Holding the Line – Former military man and now Chairman of the National Landlords’ Assocaition (NLA), David Salusbury talks exclusively to Oliver Romain, Editor of Landlord Magazine about the NLA / National Federation of Residential Landlords (NFRL) legal battle.
David Salusbury is the Chairman of the largest landlord association in the UK, however, he wants the National Landlords Association to pack an even bigger punch. When the NLA revealed this summer that it had merged with the NFRL, he thought he had created the single voice for landlords he desired.
Shortly after the merger announcement a legal fight broke out between the Chairman of the NFRL, Mike Stimpson, his supporters and those who organised the merger. The fight has plunged the NFRL into virtual paralysis and is already rumoured to have cost over £200,000.
The NLA have until now been reluctant to talk about the dispute, however, David has invited ‘Landlord & Buy-to-Let Magazine’ to discussthe legal case in a no-holds barred interview. We met at the NLA headquarters on the Albert Embankment overlooking the Thames and Palace of Westminster. The offices were a far cry from the NLA’s humble beginnings as the Small Landlords Association (SLA), which was started as a rent reform campaign group in 1973 by Lillian Cline run from a kitchen table.
Those outside the NFRL would probably not be aware that the NFRL, who were merged into the NLA, is a trading name for the Southern Private Landlords Association (SPLA), indeed David argues they are “synonymous”. David says the merger was on the cards for over six years when he was Vice Chair of the SLA and Mike Stimpson represented the SPLA.
“We got along fine and on a personal level Mike and I still do. I really thought we were going to get somewhere with this merger in 2003, but it was the SPLA that pulled out,” commented David. “I was disappointed and a bit surprised because we had a gentleman’s’ agreement that Mike would be the first chair of the merged body and it was also unspoken that the second might come from the SLA and I suppose he inferred that I might put my name forward for that.”
“We owe it to our members to find a way out. I have absolutely no desire or wish to allow this situation to become a test of ego or selfishness.”
It seems that the merger talks had rumbled on and off ever since. “I have had at least one serious session with Mike since then; I think about two years later …we parted with protestations that we must move this thing forward but again nothing came of it.”
David explains there was another flurry of excitement when there was a change of management in the SPLA, he eludes his military past describing the change as “a coup de main”. Once again David was contacted about resurrecting a merger, however, “a counter revolution occurred” and the idea wilted once more.
In August 2007 David received a call from the Chairman of the SPLA, Barry Markham, requesting a meeting. “Markham came straight to the point saying that he would like to bring the SPLA on board with the NLA and it quite took my breath away.”
The attempt in February 2007 to convert the SPLA into a limited company registered as the NFRL had been unsuccessful according to Markham. David explains how Markhaminformed him the NFRL council had ceased to meet and been discontinued and that the expected increase in membership as a result of the formation of the NFRL, which was now just a trading style of the SPLA had not materialised. The plan for the NFRL to absorb the membership of dozens of affiliated local associations had failed.
“The progress of the NLA in terms of membership, turnover, influence with government, all of the criteria he [Markham] could think of, he saw no circumstances in which the SPLA would compete successfully with the NLA, therefore, did it not make sense to get together?” “I said, Yes, I think it does make sense because we need a unified voice, and landlords always said they want a unified voice.”
If the merger had gone ahead unchallenged it is hard to ‘see that this would not have been achieved. The NLA has a good reputation for influence and attracting media attention and membership growth, whilst the NFRL was better known for grass roots activism and local representation with councils. David believesthe effectiveness of the NLA comes from an acceptance of the need to invest in employing professionals in key roles.
According to David, the subject of the merger and legal battle is of little interest to NLA members “The overwhelming majority of landlord members of totally disinterested in the current situation… they are not the slightest bit interested in these boardroom nonsense.” To be fair, NLA members have had little choice, because, since announcing the merger, the NLA does not appear to have informed most of its members about the ensuing fight.
The current situation puts the merger in a state of limbo, responding to an application for an injunction, the NLA agreed to stay the merger and not recruit SPLA members to their ranks. The NLA now has its hands tied whilst the legal case is pursued and can only ask SPLA members to join when their subscription expires.
“That is quite a serious undertaking and has constrained us in what we can do.”
SPLA members are signing up to the NLA on expiry of their annual subscription, however David admits that it is not as many as he hoped but he is still optimistic. “There are quite a number (of SPLA members) who are confused and are standing back waiting to see which way the mob will flock, some will be saying ‘a plague on both your houses’.
“Quite a number would move in and out of being landlords and that explains the relatively high churn rate we have anyway, so of the original 5,000 a pretty large number would not have renewed anyway.”
The future of many of these members may have to be decided in the high court, however, the NLA’s recent experience in the courts has not been positive. Earlier this year the NLA had an exparte injunction overturned and were criticised by the judge who awarded £18,000 of costs to Stimpson.
“We had not prepared our argument and case properly. The other side had, and the outcome was unfortunate…what he said doesn’t change the fact of the merger and it doesn’t change the fact that Mike Stimpson and others did act on their own initiative to enter premises, which they should not have entered, and removed equipment.
“I think it was a very unfortunate episode which clearly has not done the NLA a great deal of good, but it does have to be seen in perspective, it is not the determining factor in the big picture concerning this legal challenge.”
The case against the NLA and SPLA directors is based on the legality of SPLA board decision-making in relation to the handing over of the company and its assets to the NLA and that no money changed hands. Were the NLA aware of the risks?
“Nothing in life that if worthwhile is undertaken without an element of risk is it?” asks David. “Our due diligence is done by a combination of the committee, sub-committee of the board plus our legal advisors … we are not looking to merge hundred billion pound turnover companies where that sort of intense scrutiny would be necessary, we are talking about a couple of landlord associations, not for profit, in the big real world, pretty small organisations.
“We did satisfy ourselves in terms of due diligence that what we were doing was correct, that the SPLA board proceeded correctly. We knew there was a risk and we decided to go ahead because we believed it was a calculated risk and I believe today that we did the right thing. We acted in good faith.”
In a recent development, Ken Groves, the SPLA company secretary, added a twist to the story by writing to all the SPLA members criticising Stimpson and his supporters and asking members to join the NLA. It has been alleged that the NLA participated, a rumour David is keen to squash.
“Nobody from the NLA had any hand in drafting it, it’s entirely done by the SPLA majority directors who are entitled to behave in an unfettered fashion, they are not bound by any undertakings given to the court, what the NLA is bound not to do is to influence, instruct, warn, manipulate and I would swear on the sacred bible that we did not do that.”
“I really thought we were going to get somewhere with this merger in 2003, but it was the SPLA that pulled out.”
Legal expenses are estimated at close to £200,000 between the two sides and must be a worry for both. David would not be drawn on how much the NLA have spent; however, he says he was not looking for a fight. “The NLA has become embroiled in this and we’ve not been able to avoid it.
It’s a matter of deep regret for me as chairman that we’re having to waste money on pointless litigation and I regard it as pointless, a waste of time and it should be stopped immediately, but nevertheless, we cannot be walked over… the legal fees that we are anticipating would be proportionate and that they would not financially damage the NLA.”
Indeed NLA members’ subscriptions are unlikely to increase as a result of the action; increased membership has delivered economies of scale over the years resulting in many years with no increase in subscription.
“We are financially sound, we’re well founded and we can contain these legal costs.”
Both sides in the dispute seem to be entrenched in the belief that they are right and will succeed. Proving they are right before a judge will cost a king’s ransom and it seems both side’s are courting the idea of a settlement.
“I don’t think it will be that difficult. I wrote to Mike Stimpson on the 8th July suggesting he and I met, I didn’t get a reply which is disappointing. We have offered mediation; the signs are he is kicking that into the long grass.
He has suggested a round table meeting with the council in chambers with lawyers etc. which we are considering.
“I believe that actually Mike and I should meet, we know each other… we’re not bosom friends but there are many aspects to Mike Stimpson that I like, some I even admire.
‘I have no problem, I’d like to work with him for the good of landlords and I think a means could be found which would enable him in particular to play a role that is consistent, commensurate with his standing his experience and his skills. I’m not sure I could offer him my job.”
“A high court showdown will not result in a win for anybody; it will be a lose, lose. Whatever the judge says nobody is going to be completely satisfied. The vagaries of the legal system, the complexities of the argument, neither side, probably, are going to be able to land the killer punch on the other or a knock out blow.
“We owe it to our members to find a way out. I have absolutely no desire to allow this situation to become a test of ego or selfishness. My role in this is as chairman of the NLA, and I’m answerable to the members.
“You can’t look at a situation like this in terms of personalities and roles for an individual, inevitably it comes into it but it can’t be the determining factor you’ve got to try and be a little bit objective and I think that with a bit of a will, a little down hill with following wind, Mike and I ought to be able to find a solution because it’s using money that should be spent on other things. The end result isn’t going to be what he wants, but it isn’t going to be what we want either so in the end we’re going to have to live together.
“I believe that what we are embarked upon is what landlords want, it’s what members want and it will be good for them. We will get over this, life will go on and I think we will emerge from this as a stronger organisation. If Mike wants a meaningful role within it, there is one there for him.”
This article first appeared in the Jan/Feb 2009 issue and is the copyright of Landlord Magazine – reproduced with permission. The Landlord Magazine is a free circulation publication for the Private Rental Sector – subscribe free at: www.Landlordnet.com
