December 8, 2022

Yet another desperate seller facing forfeiture …

Just received this:

Dear Sebastian

We are a charity which was helping an elderly lady living in a Peverel sheltered leasehold flat prior to her move to a Home and subsequent death in 2010. We had made some loans to the lady concerned and have been in touch with her son, who lives abroad, over the years as to repayment.

The son has struggled to find any buyers and has been hounded by Peverel to meet service charges. He was so distressed by the situation that we helped him with the charges earlier in the year. He has recently been in touch to say that there is still no buyer on the horizon but that Peverel are threatening to take him to court with a view to the leasehold being forfeited.

The son is again desperately worried and has asked us if we can advise him on whether the above is legal or whether Peverel only have the right to be treated as one of many creditors against the estate once the property is sold. We assume they cannot bring a case against him as he has not, as yet, benefited from the estate.

If you could help with any advice, it would be much appreciated.

With kind regards

The Insurance Charities

 

My reply is below:

Dear XXX, The Insurance Charities,

I am afraid this gentleman is not in an unusual situation as the market for retirement leasehold property has collapsed: 40-50 per cent off peak is normal, and I have come across a flat in North Oxford on the market for £15,000.
He cannot own an asset, or be the executor of one, and not pay the running costs: the service charges have to be paid and Peverel is quite within its rights to bring forfeiture proceedings (the other residents might not be too pleased either, as they are carrying the cost of his flat).
Forfeiture of a lease should not be confused with repossession: once a lease is forfeit you lose the entire asset.
My advice would be to borrow against this flat, pay the service charges, cut the price of the flat and sell it.
If his mother bought the property new at any point between 2000-2013, he can expect a very significant loss.
It’s bleak, but that is retirement leasehold.
If anyone else has any useful comment or advice, I will pass them on.

Comments

  1. michael hollands says

    How about the unfortunate gentleman donating the property to the charity to pay off the loan.
    Peverel would not dare to sue the charity . Or would they.

  2. About Mr Prisk started to to something about this o0utragous situation where leaseholders are, just vassal to their freeholders, Dennis Jackson went through this how many more will take before forfeiture is stopped, it is about 800 years out of date, it dates back to the times of King John when the knights were given land or they were about to over throw the king, and Richard the Lion Heart was off fighting the crusades at the time.So yes what a totally out of date rediculous system!

    • James Peters says

      If forfeiture is to be abolished then something needs to be put in its place. Our block is slowly being taken over by property investors buying flats to let. We now have 10 out of our 18 flats as rentals. It is not uncommon that these leasholders do not take any great care over who they rent to – resulting in incidents of noise, nusiance, rowdy behaviour, loud music etc. etc. – sometimes late at night.

      As such activity constitutes a breach of the lease by the leaseholder – the only way we have of getting the leaseholder to do something about their tenants is to threaten them with forfeiture. We have never had to carry out the threat but if there was no remedy for a breach of the lease, our block and many others would by very unpleasant – impossible places to live in.

      Most of the leaseholders living in our block are well into their retirement years and most have lived in their flats for many years. Several of them have expressed their desire to move out because of this renting problem – but are worried that if they do so, they may end up in a situation that is worse than the one they are trying to escape from.

  3. I am not aware of residents carrying the service charge cost of other residents unsold flats. Here we have several flats awaiting resale, ongoing costs have always been the relatives responsibilty. Has something changed?

  4. michael hollands says

    I assume that in this case as the son cannot afford to pay the service charge it falls upon the other residents to make up the deficit. Unless of course Peverel are temporarily subsidising the funds to keep all the services going.

    • Trevor Bradley says

      Anna is correct. Residents do not have to subsidise any non payments by others. It is up to the Landlord/Managing Agent to recover by legal means any non payments from the owner of the flat. Services provided should not be reduced/stopped

  5. Campaign against retirement leasehold exploitation says

    Trevor: I think neighbours who do pay their service charges will resent those who don’t. In some failing blocks I have encountered, widespread refusal to pay up is a menace and the place runs downhill and the flats are virtually unsellable. I have dealt with a block in Gosport, Hampshire, where the sale values are around £30,000 (from £90,000).

    While a service charge default is not obviously dumped on the other residents, it in fact is when resolving the problem. These Chelsea leaseholders could have refurbished their four flats for c£16,000 if they had not argued and refused to pay their shares. Now they have lost £10,000 and have faced a demand for more than £50,000 for those works: http://www.leaseholdknowledge.com/feuding-chelsea-leasehold-owners-find-a-court-appointed-managing-agent-makes-all-decisions

    There are cases of appalling exploitative behaviour in leasehold. But there are also plenty of really stupid expensive squabbles between neighbours.

    • Trevor Bradley says

      Campaign against retirement leasehold exploitation, I agree with you entirely in the example you quote. I have no time for thse type of stupid inconsiderate people

  6. michael hollands says

    The situation at Gosport described above by Campaign against retirement leasehold exploitation sounds absolutely disastrous.
    With selling prices dropping from £90000 to £30000 and still remaining unsound.
    This could end up being a self perpetuating problem ending up with every resident refusing to pay their service/management fees and the whole complex being forfeited

  7. Campaign against retirement leasehold exploitation,
    This block in Gosport [actually Chelsea] has four flats with three of them as freeholders, a different kettle of fish to the normal leasehold retirement development.
    Anyone refusing to pay the services charges would be dealt with according to the terms of the lease. Are you saying that other residents will be expected to, or forced to pay more than the original service charge percentage they legally signed up to.

    • Trevor Bradley says

      Agree with Anna. We are talking about two totally different subjects here. Serv charges are divided by No of flats, not No of residents who choose to pay. Under normal leasehold circumstances and complexes that we discuss MA/Landlord soon, rightly or wrongly, take to task anyone who is way overdue on SC payments

  8. michael hollands says

    Anna, I think what Campaign against retirement leasehold exploitation are saying is that if some of the leaseholders ( particularly those who have inherited ), cannot afford to pay the management charges or just refuse to then it is the remaining residents who will suffer.
    The problem being the income from those who do pay is not enough to run the complex leading to it becoming run down. This in turn will make the properties more difficult to sell and reduce their value as in the case Campaign against retirement leasehold exploitation quoted. As I previously stated it could be a perpetuating situation if more of the residents refused to pay due to the resulting living conditions.
    The only way out seems to be for Peverel or the Freeholder or the remaining Residents to contribute more to keep the complex up to standard .Or for the freeholder to reclaim the properties.

    • Trevor Bradley says

      I know it sounds harsh but people should be aware of what they purchase/sign up to. It is up to the Managing Agent/Landlord to reclaim outstandind debt as appropriate, even if it means reclaiming the property. I have told my own daughter that “when I go” just dump it (the flat) for whatever you can get and walk away

      • Well Trevor, this seems like a reasonable idea, considering how things are going. I can’t see any improvement on the horizon, unless I’ve missed something.

  9. michael hollands says

    Can anyone answer this question.
    Who pays the service/management charges for the Apartments that have never been sold since they were built.
    On some developments it has taken years to sell the complete complex
    There are currently unsold properties in complexes completed 4 years ago.
    If only 40 out of 50 are sold are the total costs divided by 50 with the freeholder paying for the unsold 10.
    This must be the case otherwise the purchaser of the first apartment would be responsible for meeting the the cost of all 50 properties.
    Does anyone know how this works.

    • Trevor Bradley says

      I think with this, and your earlier posts you have answered your own question Michael H. The total costs are divided by No of flats, not No of people paying

    • Michael,
      Here, we waited three years for all the flats to be sold from new. During that time the landlord covered all sevice – management – ground rent – charges for these unsold flats, as with all their developments. I have not seen in the lease where it states that other residents would be responsible for any outstanding debt arising from other flat owners refusing or unable to pay. If we were, there would be real problems, based on the simple fact that we couldn’t afford to pay others debts.

  10. Say the value of the flat is worth £800,000 like Dennis Jackson’s was if say £10,000 is owing in service charges, what kind of of situation is this if the flat is taken awaqy under forfeiture. This is wrong only the service charge should be taken I have heard of situations where the ground rent of around £150 was owing
    however the flat was still taken undwe forfeiture, utter madness.

  11. To sell a used flat in adverse market conditions, you need to decorate the flat and try to make it look like almost new .

    I am sure any secondhand flat buyer will be over 60 years age and not want to buy a property in need of major decoration work.

    The property has been unoccupied for past 3 years and her son should come back and try to sort out the property condition and sweep away the cobwebs and give it a coat of emulsion. Remove any old carpets and furniture etc.

  12. Preparing the flat for resale is of course important, but I would have thought the ongoing service charges would be the deal breaker. Here, our management fees ( including part time House Manager ) are currently 40% of our annual charges, and that’s without the ground rent. Our Management fees increase every year, irrespective of the economic climate.
    I have often asked how management fees are worked out, is there some kind of criteria to go by, is it just a figure plucked out of the air? Never had an answer, probably never will, just keep on paying.

  13. michael hollands says

    Anna, on the Peverel website is a page entitled Management Fees Explained.
    Just in case you have not read I will list out the costs this charge covers.

    Financial
    Annual budget and review meetings with customers.
    Preparation and issue of annual service charge budget.
    Administration of Direct Debit/credit card receipts
    Preparation of annual accounts and invoice files.
    Service charges fully assessed and verified by an independant accounting company
    Well managed contingency fund.
    Annual account liaison with external auditors

    Treasury
    Bank account interest paid to customers.
    Monthly reconciliations of Trust Bank accounts
    Safeguarding customers money.

    Credit Control
    Chasing late/non payers.

    Regualatory Compliance
    Major works consultation
    Health and Safety.
    Conformity with the ARHM codes of practice.

    Estate Management
    House Manager training and welfare.
    Company operating costs incl staff travel
    Staff visits to developments
    Head Office overheads and running costs.

    Communications
    Production and distribution of printed information for customers.
    Welcome Pack
    Peverel service promise and Peverel repairs policy.

    Are you getting you monies worth?

  14. michael hollands says

    Anna, just one other piece of news that appears on the Peverel website.
    Under their new Customer Charter from March 2013 at the date of your complex`s annual review a meeting will be held.
    They will explain exactly what is included in the management charge and how it is calculated.
    You can ask your family to attend.
    I wonder if there are any Campaign against retirement leasehold exploitation readers who have attended one of these meetings.

  15. Michael, thanks for the info.

    Here, we are not with Peverel, but with a Management owned by the Landlord. The list you provided is similar, though ours is padded out with some things the House Manager is supposed to deal with.
    A list of provided services could have any cost attributed to its components, in effect, charge what you can get away with.

    Am I getting my monies worth? From my experience here and without any solid criteria to base the costs on, I would say no.

  16. The annual charge per leasehold flat or house for administration of service charges should be available to leaseholders on request and you can calculate if the annual charge is correct from the total charges declared in the audited service charge account issued each year. If you find the managing agent’s charge is based on % of annual spending , then call a meeting and ask for it to be changed to annual fixed rate per unit.

    And then ask your Residents Committee for competitive quotes for administration services from other local managing agents. If you are not satisfied with your existing management company, then get organised and set up a Right To Manage Company ( RTM) and legally take control of the service charge administration..

  17. Hi Ollie, our annual Management fees are charged as a percentage for a one bed flat, with a higher percentage for a two bed flat. Everything checks out in this respect according to the annual audit account.
    The Management fees are not based on a % of annual spending, and as their annual increases can fluctuate, a fixed rate seems unlikely too. In fact there seems to be no rules regarding Management fees.