April 28, 2017

Sir Peter Bottomley condemns criminal behaviour in leasehold, price-fixing cartels, cheating freeholders, exit fee fiddles, opportunist lawyers playing the system and feeble judicial intervention … in a speech that ALL leaseholders have been waiting to hear

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Sir Peter Bottomley made the speech all leaseholder victims of the system were waiting for when he condemned the current practices in the flawed sector.

Speaking at the annual meeting of the Federation of Private Residents’ Associations – which LKP urges all RAs to join – Sir Peter Bottomley said:

  • Commonhold should be adopted

  • Forfeiture of leases should end (to find out why read the astonishing case of Dennis Jackson who came within a hair’s breadth of losing his £800,000 flat in a closed court from which the public were thrown out).

  • Lawyers and other leasehold professionals who play the system – bludgeoning leaseholders into line with terrifying legal costs – should be named and shamed.

  • End to lawyers delaying right to manage on frivolous grounds, such as not having the letters “RTM” in their title.

  • End to barristers’ favoured wheeze of dumping a massive submission on the day of the hearing.

  • Bring on criminal proceedings against those using leasehold to carry on outright fraud.

  • Publicly expose price-fixing cartels that have cheated pensioners of thousands of pounds, rather than allow the authorities to make cosy confidential deals which means the wrong-doing is not exposed in court and punished.

  • He demanded that the Judicial Conduct Investigation Office publish the report into Benjamin Mire, the chartered surveyor who resigned his judicial appointment following complaints of a conflict of interest.

Comments

  1. michael hollands says:

    Well done Sir Peter , a magnificant speech.
    With regard to the Retirement Leasehold sector it would be great if a summary of this speech could be circulated to all Residents Associations as I doubt many will belong to the Federation of Private Residents Associations. Can`t see it being published on the Peverel Blog
    If Commonhold was adopted what would happen to M&S, Peverel etc,and how would the current leaseholders situation be affected.

  2. Michael Epstein says:

    Under Leasehold a lease for a property is granted for a fixed period.(normally 125 years) As the years pass the value of the lease to the leaseholder diminishes greatly, whilst the freeholder interest appreciates in value.
    Commonhold is for the entire life of the property. This means that the value of a commonhold as opposed to leasehold does not diminish with the passing of time, nor of course would the freeholder’s interest appreciate in value.
    Changing from leasehold to commonhold, would have serious consequences for M&S and Peverel, as the value of the freeholds would be dramatically reduced. These companies would be especially compromised if they borrowed against the future values of owning freeholds.
    Once again, the banks would find that they had lent money against non existent or grossly overvalued assets. It is probable that this is the reason commonhold has yet to be adopted.

    • But Michael a 999 year lease achieves that too. So could requiring instead that all new developments must be tripartate leases of ( where possible) 999 yrs, @ a peppercorn rent, with an RMC responsible for upkeep consents and management. Worth zero they would, as was the case in the 90’s, often be handed over to the RMC for a £1, In a CH scheme, their freeholds would not fall in value, they would lose them completely to the commonhold association who would own a commonhold title to the block. This suffers from the same problem as RTm amnd RTE where there are mutliple blocks or houses ending up in two or more managers for one scheme! Commonhold is already in law, and the reason they were not widely adopted is simple, firstly as it denudes a developer of an asset to manage or sell on, and second it is a concept that buyer and lenders have found hard to understand. Can we improve and change, yes of course, but CH is not a magic pill and in some cases might just kill the patient!

      • Carlex has called on developers to do precisely this.

        We want house builders, especially in the scandal-ridden retirement sector to:

        BUILD. SELL … AND GO AWAY!

        Not put unethical clauses in the leases to bump up freehold values or to entrap residents in a management system that cheats them.

        But leasehold is in theory and practice flawed, resulting in the law doing somersaults to make it work.

        The rest of the world manages with commonhold, so should we from now on.

        The best point to be made about the continuance of leasehold is that it is testament to England’s political tranquility. We did not have a 1789 – thank God, it was a bloodbath – or a 1917 (ditto). So it survived.

        But as future UK residents live increasingly in flats, let’s stop creating more leasehold with its many absurdities.

        • Michael Epstein says:

          One day a company will come along and build a development based on commonhold.
          This will immediately set the development apart from all others. Once all the financial advantages are seen it will be the beginning of the end for the Peverel’s and Mcarthy and Stone’s of this world.

  3. Michael,
    I had a meeting today at 17.15 with my excellent MP, Mr Philip Dunne. Mr Dunne had received my emails regarding Peverel Retirement Division, since our first meeting this year. He mentioned that I had sent him more emails than any other constituent.
    It was my attempt to keep Mr Dunne informed, and how we have to rely on our elected members who are some times our only helpers in what has become a travesty of justice how we pensioners/leaseholders are treated by Peverel Retirement.
    I am ashamed that I needed to send the emails to my MP when we have courts such as LVTs and now FTT that are supposed to allow us leaseholders to apply for:
    JUSTICE, ONLY TO FIND THAT WE ARE THWARTED BY MANAGING AGENTS WHO HAVE BEEN ALLOWED TO USE BARRISTORS. LAWYERS, SOLICITORS, IN A WHAT WAS SUPPOSED TO A LAYMANS COURT?
    Can anybody explain how this has been allowed to happen?

    • Clearly Chas, you have not heard of the expression of ‘Thick as Thieves’, which is what they all are, including MP’s who are the most overpaid adventurers in the business! Why else would my constituency MP refuse to take my complaint to Grant Shapps who was the Housing Minister at the time? And to compound the issue, he has now been appointed a Junior Whip with a Salary Increase to boot!

      Disgusted with the whole business, and it is easily the worst decision of my miserably life to Buy into Retirement Housing, now denied by Peveral as being Sheltered Housing so I hear?

  4. Commonhold could be required for all new schemes, however there is a sting in the tail. Given a “mad resident’s board” and practitioners and residents have many war stories about those, there is no redress to the FTT (nee LVT) for a CHA or unit holder who disputes charges- straight to Court. It would be naïve to assume that all charges will be fair and reasonable just because residents are in control, nor that a dispute will not arise. Moreover, thinking of forcing all units to be converted to commonhold requires herculean efforts in just the administration of converting leaseholds to units especially where those are linked to loans, let alone wills trusts or equity agreements (for the retired),

    • A mad residents’ board can be replaced. The directors must be reappointed at every AGM. If mad they would not be reappointed. If a majority of residents favour some course of action that a minority disagrees with it is at least a democratic decision.

      A corrupt managing agent can not be replaced without considerably more effort than voting in a new board for a residents’ management company. There is one key difference between these you have deliberately ignored: the board of a residents’ management company is made up of owners who generally do not have a CONFLICT OF INTEREST — no kickbacks of any kind. In fact, they are ordinarily unpaid volunteers who put in significant efforts to improve the lot of all owners.

      If the theoretical risk of a mad board is the best you’ve got I should get out of business now. It’s a pathetic argument. The evidence for this can be found in the abolition of leasehold in every country that inherited it from English common law, except for England and Wales. If it was fit for purpose, instead of being a medieval anachronism, it would have been retained.

      Clearly you have a vested interest.

  5. It would be naive to assume that supporters of commonhold are not well aware that disputes exist in this form of tenure.

    Carlex / LKP has covered many examples of residents’ management companies (RMCs) behaving badly.

    But commonhold would end:

    Developers incorporating questionable income streams in the leases;
    Developers selling the management contracts to firms of property managers in shady deals;
    Developers selling on the freehold as a bonus after completing a site;
    Dubious freeholders buying the freehold – worth around five per cent of the value of a site – and then making all the decisions in running it (such as appointing themselves as managing agent).

    It would be a simple matter to have disputes over RMCs or commonhold associations covered by the property tribunal.

    That would be a very minor legal adjustment compared with many that have been adopted to make leasehold work.

    For example, the right to collective enfranchisement, where a group of people have the right to compulsorily purchase an asset belonging to someone else at a price determined by a tribunal, is quite astonishing.

    It is justifiable only because leasehold itself is such a flawed form of residential property tenure unique to England and Wales – and dumped in other English law jurisdictions across the world.

    • I agree and much of what I am posting is to try and let people understand that its not a simple magic pill, and will take some legislative work. I agree that commonhold could work in new sites ,but in reality compulsory transfer of the freehold to an RMC for £1 with leases of 999 or 9999yr on the same terms and conditions as a commonhold unit would be far easier 🙂 It then opens a world of debate on compensating the existing freeholders as you say. While its easy to pin this on the “bad lot” and say the RTE value is contrived, which it is, there are a lot of household names, landed estates, and RSL/HA types on whom the government depends for housing , whose balance sheets are based on this value . I can’t see the government legisating to wipe that out.

      • LKP / Carlex would be happy to publish an article making this point.

        The retirement developer who builds with an RMC in the lease which hands control over to the residents would prosper.

        It would be a way to restore confidence to this market, where sales and capital values are appalling compared with wider housing market.

        Unfortunately, none of the main retirement developers are interested, hoping that the old business model will continue.

        The old business model is:

        Build with a complex lease;
        Introduce revenue generating clauses in the lease;
        Sell the management to the highest bidder;
        Get round the obligation to offer the freehold to the residents and …
        Flog it off to whoever will pay the most;

        Or … keep the freehold and have your own monopoly management company.

        This is the position with McCarthy and Stone and (the McCarthy family’s) Churchill.

        It did not work before in the 1980s/early 1990s.

        • Ok thank you let me work on that 🙂 We worked on quite a few retirement developments in the 80’s and none of the developers would have dreamt of such practices. I recall one in particular considered them rather dubious and marketed on the simplicity of the purchase. McC & S then made them an offer that their shareholders could not refuse…….

  6. Congratulation to Sir Peter Bottomley. The antiquated medieval hundreds years old Leasehold should be abolished and replaced by commonhold for all including we the current long suffering Leaseholders. The Leasehold is only in this country the other civilised countries never heard of it.
    The commonhold works perfectly well in the other countries so it should here! It is the best system what ever way you look at it. It should be adopted immediately. I for one am sick of the treatment rip off paying for the services not provided, dishonest, bulling, harassment the list goes on and on. Bring the Commonhold on the sooner the better!

  7. James Peters says:

    Great to see and read about this speach by Sir Peter Bottomley. However I would caution one thing. It is about forfeiture.

    If forfeiture was to be abolished, some equally tough sanction system MUST be put in place to deal with a breach of covenent of the lease. Our block of flats (or rather the block I WAS living) in was slowly being taken over by property investors buying up flats and renting them out. As these wretched people have no idea of how difficult flats are to live in – they have never lived in a flat – they go and do it and put whatever tenants they can find, more often than not, creating problems of noise and nusiance and disturbances.

    In any situation like this the leaseholder is clearly in breach of the lease but try as we may to tell ‘renter leaseholders’ to deal with their rotten tenants – they just sit on thir hands and do nothing. The only way to force them to the table is to threaten them with forfeiture. At least it would be if we had anyone in the block who knew about forfeiture and we had a managing agent that knew what a block of flats is!!

    In 2007 flat above mine was bought & rented out. The people who bought it put in the worst tenants you could have in a flat – noise and nusiance and loud music every day and night – 7 days and 7 nights a week. Unfortunately I DID NO KNOW ABOUT THE FORFEITURE PROCESS. I HAD NOT A CLUE THAT SUCH A PROCESS EXISTED. No-one else in the block came forward with that information and the managing agent that we had was worse than useless – they just ‘ran away’ and refused to deal with the problem. After two months I had no choice – I had to move out of my flat. The leaseholders of this property turned out to be very nasty, beligerent people – so I considered it unsafe to return to my flat and I put it up for sale and left. At ths point we had reached the halfway point – we had 9 rental properties out of 18 in the block. The place was simply being ruined!! The remaining leaseholders were almost all retired people, some had lived there for many years.

    [Postscript: Having sold my flat, I found a very nice little house in a nice (hopefully safe) mews courtyard development consisting of four flats and four houses. I have been here for 4 years. I have just found out that one of these houses has been bought by a buy-to-let b*****d so I am going to have to move again BEFORE I am driven out. There needs to be some legal remedy for people in HOUSES to combat this buy-to-let problem.]

    • James, I think you have not understood forfeiture. It has nothing to do with noisy neighbors its something a landlord can apply for if service charges or ground rents are not paid. Once a county court judgement is made a landlord can apply to forfeit the property if the monies are not paid.

      My experience is that most buy to let landlords are as concerned if not more so for a site than owner occupiers. I guess it all depends on the site.

      • Actually, you’re both right (or wrong, depending on how you want to approach it). Forfeiture is the process by which a landlord teminates a lease before its expirty. The right to forfeit arises when the tenant breaks a covenant. That can be a monetary one (pay ground rent or service charges) or can be any other covenant (not to cause nuisance and annoyance, etc). I accept that the monetary ones are more common, but forfeiture exists for all breaches of covenant.

        • James Peters says:

          Anon is correct. Forfeiture can be used for any breach of the lease. It was only after I had moved out of my flat that i found out about it. I phoned a solicitor (who is well known in the leasehold sector) and she said that we could get an LVT tribunal held within three – four weeks by using the LVT ‘fast-track’ process.

          The only information we had about these problem tenants came from the local authority environmental health people (used to be called noise abatement officers) who told us that these people ‘were students’ and they would be leaving in two months time. We were to late to initiate the forfeiture process.

          When forfeiture was set up under Section 146(1) of the Law of Property Act (1925) the matter was sent straight to the courts. In order to ‘weed out’ possible frivilous or vexatious applications a ‘prior step’ was introduced where the matter is first sent to the LVT under Section 168(4) of the Commonhold and Leasehold Reform Act (2002). If forfeiture was abolished it would have to be replaced with something else – either criminal procedings where the police woud be involved OR civil proceedings. Before I moved out of my flat I did have a meeting with a solicitor (who was not a specialist in Leasehold property matters) and i was told that our Management Company could take civil action against the leaseholder by suing them for damages. He said that the starting cost of this would be around £5000. At a minimum this could double over the course of the proceedings and could go a lot higher and there would be no guarantee that we would win the case. We had quite a good size reserve fund which would be wiped out completely if we started this action. We would bankrupt the company.

          LVT decisions are published on the internet here: http://www.residential-property.judiciary.gov.uk/search/decision_search.jsp

          With a bit of searching you can read them online or download them as .pdf files. I have done this myself. In the one I am reading now a leaseholder was found to be in breach of a covenant of her lease by keeping a dog in her flat which caused nusiance and annoyance to other leaseholders!

        • The chance of getting a forfeiture decision on something other than a financial issue seems more than limited. A court is not going to forfeit a property becasue a tenant breaches the lease on hanging out washing. On a noise issue the tenant defeats the action be becoming quiet during the period of the case the courts would expect the matter dealt with via environmental services in all but extreme cases?.

          Why we even need forfeiture is not clear. It was due to be abolished some time ago but got pushed into the paperwork mountain. Taking action in the civil courts if perfectly good enough for those who live in houses so why not for those who live in flats?

    • James Peters

      Shortly after securing my first permanent home in London in the 1970s the landlord/housing association went bust, after which we took over the freehold and management of 48 flats, a co-ownership scheme. The first Commonhold-type ownership.

      On the issue of forfeiture the CoM did remove one resident for causing a ‘nuisance’ to neighbours though I suspect today it couldn’t have happened on grounds of race/culture.

      But I understand entirely your concerns about ‘buy to let flats’ and the numerous problems that brings with noisy tenants etc. Under the original lease owners were forbidden to let out the flats and when the CoM had a new lease drawn up that same rule/clause was retained and I know it still stands today. It’s the only way to keep the peace and to maintain the property at a high standard making it a desirable place to live and easy to sell. In the new lease a 5% ‘redemption’ charge (now called exit fee) payable on all sales was removed.

      I don’t know what the situation is under the 2002 Commonhold legislation regarding a ‘lease’ when the leasehold system is abolished and no longer applies? There must be a set of rules of some sort by which owners and managers of flats/houses must adhere to and function properly. If anyone has that knowledge please tell us. I’d be interested to know how it works.

      • PS: The owning leaseholders were never required to pay an additional ‘redemption’ charge by the appointed managing agent for a sinking fund. All maintenance costs for repairs/redecoration were paid for out of all the service charges collected. I will never understand how Peverel can justify taking 1% ‘exit fee’ for a contingency fund. In any case, in their published booklet on repairs, it clearly says that all minor/major repair costs are paid for through the service charge..? So, where does that 1% ‘exist fee’ go to then? I have never had a written answer to that question.

  8. Anon
    What happens if the Landlord breaks a covenant?

    • Lesley Newnham says:

      Nothing it seems Chas, they do it all the time and continue to get away with it!!

      • The landlord is then subject to a variety of proceedings to require them to remedy their breach, such as the housing disrepair protocol, the appointment of a manager/receiver, a S19 determination on service charges, or right to compulsory acquisition of the freehold in the 87 Act. Some breaches are subject to criminal proceedings , some by the local authority and some privately in the magistrates court.

        • AM you seem to have one eye closed yet again? You must know there is a huge gap between the theory and practice over what leaseholders can do when a landlord breaches a covenant. To run through your list of potential remedies.

          In the last 25 years there have been no more than a dozen sites qualify contested a compulsory acquisition order under Part III of the 1987 Act. The number of s24 court appointments of a manger under the 1987 Act are not huge. Before the courts will grant either a s24 or Part III award the landlord has to be served with a notice and given time to put right those breaches which can be remedied. If he does fix the breach the case falls away. To go on and have either a Part III or a s24 decision a number of ongoing breaches will have to be proved at a hearing –with the landlord undoubtedly protesting their innocence. Once this second rather large hurdle is jumped the tenants have one final fence. The leaseholders must show their case passes the “just and reasonable” test. They must show the Tribunal those breaches not addressed are so significant and ongoing as to warrant the appointment of a manager on behalf of the court or to go forward with the forced sale of the site.

          The s19 issues you mention are handled under s27 of the 1985 Act for consideration of the reasonableness of costs. This also has its limitations. The fundamental difference between the rights of a landlord and the tenant are that most landlords have the right to recover their legal costs while 100% of tenants do not. Even when the Tribunal grants s20c award limiting the landlords costs not all of them bother to follow the Tribunals decision. Landdlords are fully aware it may cost a tenant more to prove a breach than they are likely to recover. Under those breaches which give rise to a s27 case the landlord also has the advantage that he faces no penalty. At most a s27 award requires the paying back of a proportion of the unreasonable over charges. It’s a sort of heads we win, tails we still win, we just have to give some of the winnings back?

          As I understand it, in the private sector at least, the housing disrepair protocol seems not that widely followed – perhaps because a landlord who is not keeping the site in good order is also not likely to be keen to mediate themselves into getting the work? The other year LEASE closed down their mediation service because too few people were using it.

          In the past Housing Minister Shapps used to call this a balanced system. Fortunately he was replaced by a considerably better informed Minister. Lets hope the new one is equally well informed.

  9. Robert Cooper says:

    Thank goodness for people like Sir Peter. Three years ago I made the big mistake of buying a Peverel retirement flat in Worthing and it’s the worst thing I have ever done. As I am now trying to sell the flat I am finding out all the pitfalls of trying to get out of it, trying to find a buyer being the main problem, but I live in hope. I just hope I don’t die in despair instead!

  10. Well Martin its not matter of how wide the eyes- it was a general response to a general point 🙂

    On 87 acquisition, that was a time where rights were not readily exercised and was rapidly supplanted by the 93 no fault RTE. Even today it is overlooked, as are the valuation advantages. I question the number of decisions and the exclusion of its use as leverage.

    Of course the landlord must be given notice, and an opportunity to remedy the breach as that therefore largely solves the dispute. Where they put up your “hurdle”, cases like Charter Quay “happen”, where there is case to answer-there is of course no other way to reach a decision other than look at the disputes, why the landlord refused to comply with the initial notice, and the willingness and capacity of them to act. These can be subtle and complicated, and no fault rights, in some cases, might be easier and beneficial to achieve. The value of this is where residents want a solution and lack the appetite to take on ownership or responsibility, just “a coat of paint” or just want to be heard.

    On costs that is incorrect as not only must the lease allow costs to be recovered but they fall under the control of section 20c and the new FTT regulations. Moreover and crucially Daejan ruled that the leaseholder’s costs can be taken into consideration in s19 and s20 determinations. It is often overlooked that where, as is often the case, LL’s costs are only recoverable when part of the S146 process, that leaseholders should initiate determination rather than respond. It is a by product of the protections in the 96 and 02 Acts that some landlords started to include such costs in the service charge clauses of new builds.

    He does face a penalty in losing his SC costs that he has incurred. Where the lease allows recovery, the arguments presented are very often poor, based on the wish that costs should be punitive and/or the process free to flat owners. The award in general terms is based on a dispute between two parties, and the amount reflects the conduct behind and basis for, that dispute. A read of decisions will show that a “silly landlord” is rarely “rewarded” with costs, and I accept that there have been some bizarre awards as well. Owners forget that the issue of costs applies equally to them if they are an RTM or RTE company and find themselves in disagreement with a resident(s).

    The problem with mediation is that someone has to initiate it and often pay for it, something which leaseholder’s are reluctant to do, as they can see themselves as victims (which they might well be) and not one of two parties with a dispute, who must follow a process to establish their “victimhood”.

    In broad terms, it is a balanced system, with a range of controls and remedies, imperfect as they can be. But then what is perfect?