord Leigh has maximised his profits to the point leaseholders were forced to take the landlord to the tribunal. It is more common for the tribunal to accept that commissions should be no more than 20% so the only question that remains is why they reduced the costs but did not reduce them more.”
Lord Leigh also argued that Mr Solanki had been withholding payment, putting at risk the site’s insurance, although Mr Solanki has said that he had proposed to pay the true premium without the excessive commission, an offer which was point-blank refused by the landlord.
The report into Conservative peer Lord Leigh’s insurance overcharging follows another leasehold investigation by Mr Ellson published in The Times last month showing a separate company with close links to the Tory party sneaking administration fees into tens of thousands of pounds into the leases of affordable housing for pensioners.
A Mirror investigation found Sushil and Anjana Patel demanded £28,000 in 2017 for one freehold they had bought for £4,000 at auction before a tribunal ruled it should be £5,100. It comes after the Tory government was accused of dragging its feet on leasehold reform
In The Mirror, Priti Patel’s parents were depicted as being freeholders constantly being brought to tribunal, with one couple on a short lease seeking to buy out the freehold and the Patels trying to sell it to them for £28,435, a 600% markup on the £4,000 they had paid for it. The leaseholders persuaded the tribunal to rule in their favour.
Preferring the evidence of the tenants’ valuer, the tribunal determined that the Patels had “misunderstood” the rules on valuing freeholds.
Leaseholder Michael Nock told The Mirror that it had been an expensive tribunal which had cost him more in solicitors and surveyor fees than he had saved.
But he did not regret fighting his case:
“If they had just said give us £8,000 instead of £5,000, I would have. But they just refused. They basically just said if you want to buy this take us to a tribunal.”