June 25, 2017

LEASE: We need to make a million quid a year by 2020

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The Leasehold Advisory Service conference 2016

The annual conference of the Leasehold Advisory Service saved until the last moment its most dramatic bombshell: by the year 2020 LEASE needs to be self-financing.

The Department of Communities and Local Government, on which LEASE is dependent, is facing 30 per cent cuts in budget.

This inevitably means a more energetically commercial approach to LEASE’s operations – the polar opposite of what LKP has been urging for years.

Can LEASE actually function under these circumstances?

Taxpayers fund LEASE in order to protect flat owners in the uniquely complex and poisonous leasehold system of residential tenure.

Somehow or other this role has become more elastic: to give advice on leasehold law to all comers. Another stretch: to advise commercial practitioners in the sector. Anther stretch: to sell services to the sector with seminars, webinars, specialist advice and conferences.

LKP deplores all this as the only reliable funding in the sector comes from the commercial operators.

Inevitably, this has a corrosive effect, as witnessed by the fact that until Carlex / LKP mobilised public opinion and achieved political support for reform, the sector was very successfully hiding its nasties from public view.

And LEASE stayed silent.

The exploitative practices of leasehold don’t need repeating to LKP readers.

Can a government quango be meaningful if funded by commercial practitioners?

And why would it be any improvement on the private initiatives of organisations such as ALEP (Association of Leasehold Enfranchisement Practitioners)? This organisation already does provide advice on lease extensions and enfranchisement issues out of hours.

LEASE is in for a bumpy ride, it seems.


 

Low Paine threshold

Martin Paine, who with his wife Margaret Anne Kirmond, owns the freehold and manages Blythe Court near Birmingham – where ground rents can be £8,000 a year – was to have attended the LEASE annual conference.

Two representatives of Circle Residential Management were listed among the delegates, but there is some doubt whether they showed up at all. If they did, they did not linger.


 

Burns lights the blue touch-paper and retires ….

LouieBurns3Just as well, perhaps, as one of the speakers this year was Louie Burns, MD of Leasehold Solutions, who bluntly exposed the scams in informal lease extensions.

Despite statutory provisions for legal lease extensions, many of the UK’s 4.1 million flat owners “are still being duped into informal deals by predatory freeholders, whose only goal is to extract as much money as possible”.

Louie Burns said: “At first glance informal lease extensions are designed to make it look like the leaseholder is getting a great deal, but nothing could be further from the truth. There are many dangers in accepting informal lease extensions, not least the actions taken by freeholders to hide the true cost of the agreement.

“Over the years I’ve seen every dirty trick under the sun from freeholders, whose only concern is to extract more money from flat owners.

“Freeholders often claim that an informal lease extension will save the leaseholder money, but by inserting clauses such as onerous ground rent schedules (which often double every decade), increased licence fees and service charges, and delaying tactics, not to mention the cost of the lease extension itself, leaseholders often end up paying £10,000s, if not £100,000s, more over the years than if they’d opted for the legal, statutory route.”

Leaseholders have a legal right to extend their lease by an additional 90 years and reduce the ground rent to zero if they have owned their flat for more than two years.

The law provides compensation to the freeholder when the lease is extended, using a calculation based on the ground rent, reversion fee and marriage value** (whereby the freeholder is entitled to half of the increase in the value of the property when a lease with less than 80 years remaining is extended).

Louie Burns continued: “With recent changes in legislation, such as the Disclosures Act 2014 and Consumer Rights Act 2015, the noose is tightening on the loop holes that enable informal lease arrangements, but many flat owners are still unaware of their rights and, when it comes to leasehold law, the devil is very much in the detail.

Thanks to the Disclosures Act 2014, agents and owners of property now have a very clear legal responsibility to report any facts that relate to their property, including informal lease arrangements; this is a significant shift from the traditional consumer law concept of ‘buyer beware’.

The Act puts the onus on the seller and their agents to disclose any information that is likely to have an impact on the value of a property or the buyer’s enjoyment of the property.


 

A surprise for Mr Gradgrind …

A panel session at the end of the conference threw some unexpected views into the pot.

In a rare display of unanimity, the panel, which included Sebastian O’Kelly, of LKP, Phillip Rainey QC, and Steve Michaux of housing association A2 Dominion, all agreed that the government’s policy to extend right to buy to housing association flats was deeply misconceived.

Sloane Square solicitor and chair Damian Greenish – with echoes of Prince Charles – then added that the Tory policy would drive out the social mix of Chelsea (precarious at best, one might think) with the social housing flogged off to the rich.

“Red” Steve Michaux went further still by saying that the housing crisis in London was so desperate that he favoured rent controls.

Nor can Mr Rainey be relied upon to be entirely uncritical of the sector that keeps his parsnips buttered.

In January last year he provided a brilliant manifesto for leasehold reform at the LKP Westminster round-table, which he emphasised should not be confused with his own personal views.

For those not paying attention, it would have come as a surprise that a few months later he promptly stuffed multi-block RTMs in the Court of Appeal. This has caused much lamentation among the LKP readership.

Mr Rainey frankly doubts whether there is any appetite to address leasehold’s iniquities with legislative reform.

But LKP made the point that just as affluent west London residents drove the leasehold changes of the 1990s, so a crisis in the new riverside and Docklands blocks in central London could spark something anew. More affluent people are living in newish flats than ever before, and LKP has contacts with a considerable number of them.

These issues at the end of the LEASE professional conference were heady stuff at an event where it is usually all affability and blandness along the lines of: “Mr Rachman, may I introduce Mr Gradgrind?”

Comments

  1. Michael Epstein says:

    Could not Lease raise funds by earning commissions for recommending overpriced electricity contracts to innocent leaseholders? I believe it is a method favoured by AGE UK?

  2. The budget required to keep LEASE in operation is “small potatoes” compared to the £25 Billion of tax payers money given to save Royal Bank of Scotland when it was steered to the brink of insolvency after a crazy takeover of Dutch bank ING with a black hole in its accounts?

    Leaseholders have to pay tax at 20% and 40% on their job income but the freeholder companies can deduct loan interest from ground rent income and pay NO TAX .. In a round about way , the government tax policy to freeholders in giving such a tax concession is helping to finance the leasehold abuse system. One of the biggest companies engaged in “ground rent” freehold investments is Proxima GR Properties Ltd which is controlled by Tchenguiz Family Trust based in the British Virgin Islands.

    The Ministers at DCLG should take a close look at the Nil tax paid by Proxima and how its managing agent E& M operates to demand global subletting consent fees from leaseholders . Its all documented as many cases are brought to the LVT. but why are these issues not returned as feedback to Housing Department civil servants to correct.. Ministers and MPs are voted into office by leaseholders and not by freehold companies , and the Ministers should not allow the leasehold abuse which goes on.

    The Ministers at DLCG should be defending the interests of the leaseholders and public – not there to help the freeholder companies to enhance their profits.

    .

    • There were plenty of other lunacies that RBS was up to, and the other banks: lending vast sums on flakey property assets such as the Tchenguiz freeholds (many of which had been fragmented into courtyards and flowerbeds, given preposterous valuations and then secured against an RBS loan).

      And then HBOS bankrolled the lunatic takeover of McCarthy and Stone, which resulted in the banning for life of banker Peter Cummings

      Retirement property was a playground for “financial engineers” during the property lunacy that ended in 2008.

      Taxpayers and the elderly are still paying for it.

      You are right to highlight taxation: a ludicrous amount of UK property is owned offshore in entities where the ultimate beneficial owners is secret. It is variously £150 billion to £210 billion, owing to Land Registry data searches by Private Eye and Property Week.

      In terms of reforming leasehold LEASE is irrelevant: it has no view beyond advising all comers on leasehold law. That includes advising freeholders how to forfeit a flat and make someone homeless and destitute.

      • Carlex,

        Thank you for throwing the spotlight around the banking fraternity. After Commonhold and Leasehold Reform Act was commenced, Barry Sheerman MP Huddersfield in late 2004 wanted the Housing Minister to investigate E&M and the Consensus Business Group , Keith Hill then Housing Minister declined to investigate saying the Housing Dept after separating from DETR ? had no powers to investigate companies. This seems to have been taken as the green light by CBG to enter into huge deals based on ground rent income portfolios .

        The Tchenguiz Brothers were prominent names in the City, using their business name “Consensus Business Group” and City connections to raise £££ Mil loans to buy out Solitaire Group and Pembertons in 2005-6 and MacCarthy & Stone and Peverel in 2007-8. But those banks making loans to Tchenguiz including Merryl Lynch USA , Kaupthing Iceland, RBS and HBOS all crashed in 2008 and had to be saved except Kaupthing Iceland which closed and cost the UK Treasury £3 Bil in compensation. paid out under the UK Bank Depositors Guarantee Scheme.

        I believe that wrong decision in 2004 by Keith Hill costed the UK Treasury £3 Bil in 2008 might have been avoided if Nick Raynsford MP had still been Housing Minister.

        The problem Carlex faces today is that MPs don’t see RTM & leasehold service charges as important enough issues to warrant their attention. I believe tax evasion may a serious enough issue to attract MP’s attention as the Greece Government’s huge debt financing problem is due to poor taxation management

        Proxima GR Properties has not paid any company tax over past 10 years despite reporting about £135 Mil in operating profits since 2005.

        Resident Leaseholders pay tax at 20% and 40% on earnings to pay for MPs Salaries and the upkeep of the UK Courts but often the Courts & FTT/ UTT decisions often seem to favour .freeholders who are NOT paying tax.

        So highlight the unfair tax rules favouring freeholders and lobby the Chancellor to stop “loan interest” as an expense against ground rent income and charge 40% rate on ground rents charged in Residential Leases over 21 years term . ???

  3. LEASE will have to raise a million pounds a year from the parasitical freeholders, so they can survive to enable them to advise leaseholders how they can best fight back against the parasitical freeholders?

    What could possibly go wrong?

    • Michael Hollands says:

      It sounds as if the parasitical Freeholders will have to raise the money from the unfortunate Leaseholders to pay Lease to enable them to advise the Leaseholders to fight back fight back against the parasitical Freeholders.