June 24, 2021

Campaign against retirement leasehold exploitation activists praised in Commons: clean up ‘muck’ of leasehold and stop ‘ripping off leaseholders left, right and centre’

Sir Peter Bottomley (left) yesterday made his strongest Commons intervention yet on the scandals in leasehold. He named and praised the two keys figures in the Leasehold Knowledge Partnership, named and criticised Tchenguiz and urged a full debate on leasehold under the cover of parliamentary privilege.

He attacked the role of LEASE, the Leasehold Advisory Service, for being too close to the interests of freeholders and their professional advisors, rather than leaseholders.

“To have clever lawyers, some of whom will appear at LEASE—the Government-approved agency for giving advice on leaseholds—advise managing agents on what can be done with leaseholders within the law does not strike me as balanced.

 “I ask the Government to ask LEASE to ensure that at least one of the two people I will name is invited to join its board. One is Sebastian O’Kelly, who runs the Leasehold Knowledge Partnership, and the other is Martin Boyd.”

Boyd is the LKP strategist who guided Charter Quay, in Kingston, through four LVTs winning more than £500,000 back from the Tchenguiz freehold company.

Sir Peter was intervening in the debate over the Enterprise and Regulatory Reform Bill, to which Baroness Gardner had added the licensing of managing agents.

This infuriated the Department of Communities and Local Government – whose two officials concerned with leasehold appear to believe that their former colleague, Michelle Banks, chief executive of ARMA, can be left to sort the sector out in a manner congenial to her membership.

The DCLG wanted to drop licensing managing agents, but ensure they were members of an ombudsman scheme (whose rulings are confidential). The acrimony that exists within leasehold would therefore be hidden.

In an unusually outspoken intervention, Sir Peter dismissed this fudge:

“The Minister may be right to say that the majority of managing agents behave well. In the past, however, many of them, and especially those who were associated with the freeholder, ripped off their leaseholders left, right and centre.

“Such agents are a minority, but they hold the majority of the responsibility for managing leasehold properties, and the faster they are brought out into transparency and openness, the better.”

“ … most people have argued for licensing, which would include an ombudsman service and a redress system. As things stand, we are going to get the redress system, but we are not necessarily going to get the code.”

In reference to the Tchenguiz brothers, who are demanding £300 million off taxpayers owing to their arrest on incorrect evidence by the Serious Fraud Office in March 2011, Sir Peter said “I would have thought that a handshake and an apology would solve that”.

“I am saying, however, that the Tchenguiz brothers do not have the best reputation for how they deal with leaseholders. Sometimes, they appear to charge rather high sums if someone wants to sublet a leasehold property and sometimes they want to sell it. A whole series of other issues should, I believe, be fully examined under parliamentary privilege.”

Throughout his speech, Sir Peter emphasized the need for openness in leasehold – something which ombudsman schemes do not offer – and he ended:

“Let me give an example of transparency. I challenge every managing agent to tell every leaseholder now what commission the freeholder is getting on the insurance premiums to cover the value of the properties.

“Those commissions go up to 65%. In my view, they should not be more than about 5% or 10%. Let us get that out in the open, and we will get the rest of the muck out afterwards.”

An good example of this “muck” would be the LEASE annual conference – a trade show for leasehold insiders – where Gary Murphy, the vice chair of the RICS auctioneering group, pointed out that freeholders could help themselves to up to 50 per cent of the total insurance premiums in commission, and that leaseholders have no legal right to know the level of payments!

 

Sir Peter Bottomley’s full Commons speech is below:

Sir Peter Bottomley: The issue of caste was very well covered yesterday on the BBC’s “Newsnight” programme, and I hope the Government will take up the suggestion that there should be discussion over the next few days about how the points made can be incorporated into the aim to get fairness. My reaction on watching people describe what it was like to be told by someone junior to them that they should not take orders from them because of something that happened in their family past was that that was ludicrous.

Ghandi called the untouchables the children of God over 70 years ago—in the 1930s, I think—and we ought to find some way of picking that up and echoing it in our country.

I could speak on a number of issues, but I will stick to the issue of agents, and in particular leasehold managing agents. I hope that when the Select Committee looks at this, it will address not only the letting of residential tenancies but the 3 million leaseholds in this country, many of which are held by people who are old, frail and on fixed incomes. My hon. Friend the Minister may be right to say that the majority of managing agents behave well. In the past, however, many of them, and especially those who were associated with the freeholder, ripped off their leaseholders left, right and centre. Such agents are a minority, but they hold the majority of the responsibility for managing leasehold properties, and the faster they are brought out into transparency and openness, the better.

I pay tribute to the Minister for Housing. Through his efforts and the co-operation of his colleagues, the Government have come forward with a welcome initiative. I am not arguing it is completely right—I would be surprised if it were—but its 10 measures deal with a variety of issues, the most important of which is openness.

Having a redress scheme requires having a code. The Royal Institution of Chartered Surveyors has a good code, as do some of the associations of letting agents. This explains why most people have argued for licensing, which would include an ombudsman service and a redress system. As things stand, we are going to get the redress system, but we are not necessarily going to get the code.

I hope Ministers, either in this place or the other place, can assure the Houses of Parliament that they agree that having redress requires having a code, and that managing agents will not be able to practice if they have been struck off or cannot give adequate assurances that they meet the code and will abide by decisions if they are held to have offended against it.

Ordinary disputes are one thing. I ought to declare that I have an interest in a small leasehold flat—I am now a freeholder—and our managing agent and freeholder behaved impeccably with the six leaseholders. I have no complaint about that at all. I have taken advantage of the present system, but many people have not.

In Oakland court in my constituency, a group of really old people took action against their freeholder as they were being charged for a warden’s flat when there was no warden. Eventually, when they could get to the leasehold valuation tribunal, there was an effective judgment that would have given back to them—although sadly many of them had died—not only tens of thousands of pounds but possibly £100,000. Eventually, they came to a settlement and I pay tribute to the freeholders for doing that.

To have clever lawyers, some of whom will appear at LEASE—the Government-approved agency for giving advice on leaseholds—advise managing agents on what can be done with leaseholders within the law does not strike me as balanced. I ask the Government to ask LEASE to ensure that at least one of the two people I will name is invited to join its board. One is Sebastian O’Kelly, who runs the Leasehold Knowledge Partnership, and the other is Martin Boyd.

Martin Boyd got involved because he was one of the leaseholders who took on the Tchenguiz brothers. It is not for me to get involved with whatever happened, right or wrong, with the Tchenguiz brothers, the action to which they were subject and the separate action that they are now taking—although I would have thought that a handshake and an apology would solve that. I am saying, however, that the Tchenguiz brothers do not have the best reputation for how they deal with leaseholders. Sometimes, they appear to charge rather high sums if someone wants to sublet a leasehold property and sometimes they want to sell it. A whole series of other issues should, I believe, be fully examined under parliamentary privilege.

It seems to me that officials in the Departments involved have had to work really hard to produce the five pages of new clauses that we are discussing, so I shall not add to their burdens by trying to go through them in detail.

The permanent secretaries at the Department for Business, Innovation and Skills, the Department for Communities and Local Government and the Ministry of Justice have a responsibility to add to the numbers of people involved, because Parliament will ensure that the issue gets proper attention—not just the 9 million tenancies, but the 3 million leaseholders. That will require serious effort in Government and by Parliament and I hope that in time the injustices that are rampant will have evaporated, partly through transparency and partly through legislative action.

Let me give an example of transparency. I challenge every managing agent to tell every leaseholder now what commission the freeholder is getting on the insurance premiums to cover the value of the properties. Those commissions go up to 65%. In my view, they should not be more than about 5% or 10%. Let us get that out in the open, and we will get the rest of the muck out afterwards.

Comments

  1. MICHAEL HOLLANDS says

    Your report does not say if a vote was taken on the Baroness Gardner amendment.
    Also your report mentions that the officials of the Dept of Comm & Local Gov were very upset at the comments made by Sir Peter Bottomley. Would these be the same officials who have been fobbing me off for 3 years with comments like ” This Dept and the Minister are well aware of the problems and are keeping the situation under consideration”

  2. Hi Michael I can not respond as the CAPTCHA will not let me send

  3. As a leaseholder it is very difficult to get access to the full accounts even the ones going back many years, the accountant has been paid by the freeholder, therefore, the freeholder is the client of the accountant, this is a major unfair bias against the leaseholders, even though the leaseholders have, in fact, paid ifor the accounts through the service charges, the insurance cost can be hidden easily from the leaseholders, so transparency is needed.

  4. The OFT document on Tenancy Agreement 4.4 has confirmed insurance policy stipulated by the landlord is an unfair term.
    http://www.oft.gov.uk/shared_oft/reports/unfair_contract_terms/oft356.pdf

    Some past LVT judgements have accepted the Landlord’s master block policy insurance as being reasonable due to earlier cases where it was judged that landlords were not obliged to seek ot the cheapest insurance cover.

    We want the Housing Minister to announce in Parliament it accepts OFT decision that LL stipulated insurance is an unfair contrat term and leaseholders must be refunded any overcharging for past 12 years by the Landlord..

  5. Copied from above : “In reference to the Tchenguiz brothers, who are demanding £300 million off taxpayers owing to their arrest on incorrect evidence by the Serious Fraud Office in March 2011, Sir Peter said “I would have thought that a handshake and an apology would solve that”.

    I think Sir Peter is way off target to think that a “handshake and apology” by SFO will settle a 300 Mil Pounds claim by the Tchenguiz Bros. .

    The investigation by SFO was into the use of actuarial valuation of property assets in the year end accounts of the freehold ground rent companies compared to the valuation method by RICS Surveyors . Any overvaluation would cause the bank lenders to make advances based on wrong security values. Did overvaluation contribute or directly cause the K -Bank to fail ?

    Its shamefull that no UK Government Minister has stood up in Parliament to defend the SFO . Ministers are supposed to stand shoulder to shoulder with SFO ( a branch of Government ) against extortionate demands by a Business Group based in the BVI. Coalition Ministers are supposed to show the public they are willing and determined to defend the HM Government and tax payers interests.