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.
Lord Leigh of Hurley accused of greed over ‘excessive’ leaseholder fees
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.
Priti Patel’s landlord parents overpriced three freeholds – leading to tribunals
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.”
Related posts:
Vicky Pollard property tribunal: yes, but … no, but … Yes, you have been ripped off over insurance. But no, we can’t do anything about it
Lord Greenhalgh becomes the housing minister responsible for leasehold
Insurance insiders call for an end to secretive leasehold insurance commissions following Canary Riverside ruling
Gove calls on complacent FCA to stop the leasehold insurance rip-offs, and urges the CMA to get stuck in as well
Note to Mr Gove: FSA was warning of ‘reputational risk’ in not cracking down on secret leasehold insurance commissions 17 years ago!
Privatising housing estates: what’s the problem?
Oooh, hope I get credit for alerting LKP and Peter Bottomley to this story. I don’t want any commission, honest !,
Thanks Mare. We broke the original story in December. In my personal capacity, I gave The Times and Andrew Ellson their scoop re the Tory politician ownership of the freehold and managing agent at that site.
Modest 😉
Actually if wanting to be accurate The Times did not accuse Lord Leigh of greed but rather it reported that Mr solanki had done so. In seeking balance you might
point out that the Tribunal chided Mr Solanki severely for failing to insure at all. This was an unusual case as this was not a landlords block policy but an individual leaseholders policy so arranged that each of the policies provided cover equivalent to a block of flats policy. The amount of commission paid to the landlords agent was far less than a typical service charge administration fee which would otherwise be the typical method by which individual lessees contribute towards the insurance of an Estate in which they own a flat or maisonette.
There is no “balance” when it comes to leasehold and leasehold laws. We have a system – including property tribunals – devised by the elite for the elite, an utterley corrupt system, an utterley corrupt elite.
“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”. I bet Michael Nock’s solicitor was all smiles and hugs (for Mr Nock), a marvellous victory for the little man, and a marvellous benefit for the bank account of the solicitor – and surveyor. Crispin Blunt said ““Present-day “onerous ground rents” are, more likely than not, the resultant of unconscionable conduct carried out by one sector of society who have superior information flow (developers, freeholders’ funds, financiers, SOLICITORS) at the expense of an unsuspecting and more naive part of society (consumer homebuyers)”. For “SOLICITORS” read all those professionals who benefit from out corrupt leasehold laws.
Leigh, the Patels, and all of the other ***** – solicitors, surveyors etc – who profit from leasehold, and those (politicians) who enable them, are by any sane definition, yes, utterley corrupt.
The irony of this case is that when brought by Mr Solanki, as defendants and to bring the dispute to an end we made what was quite a generous offer to settle under the Tribunal’s professional pre hearing mediation service. The claimant Mr Solanki countered by saying he would not settle for a penny less than the full amount of his claim which included sums for which there was no legal basis whatsoever. The upshot is that instead of settling and receiving something from us amicably (representing a refund of commission paid to us but not to the Insurer’s broker Stride Ltd) he was awarded nil at tribunal and furthermore the Tribunal did not order that the respondent pay anything toward his fees for issue of the plaint or the hearing. We would have been genuinely willing to settle but Mr Nolan’s intransigence in refusing to come together toward a settlement is what resulted in him getting nothing on the day. I regret in hindsight not giving the Tribunal adequate evidence of what the Insurers broker does for its commission in terms of actually creating and sending out the policy and in house claims handling. Their commission is under a work transfer arrangement with the underwriter from whom it is not possible to buy a policy direct. Mr Solanki wish to buy cover without any one earning commission was doomed from the start because the brokers commission was an integral part of the cost of the cover and it could not therefore be accommodated. There has been a certain amount of misreporting of this case. As ever it is all in the detail. Mr Solanki is wrong footed in putting out the suggestion that by RTM being granted the insurance arrangements are changed. Here each lessee covenants to insure for the full reinstatement value of their property in joint names with the freeholder and RTM does not usurp a lessees covenant. I don’t think we “gamed” the system and nor is this fair comment. One of the advantages of the set up under these leases is that in the event of a claim the leaseholder is able to deal with matters as he or she sees fit direct with insurers and their agents unlike the situation where the proposer is the freeholder of the entire Estate. These leases have been unchanged since 1962 and were so arranged such that the lessee would be the proposer and able to personalise cover to suit their needs and to date there has been no overtures to vary the leases accordingly. So far as leasehold reform is concerned I would say that there are many existing rights and with the right advice lessees can make adjustments within existing law. I believe the Government probably ought to proceed in a series of smaller footsteps such as a (fairly low) cap on recoverable lessons professional costs for lease extensions so that the professionals have no financial interest in dragging out negotiations so as to inflate costs in the process. The jump to Commonhold will need legislation as yet not fully fleshed out and even then extensive training and retraining of practitioners , which is why for now I believe the Government should chip away at it with a number of small steps eliminating the bulk of professionals costs to be recoverable which will I am sure drive practitioners to settle much more readily.
The article is inaccurate in a number of ways. For example Insurance here is a leaseholders covenant. Hence it is unaffected by applying for RTM which was pointless as the lessees (and their successors) have had their own management company to manage the common areas since the Estate was built in the early 1960s. This is not an insurance policy which is placed by the landlord. The facts should be checked even if they get in the way of a good story!
What do expect both major parties are a cesspit of corrupt self serving politicians.
The 2nd tranche of leasehold reform will be held back by Lord Greenhalgh until the next general election. Then the conservatives can dangle it as a carrot to the 3 million leasehold voters. In the mean time, it leaves us all in limbo.
More like 6 million leaseholders, and reform was mentioned in the Conservatives 2019 manifesto. Time for a change.
The Managing Agents were paid 17.5% commission on this single flat policy. What may not have been fully taken on board at Tribunal was that the Insurer’s broker undertook underwriting policy issue and claims and were paid as “commission” whereas other insurers would absorb such charges in the premium. What is surprising is the lack of prior judicial opinion on what is a reasonable rate of commission. Although Mr Solanki was not successful at Tribunal the respondents subsequently reduced the rate of commission that they were willing to accept across the Board because in any event the cost of buildings insurance generally is hardening due to poor claims history, heavy storms and sewage backing up
I as a Leaseholder of 120 lease of my ground-floor Flat experienced much more serious costs .The Legal costs to my Family was in excess of £70 thousand, The freeholds made three application’s under 168 that failed they then Appealed the 3 Decisions.
At that time the LVT could only award £500 pounds.
The whole leasehold systems and the rules favour the Freeholders . The LVT is supposed to be Fair and reasonable but the rules are very much in favour of the Freeholders.
I am still having to deal with total harassment from my resident Freeholders on a daily basis. . I have approached my Local MP ‘s 3 times requested help. their response is they cannot help it requires me to have solicitor.. The law requires me to declare I am in dispute ? Therefore any wise buyer/ person quickly drops out.