Some five million people are living in leasehold properties today, and most will have had no realistic alternative because nearly all flats are sold on this basis in England and Wales.
The leasehold sector is unregulated and anyone can be a freeholder or managing agent, so it’s vital to understand your rights and get to grips with how your block is managed. As a leaseholder you have the legal right to ask for a summary of how service charges have been calculated and spent, along with any paperwork such as receipts. Landlords must also consult leaseholders for any work costing more than £250.
There are, of course, honest and obliging freeholders who put in place competent managing agents, but as our ongoing campaign for a fair deal for leaseholders has shown there are others who are less scrupulous.
One thing that unhappy leaseholders can do is take back control, as Karen Peel did when she overcame the odds to help 137 owners assume management responsibilities for The Pinnacle development in Wakefield, West Yorkshire.
When Karen, a 55-year-old businesswoman, helped her son buy his flat back in October 2007, she knew nothing about the leasehold system. But when issues began to arise, she decided to take matters into her own hands.
“The development was going downhill fast and nobody wanted to know, even though the managing agents had increased the management fees when they took over,” says Karen – claims that are vehemently contested by Adderstone, the umbrella company for Avoca Estate Management, which managed the Pinnacle development at the time. In a statement, it said that Avoca Estate Management was appointed only in 2010, and the firm didn’t get a “reasonable chance to put right the problems it inherited”.
Big property managers don’t often have to deal with someone as determined and organised as Karen – only a handful of owners lived on site so she spent six solid months tracking down leasehold owners living as far away as Abu Dhabi and China to get the 90 per cent support she needed to serve her “right to manage” (RTM) application.
The residents took over control in December 2012, and have appointed a new company to manage the block on a 12-month contract.
“They are doing a fantastic job. We’ve worked together on a programme of improvement and general repair, and all the tenants and leaseholders are saying how nice it’s looking. It’s a much safer and more secure place to live,” says Karen.
“We saved £5,000 on buildings insurance in the first year and last year we had over £25,000 left in a reserve fund, which has allowed us to decorate the whole building. We never had a surplus with our previous managing agents.”
In response, the former managing agent Avoca says the insurance in place now is less comprehensive than the one they provided. As for the sinking fund, the former managing agent says it inherited an overspend and as a result it is not fair to compare the two situations.
Karen now has her sights set on enfranchisement so that residents of The Pinnacle can have complete control over their homes. She is even helping leaseholders from other developments to take a stand.
“Things are really looking up for us,” she says. “We are a very strong group of leaseholders and it is the best thing we ever did by taking control. I would advise anyone to only buy a leasehold that has a management company controlled by the leaseholders, or freehold property where all the owners have a share of the title.”
Unfortunately, not every building has a Karen, and even when leaseholders do fight back it often means going to a tribunal where they have to compete with the financial muscle and in-house lawyers of big companies. Expensively assembled teams of lawyers at tribunals can be a big problem for leaseholders who decide to take action, particularly vulnerable, elderly residents who cannot cope with the pressure and extra costs.
The Independent on Sunday spoke to Sir Peter Bottomley, the Conservative MP for Worthing West, who has seen leaseholders from his constituency come up against barristers using every trick in the book to delay hearings and contest RTM applications.
“To use technical skills to frustrate justice in my view is wrong. I’ve seen some of my constituents subjected to what I describe as legal torture. A barrister has a professional duty to be of assistance to the proceedings,” he says.
It is crucial that you challenge any charges properly and professionally if you think they are unreasonable. Do not stop paying the ground rent or service charge, or you could quickly find yourself in breach of your lease and potentially facing forfeiture, losing your home altogether.
RTM is still a powerful tool but leaseholders must work together to be effective. Nearly all leasehold flat owners are entitled to set up an RTM company and take over the management responsibilities, as long as the building comprises of at least two flats and has a minimum two-thirds of the flats on long leases.
At least half the total number of flats must agree to join the RTM company but, crucially, there is no need to get the landlord’s consent, and you do not have to prove mismanagement. That said, you should all be clear that there are duties and liabilities that come with managing a building.
Ian Baggett of the Adderstone Group warns that RTM is not always the panacea it is portrayed to be.
He says: “It is not uncommon for the RTM process to lead to significant fallouts between leaseholders and neighbours with the result that management becomes driven more by internal politics than the principles of good estate management.
“As freeholders, we have on more than one occasion had leaseholders plead with us to reappoint our management company after the RTM company became insolvent within a couple of years of incorporation, through poor management and non-existent credit control.”
If you are going to take over the management or even freehold of the building, you must have realistic expectations about the level of service charge for which everyone will become liable.
For all but the very smallest buildings, there is a lot to consider – lifts, door-entry systems, communal lighting and smoke alarms all mean extra costs, and although it may be tempting to scrimp, it is in everyone’s interest to put money aside for expenses.