Watch out Mr Rigsby!

Leaseholders are rising up at last against corrupt and exploitative landlords. By Karen Woolfson
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There is an army on the march. It numbers more than 100,000 leaseholders and their organisations. It wants reforms to end abuses against tenants, including fraud, theft and corruption by landlords and freehold owners of their properties. Most importantly, it wants these reforms now.

Representatives of this army met in the House of Commons this week to announce their joint response to the Government's consultation documents on leasehold reform.

Among their demands is one for the immediate introduction of a national regulator to police the multi-billion-pound property-management industry. Leaseholders are also backing one of the options put forward by the Government for a strict licensing system for managers.

The joint document follows increasing anger among scores of leaseholder organisations at the way in which, despite a number of legal changes in the past 15 years, many people, particularly in the south-east of England, still find themselves at the mercy of corrupt or inefficient landlords and managing agents. This anger has translated itself into an unprecedented united front between previously diverse and fragmented leaseholder groups.

The Government's own consultation document was published late last year. It proposes to enact legislation within the next 12 months.

The coalition's statement says: "Fraud, theft and corruption are endemic in this area of business - often linked to the activities of cowboy builders. The modest number of convictions against landlords, and of disciplinary findings against their accountants, reflects the lack of concern by the enforcement authorities, including the police and local councils."

The statement also accuses professional bodies concerned with property management, such as the British Property Federation and the Royal Institute of Chartered Surveyors, of not having effective complaints and disciplinary procedures against their members, many of whom own or manage properties.

Meanwhile, the 62-strong All Party Parliamentary Group on Leasehold Reform also unveiled this week its own reply to the Government's own consultation document. It, too, is calling for a tough statutory regulator to oversee both freehold owners and property managers.

Barry Gardiner, chairman of the All Party Group, says: "The regulator would be a licensing authority like the Personal Investment Authority that would regulate and police managers and managing agents.

"It would have the duty to prosecute and would take over the present role that falls into the remit of local authorities which they rarely use. The regulator would withdraw licenses of managers and managing agents and prosecute where there are breaches, taking a tough line. It should also have the power to carry out investigations using Oftel as a possible model."

But leasehold groups believe a regulator is not enough. Ken Murray, a member of the Campaign for the Abolition of Residential Leaseholds (CARL) and spokesman for the nationwide alliance of leasehold groups, says: "The extensive legislation placed on the statute book in this area over the past 15 years has failed because the residential leasehold system is itself incapable of effective reform.

"However carefully it is drafted, legislation cannot strike a fair balance between the legitimate interests of landlords and leaseholders alike. Both interests can never be reconciled nor satisfied simultaneously, and conflict between the two parties is inevitable."

The leasehold system allows the landlord to retain ownership of the "land" or the "freehold" on which a property stands when he sells a house or a flat. So purchasers buying a property are effectively tenants, leasing their home for a certain number of years from the landlord. The leasehold tenant who has just bought his or her house or flat is required to pay "ground rent" to the landlord freeholder each year in order to keep this system of ownership intact.

The freehold is worth a fraction of the total price paid for a house or a flat. Yet the landlord retains supreme power over the leaseholder, who is considered little more than an ordinary tenant under current legislation. It is this unbalanced relationship which leasehold groups argue is at the root of the problems and must be resolved.

They are calling for the introduction of a new form of land tenure known as "commonhold" which would give all homeowners the land on which their property stands. Leaseholders claim that England and Wales are the only parts of the world which still have a system rooted in a feudal relationship.

Other reforms demanded by leasehold groups include:

All leaseholders should be given the automatic right to acquire their share in the freehold at a price fixed as a multiple of the ground rent set in the original lease, or based on a simple valuation formula.

Ground rent should be abolished immediately.

Provision for the forced sale of freeholds by landlords convicted of offences against leaseholders or where there is clear evidence of landlords abusing their privileged position.

An urgent remedy to tackle past abuses of leaseholders' rights by landlords, some of whom have acquired freeholds for speculative purposes with the unwritten agenda of exploiting leasehold tenants. Absentee landlords, especially those not resident in the UK, are a particular problem.

Complete removal of the "residence test", whereby two-thirds of the leaseholders must want to buy the collective freehold of their block whether or not they live in it.

The setting up of inspection teams on a regional basis, with representatives from both the police and other law-enforcement authorities and interested leaseholders to tackle the high level of crime inherent in property management which includes managing agents and tenant-managed blocks.

The landlord's right of "forfeiture", whereby he or she can try to grab back the leasehold of a property if the leaseholders fail to pay service charges or ground rent, should be abolished. Leaseholders' service- charge obligations should be collectable only through normal debt- recovery procedures.

Landlords should be prevented from making unfair profits from leaseholders' service-charge contributions, including through such items as insurance commissions.

Homeowners should not be forced to test the interpretation of complex legislation in the courts. The vast majority of leaseholders cannot match the resources of landlords in pursuing litigations and do not have an in-depth understanding of the relevant legislation.

The law must be sufficiently simple to allow leaseholders to exercise their rights without recourse to litigation.

It is too early to say whether the Government plans to listen to the demands of leaseholders. What is clear, however, is that their voices are louder than ever.

If you want to consult the new Leaseholders Alliance, please write to PO Box 3076, Littlehampton, West Sussex, DN17 5BT