July 20, 2024

How the media reported the tenants fighting back in 2011

Tenants are Fighting Back

There were a number of excellent articles on leasehold in the press during 2011, but we are singling out Patrick Collinson’s comprehensive Guardian article of 12th February: “The Peverel Tenants who are Fighting back”. (See our Press Page for the link to this article.)

Patrick detailed the Leasehold Valuation Tribunal decisions made on behalf of leaseholders at Weekday Cross and City Heights, both in Nottingham, and both of which resulted in large repayments of excessive service charges from companies in the Peverel stable.

Of particular interest was the issue of City Heights insurance.  He reported that residents there had been charged 45 per cent commission for buildings insurance.

The LVT ordered this to be reduced to 15 per cent.  This decision mirrored other LVT decisions where residents had challenged inflated bills as a result of  Peverel passing the insurance through its sister company Kingsborough.  Many of the leaseholders were elderly residents in retirement developments.

Insurance is only one of the obscure and expensive charges familiar to those of us who have had our fingers burned in Peverel-managed retirement properties.

A long standing bone of contention is the one per cent ‘transfer fee’ charged on re-sales, which was written into the initial leases, and which is under investigation by the Office of Fair Trading as a possible unfair contract term.  Indeed, this has been under investigation for two years now.  Perhaps 2012 will see the OFT finally making a ruling on this.

Another outrage concerns the inflated rents which leaseholders have to pay when there are resident wardens living in a flat in the development.  These have been successfully challenged in individual cases, but is it too much to ask that charges should be ‘fair’, without their having to be challenged?

With regard to the above transfer fees, Patrick obtained a statement from Peverel Retirement, whose spokeswoman stated that, as the property manager, they were:  “ ….. obliged to collect transfer fees on behalf of the landlord (Fairhold).  The company then passes these fees direct to the landlord.”

However, Patrick pointed out that the statement omitted the fact that Fairhold shares the same common beneficial owner as Peverel (the trustees of the Tchenguiz Family Trust).

That money from transfer fees, ground rents and warden flat rents is passed into a vehicle called Fairhold Securitisation, registered at a box number in the Cayman Islands.

“The £353 million vehicle was created by Vincent Tchenguiz in 2006, at the height of the securitisation craze.  In effect, Tchenguiz sold the future stream of income from residents’ fees and rents to other investors.  In other words, it allowed him to take the money upfront, from fees that would be paid many years down the line.”

Or to take money from fees he hoped would be paid!

At the time, the deal to securitise future fees and rents was hailed as unique in the investment banking world. But the first warnings were issued in November 2010, that the investment might not be as secure as might first have appeared.

Now, this is where we came in ……. “Spot the common thread”.

If you strip away all the spin, and all the PR, it has become clear that the companies ultimately connected with the Tchenguiz Family Trust are nothing more than property investment vehicles.

The smoke-and-mirrors securitisations of 2006 fundamentally changed the nature of the business.

With the crises in world finances, is this model already unravelling?  Southern Cross, which went down a similar route only a year later has already bitten the dust.

What is so different between the mis-selling indulged in by HSBC, and the artificially-inflated insurance premiums?

It is not fair to single out the Tchenguiz Family Trust companies for this particular scam, which seems to be endemic in leasehold land.  However, it’s very difficult to get to the bottom of the true figure by which bills are routinely inflated.

What is certain is that the leaseholder is at the bottom of this particular food-chain.  And it is particularly distasteful that, as with both Southern Cross and HSBC, it is the elderly who are vulnerable to this kind of mis-selling and overcharging.

And the un-common thread?

In the case of Southern Cross, MPs jumped up and down, and said ‘How terrible’.  The House of Commons Public Accounts Committee took on board the severity of the risks to vulnerable people in the care-home sector, and said that the Government should do more to monitor the finances of care home companies.  Ministers have now said they would be looking to put forward plans in 2012.

In the case of HSBC, the Financial Services Authority stepped in, with a fine of (hopefully) deterrent proportions. They said: “NHFA was trusted by its vulnerable and elderly customers.  It breached that trust to sell them unsuitable products.  This type of behaviour undermines confidence in the financial services sector.”

But what of the multiple ongoing leasehold rip-offs, with particular reference to the retirement sector?

Many of us have written to our MPs, and the Housing Minister Grant Shapps, who are perfectly aware of the issues.

Although they say they will ‘look into it’, for the moment, the mantra is still the well-worn one that the ‘balance of power is about right’.  Which is clearly nonsense.

And, in general we have been done few favours by our conveyancing solicitors.

Please be assured that, in the coming year, we will be continuing to keep the issues in front of the elected representatives, including David Cameron himself – who, after all, work for all of us.

We will also keep you updated of what you can do personally to alleviate the situation in your own developments.

Let us hope that 2012 brings some real progress for all affected by the feudal leasehold system, and its attendant opportunities for exceedingly profitable rip-offs.