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Spend & Save

Julian Knight: Minister says all is well with leaseholders. He'd better think again...

A new fire escape? That'll be £32,000. How leaching management companies are making lives a misery

Imagine a thirty-two grand bill hitting your doormat threatening legal action unless it's settled with a month. Not a nice thought is it? But that's exactly what happened to a friend of mine last year. He had already spent a fortune on a shoebox in London, but as a leaseholder he was also subject to the whims of a management company, appointed by the freeholder.

The bill was for a new fire escape. Suspicious, and frankly petrified, he got a builder to quote for the job and it came to just £8,000. Delving deeper, my friend found that the management company was actually operated by the freeholder and – get this – the £32,000 quote came from a firm owned by the brother of the freeholder.

In any other part of daily life, the freeholder and his brother would more than likely be had up for fraud. but not in the arcane world of freeholders, leaseholders and management companies. Instead, he threatened them with a tribunal and a settlement was agreed. As we catalogue on pages 92 and 93, my friend's case is not isolated. Here at the IoS we are getting complaints from across the country about management companies, their disproportionate service charges and overcharging for maintenance work.

I suspect that management companies seeing interest rates at historic lows are trying to take a slice of their leaseholders' higher disposable income. And this is no longer just a London problem, the massive apartment developments in the northern city centres mean many more have to deal with management companies – some of which have been bought out by private equity and therefore have to pay the inevitable debt by increasing their revenues – in other words, the service charge.

Until two months ago, I too had to deal with a management company which had put up my service charge 40 per cent in four years – about three times inflation – and tried to get away with overcharging for redecoration work (They didn't succeed.), and that was a supposedly goody-two-shoes housing association.

In response, the management companies say that leaseholders can fire them and bring in their own firms. But this needs more than 50 per cent support and in developments with lots of buy-to-let properties it is often impossible to get the required numbers to kick the leaching company out.

What's the response of Grant Shapps, pictured, the Housing minister? To say that all is well and leaseholders think they are getting value for money. I'm afraid, Mr Shapps, you are either deluded or simply don't give a damn, if you believe the system offers enough support to leaseholders, and I don't need Paul the octopus to predict that as interest rates go up, the ever-rising service charge and rogue management firms will become a bigger headache.

Eggs and basket

It looks like, after 129 years, the Children's Mutual – formerly the Tunbridge Wells friendly society – is under threat. It closed to nearly all new custom last week after the Government's decision to kill-off child trust funds, a massive part of its business.

It's pretty amazing that the Children's Mutual could allow its business to be so decimated by the stroke of a pen in Whitehall. The mutual grew apace on the back of CTFs but didn't diversify. I met its affable chief executive, David White, on several occasions, and each time I put it to him that I thought that the first fiscal tightening would do for CTFs. His response? Any government doing this would be swept away on a tide of middle-class parental anger. Think poll-tax riot conjoined with a National Childbirth Trust class. The reality, though, is the death of CTFs has been quick, clean and has barely created a murmur – and with it may have gone the Children's Mutual. What's that phrase? Don't put all your eggs in one basket.

Feeling the pension pain

Pension cuts such as the decision to link future rises in final-salary scheme payouts to CPI rather than RPI are nothing to cheer about but, let's be honest, we are getting pretty used to the "c" word. As someone in his thirties with a couple of final-salary schemes behind him, I can expect the decision to slash 40 to 50 per cent off my pension income by the time I retire. Obviously, I'm not happy. I'll have to save more and diversify further. But, then, as I left these firms after just four and five years respectively, is it fair to expect them to continuously top up my pension payout by RPI to the detriment of their current employees and the business?