Emma Lunn: Shame on Wandle Housing - the not-for-profit association that gazumped its own buyers

 

Emma Lunn
Friday 30 May 2014 22:24
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Chuka Umunna, the shadow, Business Secretary, is backing constituency members who are in dispute with a landlord Charlie Forgham-Bailey
Chuka Umunna, the shadow, Business Secretary, is backing constituency members who are in dispute with a landlord Charlie Forgham-Bailey

Selling property can often bring out the worst in people and the subject of "gazumping" – demanding more cash from a buyer after an offer is accepted but before contracts are exchanged – tends to get people's hackles up.

Those who have been victims of such a practice, myself included, criticise it as unethical and immoral. However, vendors find they can mostly live with a slight feeling of shame if it means an extra £10,000 or £20,000 in their bank account.

But, while private sellers are one thing, and have their own motives, you'd think a not-for-profit housing association might act differently. Well, apparently not.

Last week saw Wandle Housing Association – funded by the state – forced into an embarrassing U-turn after it attempted to gazump its own customers by hiking the price of flats it had agreed to sell on a shared ownership basis to first-time buyers.

Dozens of keen buyers had paid £500 deposits for flats in the Streatham Hub development in South London and were waiting for the deals to be completed. But with some buyers expecting to move in within a matter of weeks, Wandle Housing moved the goalposts and upped the flats' prices by up to £150,000 in some cases. This put the properties well out of reach of the people the association is supposed to help.

It attempted to justify its actions by telling the distraught buyers that there were "significant changes in the London property market which are beyond our control". Roughly translated this meant "with house prices in London on the up, we realised we could get a load more cash for these flats".

After all, the cost of building the flats won't have suddenly gone up – the move was simple profiteering.

When devastated buyers went to the press with their story of woe, Wandle realised, lo and behold, that it could stick to the original price after all.

So, all's well that ends well, right? I'm not so sure. I'm sceptical about both shared ownership and the current laws around leasehold flats – and the flats at Streatham Hub are being sold on a leasehold basis.

"Owning" a leasehold flat means you buy the right to live in a property for a set period – usually 99 or 125 years – rather than owning the land it stands on. The land is owned by a freeholder or landlord who is responsible for the upkeep of the communal parts of the building such as staircases, roofs and gardens. But although the freeholder decides what maintenance work should be done and by whom, it's the leaseholders who pay.

The rules mean corrupt freeholders can charge leaseholders over the odds for services – and many freeholders do just that. For this reason, disputes between leaseholders and freeholders are common.

Most flats across the country are owned on a leasehold basis with the alternatives, share-of-freehold or commonhold, being relatively rare.

Presuming Wandle retains the freehold of the Streatham Hub, the new owners of the flats will be stuck in a long, one-sided relationship with an organisation that's already shown its true colours. What can possibly go wrong?

The perils of leasehold ownership are further demonstrated by a case just down the road in Brixton.

In theory it should be simple for leaseholders to take over the running of their building by exercising their "right to manage" or RTM. However, in reality this can be a far from simple process, with freeholders often doing their best to derail proceedings while residents face rising legal bills in the process – they have to pay the freeholder's legal costs as well as their own.

Residents at Brixton Hill Court are battling for their RTM even though their first attempt to break free of freeholder Springquote resulted in an £18,000 legal bill – reduced from an initial demand of more than £42,000 – and their RTM was rejected on a technicality.

Streatham MP Chuka Umunna, the shadow Business Secretary, has waded into the case, promising the residents his full backing. And so he should – this is exactly the sort of issue MPs ought to tackle on behalf of constituents.

Flat owners in the 1930s-built block of 143 flats have already taken Springquote to a tribunal in June and July last year. Another hearing followed in January.

The group's solicitor, James Compton, argued that the cost demands were being used to intimidate the leaseholders to get them to drop their RTM claim, and I suspect he's right. Freeholders and managing agents routinely use bullying tactics to frighten leaseholders – something which must be stamped out.

Twitter: @emmalunn

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