Our campaign for the rights of leaseholders may lead to a new law
Readers, property professionals and MPs back Independent on Sunday drive to legislate against dodgy practices that ensnare homeowners
Saturday 22 February 2014
The Independent on Sunday's campaign for better rights for Britain's five million leaseholders has drawn major backing not just from readers and property professionals but also politicians.
Reflecting on our expose of endemic wrongdoing by freeholders and the managing agents they employ, Sir Peter Bottomley, MP for Worthing West, has said there is now a real appetite in parliament for legislation to curb dodgy practices.
"This comes from all political parties as there are a lot of MPs who are coming across problems where leaseholders are being routinely overcharged and bullied into submission by the legal shenanigans of managing agents or freeholders," Sir Peter told me this week.
In particular, he is concerned that the current system of redress – the leasehold tribunals – give well-resourced freeholders and their managing agents a massive advantage.
"There is something deeply unfair about a system that allows for one side – the freeholder or managing agent – to employ expensive barristers and then charge the cost of these, regardless of whether they win or lose, onto the leasholders.
"What's more, the punishment for disputing a service charge can ultimately be loss of lease, in effect reposssession. I know of one case where a homeowner stood to lose £800,000 equity in their own home because of a dispute amounting to just £9,000. That is wrong."
Momentum seems to be gathering at last for major legislation in this area, particularly after cases have emerged of managing agents and insurers being involved in dubious commission deals with over-the-top charges being levied on leaseholders for buildings insurance.
Reader Mr Sheehan wrote of his experience where he found that the very expensive building insurance was actually arranged by a brokerage firm owned by his managing agent and that brokerage fees had trebled in consequence.
Elizabeth Ruhmer is typical of the hundreds of readers who have contacted the Independent on Sunday since the campaign began complaining that she has felt systematically "fleeced" by her freeholder who also happens to be the local council.
Mrs Ruhmer wrote: "It seems that every single small repair is charged to leaseholders these days by councils... something has to be done, especially for pensioners who are struggling to pay these overcharges."
Others have complained about the charges levied by housing associations – suggesting that they pay too much – and of a lack of transparency in what is supposed to be social housing.
Mr Hunt from Harrogate highlights the fact that unless leaseholders are given greater rights to query charges levied on them by their freeholders and managing agents then we are likely to see more problems in the future. New-build flat developments are adding to the problem.
"In order to improve their profits builders complete the development, build the houses, but before any sales take place they sell the land to investment companies," he said. This provides the investment company with the land ownership and the properties are then sold by the builder on a leasehold basis. The builder receives an enhanced profit with the income from the sale of the land on top of the houses. The investment company receives an income for doing absolutely nothing other than supplying or borrowing capital to purchase the land on which they receive annual leasehold charges. The person who stumps up for all this is the property purchaser who has to pay an annual charge with no added value.
"It's not only overcharging for unnecessary repairs and maintenance that takes place but the creation of leasehold arrangements where none need exist."
In addition, as Britain's population ages and life expectancy extends, more of us are going to move into sheltered style accommodation which often has a managing agent in place, ready to levy charges not just for maintenance but for porters.
Even when the current system of leasehold tribunals is seen to work, wronged leaseholders can still count the cost. Not only can they end up paying the costs of the freeholder or managing agent but they may never get their hands on money awarded by tribunal. Mr Doherty from Bournemouth recounted the case of a local agent that, having had a major award made against it, went into administration and even seemed to have lost its sinking fund (which acts like a savings account for leaseholders so they can better budget for big repairs).
He wrote: "The leaseholders faced the perfect storm of all that is wrong with this outdated feudal and manorial system of property ownership."
A "feudal" system in desperate need of reform seems to be the overwhelming response we have had to our campaign. All we are now waiting for is some proper legislative action to ensure Britain's leaseholders get a fairer deal. Regulators are investigating as I write, but the overwhelming response to our campaign should show that virtually no one wants this state of affairs to continue apart from the freeholders, managing agents, builders and some insurers. Come to think of it that is quite a powerful lobby, but if MPs really want to know what the British people think they should look at the cases we are highlighting and delve into their own postbags. The situation is bad and in these straightened times it is getting worse.
Cash Isa letdown
It is the time of the year when I start to look at which cash individual savings account (Isa) to put my hard-earned money into.
Unfortunately, as Chiara Cavaglieri highlights on page 57, the cupboard is bare this year as far as rates are concerned. In fact, wherever I look I can only see returns which are below inflation – which effectively means I am losing money.
Normally by now we see firms beginning to offer more-tempting deals, but with the Bank of England printing such huge sums of new cash, it seems many banks and building societies really don't need our few grand here or there.
But there is something else at play: perhaps certain financial institutions just don't have the technical knowhow to actually offer good, easy-access Isas online?
I had some interesting research through from Transform UK which advises on how financial firms deal with their customers online. It lambasted Britain's mutual sector for having "antiquated and badly developed" IT, making it a wearisome experience for savers looking to deposit money online.
I have noticed this in the past myself and the fact that many mutuals seem to go to extraordinary lengths to put barriers in the way of people looking to save and invest, always citing money-laundering rules.
In one case Transform found that an average saver would have to answer 31 questions online before being told to fill out a form and send it in.
Contrast this with National Savings which checks the electoral roll to confirm identity rather than asking people to send in original, sensitive, personal identification.
It seems odd that a government body such as National Savings can do this but mutuals (including building societies and credit unions) need to ask dozens of questions.
When you are paying people below inflation in terms of interest rates then it seems a further insult to drown them in bureaucracy and unnecessary complexity.
I really think Britain's mutual are missing a trick here. If they can't pay the best rate, they ought at least try and be the most open and welcoming to new money.
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