Counting the high costs of freeholding: Turning a leasehold into a freehold can be an unexpectedly costly and painful experience, as a west London couple found. Mary Wilson reports

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The Independent Online
THE LONG-awaited Bill on leasehold reform has started its journey through Parliament, and should become law next May. For leaseholders subject to dilatory landlords and escalating service charges this is good news. But for many who think owning the freehold of their flat is the answer to their dreams, it could be the start of a nightmare.

Alison and Paul Domenet are ruing the day they bought the freehold to their two-bedroom flat in west London. 'Either one person doesn't want to get involved in the day-to-day running' Mrs Domenet said, 'or another doesn't pay his bills.

'We were approached by the freeholder in June 1990. He said we had until August 1990 to decide whether we wanted to buy the freehold or he would pass it on to a management company.

'Since we knew of a house in the next street who, under management, had their service charges put up from pounds 400 to pounds 1,200, we thought buying sounded the best course of action.'

There are five flats in their end of a Victorian terrace house, all with 122 years left on their leases. The leaseholders held several meetings and four of them decided it was a good idea. The fifth could not afford the pounds 1,000 it would cost, so the others agreed to buy 25 per cent each of his share.

It took a long time to finalise arrangements. Then, just before contracts were signed, another flat pulled out. Because it would cost too much to jack out at this late stage, the Domenets decided to buy that share too.

In all, it cost pounds 4,854.65 to buy the freehold, including solicitors' fees of pounds 459.10 and accountants' fees of pounds 249.99 incurred in setting up the management company.

Since buying the freehold, the Domenets have been dogged by problems. 'It was painful enough organising the purchase,' Mrs Domenet said. 'Now it is even worse. We are meant to have meetings twice a year, but they are poorly attended. We have ended up doing the work, collecting the service charges from everyone, organising the maintenance that needs doing, paying the bills and doing all the paperwork. One flat doesn't want to ask another for money because their front doors are next to each other and so it goes on.'

Building insurance ( pounds 112 a month), electricity bills ( pounds 17 a quarter) and an annual audit fee (yet unclear) have to be paid. If more money is needed, someone - ie the Domenets - has to persuade and cajole the joint freeholders to cough up.

Paul Domenet is just as fed up. 'It was all done for altruistic reasons,' he sighs. 'But it is just an administrative nightmare. We envisaged having a management company as landlord as purgatory, but this is far worse. We have been shot by our own side. The only good thing that has happened is that the flat that pulled out at the last minute has been repossessed.'

There had been problems collecting money from this flat, but when it was repossessed, the mortgage company, Eagle Star, paid all the bills and will pay anything owing on the flat until it is sold.

A spokesman from Halifax Building Society confirmed that this is usual policy. 'Any bills that are due are met, but back payments are taken separately on their merit. The borrower is deemed to be responsible for his debts and we are acting on his behalf. The money paid is just charged to his account.'

The enfranchisement of flats (converting to freehold) under the Bill tabled last week is a complicated matter. The original lease has to be more than 21 years, ground rent must have been less than two thirds of the rateable value at that time and at least two thirds of the flats have to agree to enfranchisement. If the landlord lives there, any rights the tenants might have are negated.

And it can be costly. Schedule 5 of the Bill says that tenants will pay an open market value, but there are other factors for which the landlord can demand more money. The only way for a dispute to be resolved is for the tenants to go to the Leasehold Valuation Tribunal, which costs more money and takes time. And they have to pay the landlord's costs too.

Paul Garrovitch of the Consumers' Association said: 'This is a problem which we are not very happy with. There is no guidance, as yet, on dealing with the problems before and after enfranchisement. We are pressing the Government to create an advisory service. But they want us, and other relevant bodies, to come up with the information and apply for a grant to set it up.'

(Photograph omitted)

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