Do freeholders have too much power over leaseholders?

[markey]

What do you think?

I think they do. But again I would because I hold a long lease.

First let me apologise to those 'good' freeholders that this doesn't apply to.

It still is an unfair world where Freeholder's still have too much power over use leaseholders. We are to some extend still living in the dark Victorian age, where the peasants were kept from owing anything; the rich got richer while the poor were suppressed and got poorer.

The Commonhold and Reform Act has made a difference but still has a long way to go. Freeholders should not have power they have over 'long' leaseholders

Imagine years ago taking out a hefty mortgage to purphase a house/flat; thinking in years to come will own it. Then all of a sudden, out of the blue the 'greedy' freeholder makes some unreasonable demand. For example, you MUST insure your building insurance with 'my' approved insurer so I can make a 'nice big commission' off your back (and you paying double or triple what you would normally pay with your own insurer). Oh, and I won't pay the extra you have to fork out! Or demanding you forking out (big time!) for some othe service charge.

And what has the freeholder paid for the land in comparison to our house/flat purchase? Very little! And yet make these unrealistic and unnegotiable
demands on us.

I think more should be publicised about the rights leaseholders have and these rights should be made easier.
We can insure with our own insurer (and not the freeholders) if we conform to that set up in the Reform Act 2002 - serve the freeholder with the Notice of Cover form and within time period (and each year). Some Freeholders will for a fee of say £25 (yearly) waiver this covenant restriction - but will not inform you of your right via the Reform Act and hence avoid this.

The Act says we can buy the freehold, but again this might not be that cheap - okay purchasing the freehold might be, but then you have to pay their legal costs, yours and possibly tribunal costs if the freeholder doesn't agree on a reasonable price.

Okay I've had my say.

[jeffrey]

Yes, to a certain extent: usually London-based investors who snap up f/r portfolios elsewhere to try and squeeze £££ out of leaseholders.

[tenant29]

I agree that residential ground rent freeholders have too much power.

In my block of 30 flats which sold 12 years ago for approx 2.5 Mil pds, the builder Belway Homes sold the freehold over our heads without any offer of Right of First Refusal for only 29K to Cherrybase Properties Ltd and we were lumbered with Simarc as its managing agent although there was a Managment Company owned by the lessees to run the service charge account. None of us lessees knew the law and our managing agent later advised that we had 2 months to organise to compel a transfer to us but the time allowed had expired.

Under Simarc, our building insurance premium rose 400 % over 4 years and many of the lessees faced demands up to 200pds + VAT for subletting of their flats although the lease stated a notice fee of not less that 20 pds was to be paid to landlords solicitor. Those who resisted the demands faced a 6 weekly bombardment of letters threatening forfeit lease and some lessees found demands were made to their mortgage lenders who insisted on paying up to those threats as it put their loan security at risk.

When I checked around with the other lessees, I found that about 8K had been paid to Simarc for subletting fees. The purchase by Cherrybase of our freehold was financed by Royal Bank of Scotland and I estimate probably on 25% deposit which would be covered by the collection of subletting fees. The inflated building insurance demands were additional source of income to the collection of ground rent which gave a 12% yield. So basically we lessees had been squeezed by Simarc / Cherrybase enough to finance the freehold for free.

So by paying 29K for the freehold, a dishonest freehold company has the right to forfeit the leases of those lessees who had collectively paid 2.5 Mil to buy the leasehold interest of their flats. This leasehold system only operates in UK. If Australia, the strata property title system operates with the communal areas under the body corporate ( similar to Commonhold system enacted in UK but not yet willing to be used by british builders.)

So if other lessees have similar leasehold abuse experiences , please tell us about them( and inform your MP to support Commonhold Introduction )

[markey]

Hi tenant29,

So I'm not the only one with a sore spot.

I thought this post might have attracted lots of responses, with people wanting to get it off their chest the bad (or good?) experiences they're had (or having) with their landlord ; especially with so many freeholders bleeding us dry.

[markey]

I was of the opinion that service charges only applied to flats, but it appears not. However, one of my work colleagues is purchasing a new house in Chorley which will have a monthly service charge of £160 per month. He thinks this isn't much because it covers all Gas, Electricity, gardening, building insurance and he can use whatever Gas etc. Also, the house price is less than the average house price. There is just one boiler that serves all the houses. Also no animals are allowed; I suppose not even goldfish ;-) .
tenant29, as in your case, I would expect this service charge is increase rapidly as time goes on - once people have moved in and got their feet firmly under the table.

Is this the norm now with new housing estates - i.e. houses being leasehold with a 99 lease? I thought new builds where freehold - but I suppose then there's less money to be made then.

[jeffrey]

New houses can be sold either freehold (if V owns freehold) or leasehold. Often, the choice reflects regional variations- e.g. leasehold is the usual preference for developers in Sheffield, South Wales, Birmingham, Wigan/Bolton area, etc.

[markey]

Cheers Jeffrey.

[LongsufferingLeaseholder]

What do you think?

I think they do. But again I would because I hold a long lease.

You are absolutely right that freehold is a totally outdated and fedual system that does not seem to be suffered by flat owners anywhere else in continental Europe. What needs to happen is for the Commonhold system of ownership used in continental Europe to completely replace residential leases and residential leasehold. This then leaves the duty remaining to maintain the common parts of the building with your fellow owners but removes the oppressive forces of a lease that run eventually run down to nothing, leases worth hundreds of thousands of pounds that can be completely forfeited for a debt of only say £1,000 and finally landlords who simply enjoy writing threatening and oppressive letters making mention of forfeiture and other other penalties under the lease if you do not comply with the most minor covenant or immediately pay every single bill.

I have a flat on which I have over 100 years remaining of a 125 year lease from a management company in which I am also a shareholder but that management company has more shareholders in it who are freeholders than leaseholders and they have diametrically opposed interests to us regarding spending money on communal maintenance to the building containing the flats. And on top of that the management company was hijacked by a lady freeholder who was Chairman continuously for many, many years and who then made it her business to make the lives of the second class citizen leaseholders here (in her view) hell by sending them threatening letters about where they parked their car, leaving tables and chairs outside their patio doors or dropping needes from xmas trees on to the carpet etc, etc. Not to mention always threatening forfeiture against leaseholders for the slightest thing.

Believe me owning a share in the freehold of the company which owns your lease is not good enough. The oppression from a management company and the feudal threat of forfeiture from owning an apartment only goes away when you have commonhold that gives you permanent ownership of your flat. My understanding is that under commonhold ownership where an owner does not comply with the terms of their deeds regarding maintenance and/or contributing to building upkeep they can ultimately be evicted from their flat and the flat sold to pay the bills but they will still receive the full market value of their flat minus any legal costs in taking the action and any other outstanding bills. This is quite different from forfeiture on leasehold properties where flat owners can quite unjustifiably be robbed of hundreds of many hundreds of thousands of pounds and freeholders given a quite unjustifiable windfall gain.

Anyone who opposes the continuation of leasehold should have signed up to the now closed petition against it at http://petitions.pm.gov.uk/UnfairLeasehold. They should also join the Campaign For Leasehold Reform at www.carl.org.uk to protest against the continuation of Leasehold and to demand its universal replacement with Commonhold.

[martinman3]

LongsufferingLeaseholder,

The power is in your hands already.

The 'lady' Chairman you refer to had no more power than you did. If you, and others I expect, didn't like what she was doing then remove her from office and replace her with someone you all supported.

[LongsufferingLeaseholder]

The 'lady' Chairman you refer to had no more power than you did. If you, and others I expect, didn't like what she was doing then remove her from office and replace her with someone you all supported.

The situation is much more complicated than that because the old country house is converted in to flats but then there are stable cottages and new build houses in the grounds. The houses are all freehold and have more shares and more votes than the flat owners in the management company.

After over 10 years of sticking to the service charge percentages in the lease the lady chairman and another director led a crusade to alter the service charge percentages against our interest (using a contentious clause in the lease that may or may not give them the powers) even though there was initially no strong feeling amongst freeholders that they were unhappy about the existing system. She and another director whipped up this feeling to suit their own ends. The Chairman is entirely two faced and is nice to other freeholders while behaving like an old fashioned feudal baron towards the leaseholders who she has frequently personally threatened with forfeiture. A lot of the behaviour amounts to harassment.

The flat owners on average move after 3 years and the freehold owners stay around 10 years so there is a huge mismatch of powers. We the flat owners contribute well over 50% of the company's income but are only permitted 40%of the directors due to the shareholder situation.

This is a much worse situation than a normal dispute between flat owners in a block of flats.

Most of my fellow flat owners who felt strongly have sold up and and left and I am left with a few Col Blimp type flat owners who do not want to rock the boat and a few young professional owners who are too busy at work to want to get involved.

[martinman3]

That is a terrible situation. The only thing that I can think of is an application to the LVT by all the leaseholders to have the leases varied.

:o But I think that you have done that already, I have just seen another of your posts.

Is there one freehold title for all the buildings ?
Can you not purchase the freehold just for your building ?

[LongsufferingLeaseholder]

That is a terrible situation. The only thing that I can think of is an application to the LVT by all the leaseholders to have the leases varied.

There are variuous possible theoretical remedies that are all difficult in practice to achieve:-

1. Contest the changes at the LVT and see whether they believe the reapportionement under the lease has been on an equitable basis. Still being tried - now at Lands Tribunal stage.

2. Apply to vary the lease as defective because they do not make provision for collection of service charges on a fixed scientific and objective basis but purely based on the current whim of the directors (where freeholders hold more votes than leaseholders on the charges that are imposed from year to year).

3. Seek the Right to Self Manage by the main house containing the apartments whilst remaining under the same management company

4. Seek the Right to enfranchise from the current management company, in which we own shares, in to a new company that just runs the building containing the flats.

Unfortunately most of my fellow leaseholders who opposed what has gone on as strongly or more strongly than me sold up and left and I am left as the longest leaseholder with now either largely new owners with an apparent short term horizon on ownership plus the few retired longer term Col Blimps who are fearful change and some of whom have nominal status as directors in the current company. Thus the reality is that only the legal option of the Lands Tribunal deciding unilaterally that variation from the percentages in the lease was illegal is likely to work and even then it is possible the freeholders may then try to close down some of the communal facilities to cut costs if the Lands Tribunal rules their reapportionment was wrong.


Is there one freehold title for all the buildings ?
Can you not purchase the freehold just for your building ?

That is rather an interesting question which I am about to pursue. I think at present the title for the building containing the flats and the extensive grounds are intertwined but we could enfranchise just the building in to a new company and leave the grounds and facilities with the present estate management company. The problem is persuading certain other parties that not creating a fuss "old boy" is not the best approach. Some of them believe that two management companies will require more directors be more complicated and create short term uncertainty for anyone thinking of buying an apartment here.

[martinman3]

I really hope that you succeed in whichever option you decide to take.

[moocow]

did you challenge their increase in service charges with the LVT?

[jeffrey]

That is rather an interesting question which I am about to pursue. I think at present the title for the building containing the flats and the extensive grounds are intertwined but we could enfranchise just the building in to a new company and leave the grounds and facilities with the present estate management company. The problem is persuading certain other parties that not creating a fuss "old boy" is not the best approach. Some of them believe that two management companies will require more directors be more complicated and create short term uncertainty for anyone thinking of buying an apartment here.
The distribution of ownership into separate titles is irrelevant. However, a self-contained block's lessees can enfranchise that block so as to separate from the rest of the development. See s.3 of 1993 Act as to definition of "Premises to which this Chapter [s.1-s.38] applies".

[LongsufferingLeaseholder]

did you challenge their increase in service charges with the LVT?

Yes but the LVT Chairman we had wrongly maintained the LVT did not have jurisdiction over service charge reapportionment in her decision. She seemed to be wholly unaware of the extended powers given to the LVT under the revised Section 27 of the Landlord and Tenant Act 1985 implemented by the Commonhold and Leasehold Reform Act 2002.

As a result I am having to appeal to the Lands Tribunal which appears to take forever. They could just review the same bundles submitted to the LVT and reassess the arguments but no they want to start all over again as though this is an entirely fresh case.

[teatree]

Hi all,

I don't really know how much the law has changed regarding giving rights to leaseholders who want to buy the freehold to 'their' property, but in my experience and opinion, a lease is ok if the freeholder is a reasonable person, but if not, buying a leasehold property can be a nightmare and finanancially very costly. I would never again buy anything leasehold, not even a garage, which after my first property experience is about all I can afford.:) I'm not bitter, just once bitten.

[Brendan]

What do you think?

I think they do. But again I would because I hold a long lease.

First let me apologise to those 'good' freeholders that this doesn't apply to.


I think they maybe do. I have had feet in both camps over the years. I think not only are most leaseholders not 100% clued up about their rights but also most freeholders are fairly ignorant. In my freehold capacity I am seriously concerned a lot of the time that I might accidentally overstep the mark and end up not being able to recharge something I've already paid for, or end up in breach over a duty of care, or various other things that could cost me dearly. There are probably lots of freeholders out there who knowingly overstep the mark and choose to accept the very small risk that some lessee will haul them through the remedial procedures. I would not operate like that.

[leaseholdanswers]

I think they maybe do. I have had feet in both camps over the years. I think not only are most leaseholders not 100% clued up about their rights but also most freeholders are fairly ignorant. In my freehold capacity I am seriously concerned a lot of the time that I might accidentally overstep the mark and end up not being able to recharge something I've already paid for, or end up in breach over a duty of care, or various other things that could cost me dearly. There are probably lots of freeholders out there who knowingly overstep the mark and choose to accept the very small risk that some lessee will haul them through the remedial procedures. I would not operate like that.

If in doubt employ an ARMA or RICS managing agent local to you with a good reputation, even if only as a consultant on set up and larger issues.

[KMB5]

Yes, Freeholders do have too much power over leaseholders.

Being a long leaseholder myself, I am continuing to have trouble in regards to my freeholder. I have been nothing but reasonable, and am desperately trying to get the property looked after, but am meeting brick wall upon brick wall whilst the property continues to go into further disrepair. I have been battling for months, nearly a year now and still have no light at the end of my tunnel.

And then, what will happen when I wish to extend my lease? No doubt exorbitant fees........ I despair...... I welcome Commonhold if and when it ever occurs. I can't even force my freeholder to sell to me so I can look after the property as I live in one dwelling comprising of two flats, one of which she owns.......... I will never, if I can help it, purchase another flat due to the problems I have experienced and am continuing to experience.

By nature, I have always seen myself a conciliator and not a fighter, but have learnt there is fight in me, and I will continue to fight, sadly, I have to.

I am lucky to have just stumbled upon a "lease advice drop in" in my local area and will be attending as soon as I am able, they even have an evening this week where a solicitor will be in attendance to give additional advice.

I hate the extra stress and worry this whole leasehold situation has added to my life, am now on medication for high blood pressure, but won't let the freeholders grind me down.

To all of the decent freeholders out there, I apologise, but my experience is nothing but bad.

[andydd]

I too have had nothing but problems, clearly the ground rent is not enough for my freeholder he has many scams, commisons and kickbacks going to add to his profits, he has seeked to add all sorts of charges not allowed in the lease, it has taken an LVT application to stop this.

I had owned the property for over 10 years before I wised up and began to investigate the various costs I had been charged, many of these were deemed not recoverable or simply excessive by an LVT (although I wasn't really happy with the outcome), I also had to start a seperate court case to recover overpaid ground rent (successfully).

It is thanks to sites like this (and the helpful posters) that have enabled me to 'fight back', but it hasn't been easy, in my opinion landlord and tenant law is a mess and although there have been a few improvements in law over the years, i'd still haazard a guess and say that 80-90% of tenants just pay up when faced with a dispute and/or legal action as they are blissfully unaware of their rights and even that they have the option of questioning the charges.

Even if a tenant wishes to dispute charges, applying and attending a LVT is not easy, it is not as easy-going and informal as it suggests it is and unless you go to the expense of getting a solicitor you do have to be very clued up on all aspects of the relevant laws, not to mention the sheer complexity and size of preparing your case is probably beyond the means of most people.

It would appear that the present government has even less interest in making the system fairer than the last one.

Andy

[andydd]

I think they maybe do. I have had feet in both camps over the years. I think not only are most leaseholders not 100% clued up about their rights but also most freeholders are fairly ignorant. In my freehold capacity I am seriously concerned a lot of the time that I might accidentally overstep the mark and end up not being able to recharge something I've already paid for, or end up in breach over a duty of care, or various other things that could cost me dearly. There are probably lots of freeholders out there who knowingly overstep the mark and choose to accept the very small risk that some lessee will haul them through the remedial procedures. I would not operate like that.

I agree with these comments 100% :)

Andy

[leaseholder001]

I think they maybe do. I have had feet in both camps over the years. I think not only are most leaseholders not 100% clued up about their rights but also most freeholders are fairly ignorant. In my freehold capacity I am seriously concerned a lot of the time that I might accidentally overstep the mark and end up not being able to recharge something I've already paid for, or end up in breach over a duty of care, or various other things that could cost me dearly. There are probably lots of freeholders out there who knowingly overstep the mark and choose to accept the very small risk that some lessee will haul them through the remedial procedures. I would not operate like that.

If I was a landlord and worried about not being able to recharge for service charge expenditure I'd firstly seek agreement from all leaseholders, telling them that if agreement wasn't unanimous I'd have to check with the LVT over whether prospective charges are reasonable or not. Then if agreement wasn't forthcoming I'd ask the LVT. It's not ideal but the only other option is doing nothing.

[rajeshk4u]

I am on both sides and owning a Freehold is not a 'good investment' for the sake of say £50 ground rent per year, you open yourself up to greater loss, if say something goes wrong, especially as the Leasehold laws are complicated. Just read the topic about the fire in a building and then the insurance does not pay up for the fire and people are saying sue the Freeholder.

But as a Leaseholder I am victim to high service charges....


We can insure with our own insurer (and not the freeholders) if we conform to that set up in the Reform Act 2002 - serve the freeholder with the Notice of Cover form and within time period (and each year). Some Freeholders will for a fee of say £25 (yearly) waiver this covenant restriction - but will not inform you of your right via the Reform Act and hence avoid this.

I am not sure exactly what you mean. Do you mean that Leaseholder should be allowed to insure themselves?. So if you live in a 4 storey block, how do you know that the chap on the 3rd floord as not forgotten to insure his flat?. Or say if there is a fire, images trying to sort out with all difference insurance companies involved and each policy have a difference excess....

[animal]

If in doubt employ an ARMA or RICS managing agent local to you with a good reputation, even if only as a consultant on set up and larger issues.

Doesn't necessarily help. We had a RICS MA who was worse than useless. Yes you can complain to RICS, but IMHO they're more there to protect the interests of their members than help individual lessees. We now have an even worse non RICS, non ARMA MA, who was imposed upon us by a management who didn't consult. There appears to be no authority to complain to about their antics.

And when you mix in company law, with RTE, then it becomes an even worse knightmare...

Given the number of leasehold properties, we do need an all encompassing reform.

[InTheClouds]

I've lived in flats for years. I've been a leaseholder, and I'm now the freeholder of a block of four flats (and I live in one of them) and I have to say that most of the leaseholders I've encountered don't know the first thing about their rights. But by the same token, they also don't understand their obligations. Most don't understand that their lease is a binding contract that they should take seriously.

I don't believe that the commonhold system is the answer. I've lived in too many buildings that were managed (or rather, not managed) by fellow residents to want to live in one again. We all have differing ideas of what 'proper management' entails, and for some it is painting the front door every thirty years or so.

I don't know how possible it would be, but I think it would help if leaseholders were given (well, sold) a guidebook during the conveyancing stage, highlighting both their rights and obligations and giving full details of advisory organisations and the LVT. Freeholders should get something similar, because a lot of them are equally clueless (myself most likely included).

[leaseholdanswers]

Doesn't necessarily help. We had a RICS MA who was worse than useless. Yes you can complain to RICS, but IMHO they're more there to protect the interests of their members than help individual lessees. We now have an even worse non RICS, non ARMA MA, who was imposed upon us by a management who didn't consult. There appears to be no authority to complain to about their antics.

And when you mix in company law, with RTE, then it becomes an even worse knightmare...

Given the number of leasehold properties, we do need an all encompassing reform.

Yes there are bad agents who are qualified, however thats why you establish what you want as a client, how they will deliver it, and regulary monitor and work with the agent, and take up references, even visit the local blocks. One thing is for sure, most people talk about their homes and you would be surprised how willing residents are.

Too many Google then cut and paste the ARMA list of duties email to everyone, allow half an hour for an interview, choose one and sit back and congratulate themselves on having done a lot of hard work. They only scream when something is wrong.

In that environment should we be surprised if like any business, you slip down the list of priority in favour of the demanding rude clients and those its a pleasure work with, or that activity lurches from feast to famine?

A managing agent if not just for Xmas: it takes TIME work and understanding from residents too.

[jeffrey]

Doesn't necessarily help. We had a RICS MA who was worse than useless. Yes you can complain to RICS, but IMHO they're more there to protect the interests of their members than help individual lessees. We now have an even worse non RICS, non ARMA MA, who was imposed upon us by a management who didn't consult. There appears to be no authority to complain to about their antics.

And when you mix in company law, with RTE, then it becomes an even worse knightmare...

Given the number of leasehold properties, we do need an all encompassing reform.
The nightmare is not a result of legislation but simply because parties:
a. do what they're nor allowed to do; or
b. fail to do what they're required to do.
No amount of legislating (not even the dear, dead commonhold farce) can ever alter human unreliability!

[Brendan]

As an example of what I consider ugly behaviour, I have had a fellow share-of-freeholder say to me "even if we are wrong about being able to recharge this, it's only a problem if one of the leaseholders makes an issue over it, which they won't, and even if they do we'll just use a bit of legal language and they will shut up".

...Which I thought was pretty revolting.

[leaseholdanswers]

And when they do challenge the freeholders make up the balance. Will he indemnify you for the share of the shortfall? If you have directors insurance then you can kiss goodbye to it with that attitude.

[Brendan]

And when they do challenge the freeholders make up the balance. Will he indemnify you for the share of the shortfall? If you have directors insurance then you can kiss goodbye to it with that attitude.


What, my attitude? Or the other freeholder's attitude?

[leaseholdanswers]

What, my attitude? Or the other freeholder's attitude?

Sorry I can see how it can read badly. Its the freeholders attitude; if they insure against liability, but if they know what they are doing is wrong the insurers will not pay out.

I just felt very strongly about that sort of attitude. Its not the first time that acting contrary to the instruction of client directors I have notified the other shareholders in a scheme about such decision making, at best its bullying at worst its theft and fraud. Being a director means that you are the steward of everyones interest.

Sorry again to offer you the wrong end of the stick. My bad.

[Benjamin Mire]

I am not so sure this is a power thing for freeholders or a submissive thing for long leaseholders and that it is more a imbalance of rights and obligations between the parties which the legislation clearly does not have well balanced as both sides feel they are being oppressed by the other! We manage many developments around the country for non-resident and resident freeholders and for resident's management companies. Finding the balance is very difficult. The Directors of RTM companies, who were once part of the resident body, become the "bad landlord" once they assume control as they then have to ensure legislation, which nis slanted againt the freeholder, is complied with. I find myself agreeing with leaseholdanswers - find a responsive regulated managing agent (of course I'd recommend us!) who will try and balance your rights with your obligations and will do the same with the freeholder - it is possible to be an impartial middleman - we do it regularly.

[Raine55]

I completely agree with your views Longsuffering Leaseholder. Only this morning I was wondering why the Freeholder wielding his big stick over his 'tenants' is allowed to continue. I have over 900yrs left on my lease and yet the freeholder thinks of a way to get money out of myself and other 8 leaseholders on the estate every year - latest is £8,000 for a new roof that I don't need "or he will call in his own contractors and bill me". If the property is unlikely to still be in existence in 900 odd years, what do freeholders of long leases get out of using their power? Very wrong..... Would sell up but unfortunately bought a defective lease and in process of trying to correct it. I would never buy leasehold again.