The Office of Fair Trading today announced a full investigation into leasehold in England and Wales.
The announcement has been prompted by the campaigning of the Leasehold Knowledge Partnership (www.leaseholdknowledge.com) and its sister website Campaign against retirement leasehold exploitation (www.betterretirementhousing.com), the Campaign Against Retirement Leasehold Exploitation.
In September LKP / Campaign against retirement leasehold exploitation involved prime minister David Cameron in the issue of the protracted OFT investigation into Peverel’s price-fixing scandal involving Cirrus. Pensioners were cheated after Peverel – which admits the practice and turned itself in – orchestrated a bogus tendering process for warden call services and electronic door entry systems.
A meeting resulted between the OFT and LKP / Campaign against retirement leasehold exploitation, backed up by Sir Peter Bottomley and Energy Secretary Ed Davey.
The OFT will be announcing the conclusion of its investigation into the Peverel price-fixing scandal on Friday.
But today it has announced a further investigation into the entire leasehold market in England and Wales – the only two countries in the world with this form of residential property tenure.
Sebastian O’Kelly, chairman of Campaign against retirement leasehold exploitation / LKP, said: “At last, officialdom is waking up to the monetising abuses in leasehold, ranging from small-scale Rachmans to huge corporate players.
“The amounts of money involved are staggering, and vast sums ofhmoney have been borrowed against dubious leasehold revenue streams from taxpayer-owned banks.
“Abuses in leasehold cross class boundaries: every single prime riverside site in London has been affected, as well as retirement flats often worth no more than £50,000. LKP has been contacted by flat owners at The Knightsbridge (£3m each) and retirement flats in St Helens.
“While the OFT is at last doing something, the same cannot be said for the complacent property tribunals, which have tolerated freeholders’ expensive lawyers playing the system, and the Department of Communities and Local Government, which until very recently was determined to ignore the evidence of widespread sharp practice.
It is disappointing that the present leadership of the Leasehold Advisory Service has nothing to say.
As a new generation of homebuyers lives in flats, rather than freehold houses, the issue will only get worse.
As Sir Peter Bottomley made clear at a meeting of leaseholders in London on Nov 12: the abuses and cheating endemic to leasehold can only take place with the assistance of professionals: lawyers, surveyors, accountants, auditors.
“I predict ruined reputations in this sector and criminal proceedings,” said Sir Peter. “What is going on in leasehold is nothing short of a scandal.
“Every professional standards body – for lawyers, bankers, surveyors and accountants – should be investigating whether their members have been behaving wrongly, unprofessionally, unfairly or criminally
“You cannot have the level of bad behaviour that we have seen with the professional standards bodies all looking the other way.”
Ed Davey, the Energy Secretary and MP for Surbiton and Kingston, said: “I am very pleased the OFT has taken up our request to investigate the leasehold sector.
“I have been campaigning alongside Campaign against retirement leasehold exploitation on this issue for a number of years.
“Since hosting a meeting in the House of Commons in 2009, it has always concerned me that some freeholders and managing agents are in an unfair position to exploit leaseholders and particularly those in the retirement sector.
“Sir Peter Bottomley MP and myself met the OFT Chief executive, Clive Maxwell, last September where we again urged him to consider this investigation. I am pleased the OFT has now moved forward with that commitment.”
Martin Boyd, joint LKP / Campaign against retirement leasehold exploitation director and chairman of Charter Quay residents’ association, said: “This OFT inquiry is important because it is the first time that there has been a fundamental review of the leasehold sector.
“It is inevitably going to expose unfairness that may well lead to primary legislation.”
The Leasehold Knowledge Partnership / Campaign against retirement leasehold exploitation – with a handful of activists, notably Peverel Action – has been exposing the appalling practices in leasehold, mounting investigations and examining closely the land tribunal rulings – which are too unexciting for the mainstream press.
On four occasions it has faced libel threats – and one vague legal threat came, disgracefully, from the leadership of the Leasehold Advisory Service – but has not altered or removed any article from the website.
As millions of Britons move to being flat owners rather than house owners, it is essential that the scope for cheating them is drastically reduced.
Ideally, LKP / Campaign against retirement leasehold exploitation would like to see commonhold being introduced, where flat owners all own a fraction of the freehold. This applies in the rest of the world.
Or, developments could be built with a residents’ management company in the lease, meaning that the residents control the building.
At present, developers bulk up the value of the freehold with sneaky revenue-generating leases; easily get round the law that freeholds must be offered to leaseholders before sale; and then sell it off to some shark in an auction.
The scale of the abuses being unearthed by LKP / Campaign against retirement leasehold exploitation is staggering.
It is excellent that the OFT has announced this investigation.
“The OFT is particularly interested in:
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Whether leaseholders feel that they have sufficient involvement in decisions taken about appointing managing agents, and if it is difficult to establish whether the property manager is providing value for money or a sufficient standard of service.
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Whether property managers and freeholders have the same interests as leaseholders in, for example, keeping down costs of maintenance work or buildings insurance.
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Whether there is effective competition, including evidence about how easy it is to switch between providers.”
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Whether residents receive good value for money and reasonable quality of service.
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The time, effort and resources required to complain and seek redress.
Related posts:
Office of Fair Trading deal over exit and sub-letting fees with Tchenguiz
You and Yours features Campaign against retirement leasehold exploitation and OFT inquiry into leasehold management
Full Campaign against retirement leasehold exploitation / LKP briefing notes on leasehold abuses for MPs
Campaign against retirement leasehold exploitation meets McCarthy and Stone, but let’s talk about making the leases fair
Sebastian,
Absolutely brilliant.
Words cannot express the thanks we owe to you for obtaining this fantastic result.. However long this investigation takes we can, at long last, now see the light at the end of the tunnel.
Many congratulations.
Yes , very well done and, at long last someone has finally woken up and thought “there is something seriously WRONG here”. Just told my old friends trapped in a Leasehold extortion group of flats the good news.
Outstanding result by LKP and Campaign against retirement leasehold exploitation. This really is a breakthrough and significant thanks are due also to Ed Davey and Peter Bottomley for their help in this.
Alan, Frank and Paul,
Yes this has been a great breakthrough for us leaseholders and I agree that Sir Peter Bottomley and Ed Davey have stood up and been counted, and I thank THEM BOTH. My own MP, Philip Dunne has also been working at our behest over this year and I visited Philip Dunne recently and he was to speak to Sir Peter after I had furnished him with fact sheets regarding Peverel Retirement who are our Managing Agents and have been useless in providing the information regarding the PRICE FIXING? AND THE COMMISSIONS, NOW OVER £8000.00 that has been paid to Peverel Retirement since 2000. They received thousands of pounds each year for a period AND DENIED THAT IT WAS EXCESSIVE, even when Janet Entwhistle agreed it was excessive.
I have checked the past seven years Expenses Files and found invoices for works carried out at other development, that had been charged to us going back to 2006/07 and others more recently.
The information regarding the Warden Call System, undertaken in 2008/09 and costing £22,000.00 plus at an average of £750.00 each flat has been removed and only the Trial Balance Sheet/Audit Trail now shows the invoice costs.
I have asked our Area Manager now four times over the past year for the information regarding the contract documents regarding the Price Fixing and Tender Rigging carried out by Peverel Group and their sister company Cirrus. I am still waiting and can not understand as the documents had been scanned.
We have been informed that Cirrus not only knew the Tender Price that Glyn Jackson was to Tender but could have doubled the costs as it was reported to one of my sources that they could have doubled the actual cost and WHO WOULD KNOW?????
Yes, it is truly wonderful news and all those who have fought so tirelessly in the face of threats and isolation deserve our gratitude. Let.s spare a thought too for the people who did not make it – who died still fighting their corner and by these efforts have brought us to this point. It has been a long and dark journey and now there is a hope of victory. Thank you all
The key question is,does this OFT have the support of the full Government and will they be prepared to act upon its conclusions.
The OFT Inquiry into Exit Fees concluded that they were unfair and possibly illegal, but we have seen no action from this Government.
Michael says it all. An unfavourable OFT report (as I am sure it will be given the weight of evidence available) is absolutely no good unless there is a political will to change things. The Tories with their big business backing will not want to change things, but by the time the OFT report, we may have a different party in place. Whatever its faults, the Commonhold & Leasehold Reform Act was a labour initiated policy and they might just be brave enough to take on the big landlords. I hope they will. Five million leaseholders might be grateful and Labour could gain a lot of votes.
Yes, you are absolutely right. The Tory party, as a whole, will never back Commonhold.
The OFT is a government funded “non ministerial government regulatory organisation” run by civil servants.
An investigation will take years before reaching a decision. Its the same as the FSA was, and still is, only under a different name.
Fleeced you may be wrong on this one. We have been working with the British Property Federation who represent many developers and landlords including the Grosvenor Estate. There is no longer a philosophical objection to Commonhold on new builds. The legislation was badly drafted last time round but all political parties seem to have understood the benefits of moving away from leasehold. The problem is finding the time to legislate.
Martin – You say I’m wrong and I hope you’re right!
You say there is consensus of opinion for Commonhold tenure for new builds and that I would agree. For that to happen isn’t the problem; it’s abolishing the existing leasehold tenures that pose the almost impossible obstacle to overcome.
I’m not a member of any political party but I do wonder why the Labour party, in particular, hasn’t done anything about it since Commonhold was first introduced?
I disagree, commonhold CH is a red herring and too much is expected of it. Leases and unit agreements are both just contracts, and if this requires new legislation, then it is as easy to legislate that all new sites must transfer the freehold FH to a residents company. All leases must be longer, say perpetuity minus a day “P-1” leases, at a peppercorn rent, and eliminate forfeiture, substituting provisions for other methods of enforcement such as injunctions, which a Commonhold Association CHA would have.
Just as in CH, residents own and control the building and own their flat outright with no fear of forfeiture. It is daft to create a third tenure to confuse owners and buyers, particularly as, as disputes will arise and people won’t pay, the CHA and owners will not be under existing Landlord or Tenant protections but a whole new area of law under supply and goods and services. Ask a freehold house owner on estates that pay service charges how that feels! Residents companies are not immune to mistakes or daft schemes and the objector in a CH unit is forced to go to Court rather than the FTT (nee LVT). There is no Section 20 obligation to consult, or ringfencing of service charges, nor no statutory criteria for fair and reasonable charges. If that has to be extended to CH, what is the point? It is now a 3 track 2 system jurisdiction,,,
The P-1 lease creates a new lease model for the transition of existing schemes where CH would not be available, improving statutory extensions to leases, and a better model lease for those who enfranchise their block and extend the leases. In cases like the Grosvenor, or, crucially, the public sector who won’t want to share control and retain their freeholds, and if the freehold cant be transferred, this allows for head leases to be granted where control is vested in the residents as far as possible e.g. in a part commercial or hotel/apartment scheme.
Freehold owners of houses are still left out in the cold and the biggest bug bear, common parts leases and income producing units such managers flats and leisure areas, can, under commonhold still be leasebacked by developers, and areas like road parking and gardens retained or sold off to people like Meadfleet.. Owners will still find themselves paying out.
No need to reinvent the wheel.
EXCELLENT NEWS
Well done to everyone involved. It may only be the first step but it is more than we have ever had before from any of the bodies who SHOULD have helped!!
In advance of any OFT Inquiry it is open for any developer to offer a commonhold, rather than leasehold.
or offer a 999 year lease at a peppercorn rent. They could encourage residents to take over the management, as soon as possible.
The first developer, willing to do this will find their developments will have much more value and more sell-able than developments offered with old style leaseholds.
Who out there will take the step?
Totally agree with ME. Who will be the first “decent” developer to ffer commonhold then.
I cannot thank enough all those that have no doubt “shamed” the OFT into making this decision to investigate.
Only negative here is who trusts the OFT, I know no one that does.
The investigation needs to have time scales to stages and a final closure max of 12 month, and to have any “truth” must be overseen and approved by such knowledgeable people as Sebastion K, Sir Peter Bottomley, Martin Boyd etc.
Any body who works for OFT who is not prepared to work hard, face “the facts”, accept full transparancy and honesty – please resign/leave now
When Commonhold was first enacted in 2002 it should have been mandatory for developers to pass the ownership of flats to buyers – not a voluntary system.
Hopefully we see this as the thin end of of very very wide wedge to be driven home inexorabley by the team of Sebastion K, Sir Peter Bottomley, Martin Boyd etc.
I still revere Melissa Briggs though that took up the initial cudgel, hope this gives her some seasonal satisfaction.
Without Melissa Briggs Campaign against retirement leasehold exploitation would not exist. We all owe her a huge debt of gratitude. Sebastian
Sebastian
I put a post on LKP recently asking if it might be possible for us to have a conference of our own. If it was Melissa would without doubt be the guest of honour!
You are right we do all owe her a huge debt of gratitude but you have certainly continued with the same determination and I am sure she is pleased with the results so far.
I remember reading the storey of Melisa Briggs, it was her original comments that gave me the kick up the *** to do something for our development.So Melisa you have been the STAR IN A SOME WHAT DULL SKY.
THANK YOU VERY MUCH!!!!
IT NOW DOWN TO SEBASTIAN AND MARTIN AND OTHERS TO MAINTAIN THAT LEVEL OF BRIGHTNESS.
Bless you!
I to think Melissa is a star. who sacrificed her health and family life to highlight the abuse of the Management Companies and Freeholders. We must also remember those who surported her Don Heady, Ken Kilminster, and Susan Wood. I still have a copy of ” I don’t want one” written by Ken for Age Concern. This article highlighted Leasehold abuse for me. Keep up the good work Campaign against retirement leasehold exploitation/LKP
A few years back in time, when unchecked abuse of leaseholders was at its rampant worst, something extraordinary happened, which came as a total shock to developers, freeholders and property managing agents and let us not forget the banks that financed their activities
For years they had grown accustomed to basically doing what they liked, without challenge. It wasn’t a question of whether leaseholders were being ripped off, but they were in many cases. Sometimes a leaseholder would attempt a challenge, either to be crushed or to have a small victory, that would have no effect as the slightest victory would be limited to the individual.
Some very brave, dedicated and principled people decided to call time on the sharks.
Instead of the previously used methods which was meat and drink to freeholders/managing agents they decided publicity and a public forum was needed to bring all leaseholders together.
They also made the decision that even if their individual problem was addressed they would carry on fighting for others. It also meant that they could not simply be “Bought Off”
To test this theory perhaps Peverel would like to give me £250,000 to see how principled i am in the fight? My account number is xxxxxxxxxxxxxxx (cash only please )
How their work has born fruit is self evident. All those involved in the campaign are to be warmly congratulated. The names are mostly a mater of record, some though have remained in the background, but they should know they have our sincere thanks.
When Melissa stepped down from the front line, Sebastian stepped in. I remember writing a post at the time thanking Melissa and wishing Sebastian well. I also said Melissa would not have passed her campaign on to Sebastian unless she was sure he could take Campaign against retirement leasehold exploitation/LKP to another level, and for those that had any concerns Sebastian was absolutely the right choice.
Of all my predictions, none has proved truer.
As I mentioned on the LKP site, I don’t think that they will glean anything new from this line of questioning. If the published questions are representative, they are not digging into the key problems of tactics in and the lack of objective standards for, procurement and tendering; “fair and reasonable in scope procurement and cost” is not sufficient. That is particularly problematic with vertically integrated or common ownership of landlord and manager as well as manager and contractors, commercial arrangements and commissions, not to mention treasury management. This allows practices that create the conflicts of interest and added value earnings that impact service charges, performance and trust.
Insurance commissions, using “mates” eg Cirrus, and tender rings (every contractor colludes on prices and shares the work via sub contract or partnering) are live examples on this site. Few appreciate commissions earned on say utility contracts tendering, approved contractor schemes, payment discounts after 100% is debited from client/trust accounts, or putting that money on the money market for a week or more. Agent or Landlord may say they earn no commission but if the company has a group, associate or subsidiary company that is the broker, they earn it that way.
The OFT doesn’t seem to deal with the abuses in the public sector, the eye watering sums involved, nor the attempts to subvert the consultation rights as attempted by Hackney in July, but denied them by the maligned “LVT”-now FTT.
Relying on the current mish mash of case law, codes and initiatives is unacceptable as residents must expect be able to expect a certain standard of conduct and transparency. That must apply to the landlord, whether to reign in the investor landlord, or to guide and support residents groups who, while less likely to exploit neighbours, are prone to amateur mistakes and misguided decisions, and to the agents that act for either.
The other issue that concerns me is the notion of “changing providers”. Unless the manager is a party to the lease manager, the provider is always the landlord, be it a residents group or investor. The agent is just that the conductor to an orchestra, and it should not be assumed, as it often is especially with notorious landlords/agents, that the service providers are linked or one and the same. Those involved with changing managers often learn that the cleaner is capable of doing a good job just that the last lot wanted 20% rebate.
One well known, higher end, company in London requires all contractors to rebate 10% of all bills to clients, via third a party company. Erinaceous, thankfully now defunct, used to have arrangements that went as high as 50% add ons.
I don’t see the OFT getting to this or appreciating that in the absence of clear abuses, first you need a standard to target landlords to “do better” and second to force them to ensure that if they have an agent, to make that clear to them, after all the landlord is just as liable as the agent.
I think that LEASE could do a better job of setting out help and advice for residents groups who find themselves as landlords and , today, could post say “ Unhappy With the Landlord’s Agent? Form a Residents Association (link) and use your rights under Section 30B Landlord and Tenant Act 1985”
http://www.legislation.gov.uk/ukpga/1987/31/section/44
Thank you Melissa for all your past work, and Sebastian and Martin for all your continuing efforts in fighting for the leaseholders interests.
We all want Commonhold title not just introduced but to permanently replace the leasehold title now offered for new build property. Already Scotland and Ireland have given up the Leasehold Property Tenure system which now only continues in England and Wales. Are Scots and Irish people smarter than the English and Welsh ?
Successive Housing Ministers claim that Government accepts first registration of new property under Commonhold title equally with Freehold and Leasehold title yet very few Commonhold Properties exist even after 10 years since legislation was enacted. But successive Housing Ministers have shown no interest or initiative to find out reasons why so few ?
Ollie,
I suspect the vast majority of leaseholders are first time purchasers of flats, be it new build residential or retirement developments.
Most will be aware that unlike freehold there is a fixed term lease of perhaps 125 years.
No doubt both groups of purchasers take a similar view. They understand that they will have to pay a service charge, but they come to the conclusion that they won’t be in the property too long, so in a sense the fact it is leasehold is not material.
And that is how they and I walked straight into a trap. Of course it remains the case that though the failings of leasehold can lead to the ruthless exploitation of leaseholders it does not mean every freeholder does exploit them.
I can’t agree more- my point is how do you take the “good” practices of landlords and agents and impose them, under statutue, on the rest. One reaction to the rights of lease extensions is that in the latter days of the boom, ground rents were not only high, but the reviews have come to down from 33 or 25 years to 10, and indexed to points well over RPI. Even if you bought a new 125 year lease and extended in year 3, the ground rent makes the extensions enormous. This is somehting which has yet to occur to many leaseholders.
I remember the very first leasehold flat I purchased, the developer’s conveyancing solicitor sent the draft lease for acceptance and solicitor’s cover letter said “no amendments to the lease will be accepted as all the leases for other units in the block must be the same”.
First time buyers are advised by a conveyancing solicitor who basically understands the procedures of property registration , mortgage financing and money transfer s between buyer and seller. But the conveyancing solicitor is not an investment advisor and cannot say if the purchase of a lease is a good or bad long term investment.
The Housing Minister’s policy is to accept sale of new property under Freehold title, or Leasehold title or Commonhold title and so it is the developer who decides the form of property title to offer the buyer and Developer will offer the one which produces the maximum profit. Most residential property purchases are financed by a mortgage and so the developer must choose and offer a property title which is supported by the mortgage lenders and one for returning greatest profit.
The Council of Mortgage Lenders have a longtime lending policy to require flats to be tied to a maintenance agreement and so they do not offer mortgages on freehold titled flats. Members of Council of Mortgage lenders also do not offer mortgages for purchase of leases falling below 70 years. due to the marriage value factor entering into cost of lease extension and mortgage lenders are unable to judge the value of the leasehold title for securing the loan.
I suspect the Council of Mortgage Lenders treat Commonhold title as same as freehold title and I have never seen any mortgages advertised for Commonhold property. I think Campaign against retirement leasehold exploitation and Sebastian will have to educate the Council of Mortgage Lenders to change their thinking and their policies.
At the time most of the main High Street lenders offered mortgages on commonhold property, though in the 10 years since commencent order ( 10 is off the top of my head) the almost complete lack of demand means that while I am sure they are still there, they are very dusty!
I understand that Halifax and Nationwide do still do them.
Of course the commonhold unit agreement just like a lease is an agreement between them and the commonhold association, to maintain the building and to pay charges for that. As the Articles are left blank to fill in the terms and conditions of how chargee are established , they will be drafted by the developer and their solicitors.
Where is the handout information that Halifax and Nationwide offer mortgages for Commonhold ? Its not on the racks in their branch offices ?
Well of course not for the reasons stated above.If you ask either, they do do them – I had a minion call and ask 🙂
Thank you for all you do to keep us informed, there seems to be great activity and hopefully 2014 will see all these efforts bringing closer the end to this terribly unjust system. I send Christmas greetings to those who keep this site (and LKP) up to date. and also to Melissa who gave so much to the cause.
I have today sent Christmas cards to Sir Peter Bottomley, Ed Davey and Jim Fitzpatrick at the House of Commons just to tell them how much their help has meant to elderly people living in retirement apartments.