By Micheal Epstein
Leasehold and the whole concept of leasehold is a feudal legacy that is well past it’s time.
Indeed, the word “feudal” is derived from the “fee” that a tenant paid his landlord for use of the land.
There is much misunderstanding about freehold and leasehold.
A simple explanation is that a freeholder owns the land and any properties on that land and can do what they will with that land (within reason and planning laws)
The leaseholder has a contract that entitles him to use of the land or property provided he keeps within the terms of the contract for the length of the lease.
After such a period, or if the leaseholder has failed to comply with the terms of the lease, any land or property reverts to the freeholder.
That is why it is so important not to allow the lease to run down, and why as the length of the lease decreases it becomes more vital to extend it and why it becomes so much more expensive to renew.
Over the years, leasehold has proved to be so very controversial and exploitative for leaseholders that it has ceased to exist around the world except for England, Wales and, for specific historical reasons, a few parts of New Zealand and Australia.
Though technically it exists in Northern Ireland, leasehold has been so substantially changed, it is really leasehold in name only.
Historians who have studied the Irish uprisings have in part ascribed the reasons for the rebellion and the demands for independence due to the unfairness of onerous leases foisted on the Irish people (such that it meant the people were forced into abject poverty paying large amounts of their income to English landlords simply to farm the land that though in their native country they could never own)
So can leasehold be replaced?
YES IT CAN, YES IT WAS!
Scotland showed the way.
Various acts were passed that led to the abolition of leasehold, such as the Abolition of Feudal Tenure (Scotland) Act 2000 and, of course, it would be remiss of me not to mention the Tenements (Scotland) Act 2004, which effectively ended leasehold in Scotland.
The Long Leases (Scotland) Act 2012 automatically converted remaining long leases to outright ownership to the former tenants.
Freeholders wanting compensation were given two years from 28th November 2015 formerly to demand compensation from their former tenants.
A calculation for compensation was set out by legislation based on the ground rent payable.
Crucially, while freeholders in England & Wales try to work on an effective interest rate of a notional 7% (I realise that it has been challenged in tribunals and has in some cases been set at nearer 5%) but in Scotland interest rates were set at a compulsory 2.5%.
This made it much more affordable for the former tenants. Additionally, they could pay by instalments the number of instalments being statutorily determined by the amount to be paid.
Whilst not perfect, the system adopted by Scotland is much fairer and more reflective of a modern society.
It is time England and Wales ended leasehold.
IT CAN BE DONE! IT MUST BE DONE!
Related posts:
Scilly Isles leaseholders rebel against Prince Charles’s ‘feudal’ Duchy of Cornwall, in Law Commission evidence
Sajid Javid pledges Help To Buy clampdown on ‘feudal’ leasehold terms
Guardian says: It’s time to send the feudal leasehold system crashing. Amen, to that
Leasehold is a feudal, wasting asset with opportunities for exploitation, says the Financial Times in a devastating article
Views of Tory MP Crispin Blunt: Government should ‘nullify’ ground rents. End ‘feudal’ leasehold. Bring in commonhold. And stop developers’ and solicitors’ ‘unconscionable’ cheating of the naïve
Yes Indeed Leasehold MUST be abolished. However Residential Managing Agents MUST be formally regulated. Here’s the thing- What if former Leaseholders who become ‘ commonhold wish to appoint a Managing Agent?
Without wishing to sound in the slightest patronising there are many flat dwellers out there who really do not wish to be involved In the doings of the agent e.g. Checking the accounts, insurance schedule etc. The unscrupulous Agents out there feed off the apathy of others and will continue to play their nefarious games even when leasehold is abolished.
The BAD practices of Managing Agents – ‘DIRTY TRICKS’
1. Overcharging
2. Setting up and using their own companies to carry out expensive and sometimes unnecessary works of repair.
3. Charging on false invoices.
4. Charging Insurance premiums where no such Insurance had been placed.
5. Colluding with Insurance brokers in a fraudulent way.
6. Sending emails and correspondence to the wrong address deliberately.
7. Persecuting guillible and aged tenants into making inappropriate payments eg for expensive and unnecessary repairs classed as urgent and backed up by spurious recommendations that turn out to be totally unnecessary.
8. Threatening Forfeiture ( that old fave) when bogus bills remain unpaid.
The above practices have become routine and commonplace amongst certain agents!!
I refer you to Romneycourt to read a masterclass in A Managing Agent ‘allegedly’ behaving badly.
This Government must without delay:
BRING IN STATUTORY REGULATION FOR MANAGING AGENTS.
REMOVE “FORFEITURE ” FROM THE STATUTE BOOK.
Kim,
Personally I would never want to take on the management of a development as a leaseholder.
It is far too complicated. Added to that is the real risk of falling out with fellow leaseholders and issues being decided by friendship ahead of what is best for the development.
There are very many excellent managing agents in property management to choose from.
The problems tend to arise when a managing agent is not appointed by the leaseholders but by the freeholders (who are often connected companies) .
Even worse is when the freeholder has embedded into the lease a connected managing agent. (I wonder if Roger Southam (chair of Lease formerly of Chainbow would agree with me on this point?)
When a freeholder and managing agent are dependent on each other, their is simply too much of a risk of a conflict of interest which does not serve the interests of leaseholders well.
How tempted they must be.if they are under any financial pressure to simply invent or maximise any work to increase their profits?
Better regulation is needed, without any doubt. Possibly a bonded system would be an idea? that would give the regulator teeth.
Another idea that may work, is that a leasehold development has a Right To Manage Company set up at the development stage. Purchasers are given a £1, share in the Right To Manage Company. After a period of two years the Right To Manage Company has the automatic right to appoint an agent of their choice.
Not a total solution I know, but it would be another step in the right direction .
Michael
I own a shared Freehold flat in Central London that I now let. Victorian conversion comprising of 7 Flats.
I managed the property for 20 + years without incident. Incidentally, the building is sound and maintained to a high standard.
When I moved to another property none of my fellow leaseholders wanted to manage the property and a Managing Agent was appointed by the directors of the Freehold company.
That was in 2014. In a nutshell- I have evidence that the ‘Managing Agent’ has ticked almost if not all the boxes of ‘ Dirty Tricks’ listed in my previous post and much more.
The directors of the freehold company are lambs to the slaughter and very naive. Our leases are crystal clear about ‘ Reasonable amounts being requested from time to time’ for a sinking fund for future maintenance. We have always adhered to this clause.
However, our agent in January 2015 managed to cobble together a 3 yr sinking fund for the sum of £108,000! for cyclical Major works that will cost no more than £30-32,000includingvreplacment Mansard roof at the front of the building.
The directors are out of their depth , non directors Leaseholders don’t want to get involved, the AGM was cancelled on 2 days notice in Dec 2015 and not been rescheduled.
I have not received any service charge demands or a budget for 2017 despite repeated requests.
This has been my first and last experience with a managing agent and I am aghast at how clearly dishonest practitioners can work in residential property.
Statutory Regulation of Residential Managing Agents is required.
I have shared Freehold but the directors are numpties and the Agent like a shark scents blood. If she/ he was formally regulated they would think perhaps twice about committing Fraud .
This behaviour cannot be allowed to continue without introducing proper forms of legal discipline and serious financial penalties for those who perpetrate such ill judged practices.
I refer you to the shocking Romneycourt
The leaseholders of this property must have lived in utter misery due to the alleged criminal behaviour of the freeholder and Agent. Incidentally in 2009 the Managing was removed but is still operating in Residential Property Management under a different company name.
Cont.. from previous post.
Michael, for clarity- I have refused to contribute to the £108,000 sinking fund figure as it is not ‘Reasonable’ . I had however .paid all other sums due. I have threatened with ‘Forfeiture ‘ and received legal letters ‘solicitors’. I have refused to budge and appointed a lawyer. Haven’t got a Court date yet but think early next year. The cyclical works are due in March-/ April 2018 so we really should be going through the s20 process to agree upon a contractor and book him. Also the s20 process will of course show whose set of the works is valid. Mine or the outfit that was formerly ‘COUNTY ESTATE MANAGEMENT’.
Kim, you have just proved the point that regulation is needed with this post. Nobody but nobody should have this kind of serious aggravation in their life – imposed on them by the parasites who live off leasehold. Very best of luck.
Oh that clarification is a real mess. I shouldn’t post when I am cross.
1. I have refused to contribute to the sinking fund as it is not reasonable.
2. I have received numerous solicitors letters threatening ‘Forfeiture’.
3 I explained my lease terms but to no avail.
4.My directors of the Freehold co have decided to sue
me and have spent North of 12,000 of leaseholders funds
5. I reluctantly engaged a lawyer and will ask for my costs and to be paid.
6.All attempts to proffer an alternative est for the 2018 works have been ignored even though I have overseen all major works for 20+ yrs at the property.
7.I honestly believe that our Managing Agent is exploring us and have evidence that will be presented to m’ learned friend when the court date arrives.
Thing is, I am a strong independent woman who is not easily intimidated and lucky enough to have a bit of cash to throw at a lawyer albeit reluctantly!
STATUTORY REGULATION FOR MANAGING AGENTS.
I am afraid a ‘bonded ‘ system will not do.
Kim, I am certainly interested in your story and imagine others are, Keep us posted.
I hope you have your head screwed on properly, it needs to be when a layman tangles with vested interests and the legal profession. There was a TV series many years back, “The Duchess of Duke Street”, the Duchess in question was a high class madam and was then aged (but still trading) and worldly wise. I remember to this day a line from her mouth, “No lawyers, no letters”. Nothing wrong with the odd letter so long as it isn’t libellous, but “No lawyers” is spot on. .
Micheal, as ever agree with your knowledge.
I also agree that self management is not for the light hearted or viable for more than a small block. RTM yes, but yes also with agents, sadly.
As for managing agents. I have lived under six of the breed. Meanwhile, I also see endless horror stories on a forum I am daft enough to spend a lot of time on.
As a jaded ex public sector manager used to public audits and judicial review hanging over your head, I find this bunch as a class astonishing.
I have yet to meet one who can do the job they claim to know – whether they know or can’t be bothered or don’t know that’s not for me to judge.
At least with RTM you can move on and try another one. When you chat to them pre-tender they are brutally honest about their industry. As are some long standing chartered accountants.
Agents exist in an unregulated world so have nothing to aim at, seems to me. Any Tom Jack can set up as an agent and having RICS/ARMA status is no guarantee of standards either. Managing is not the same as surveying/valuing. Nor is book keeping.
The RICs code seems merely an aspirational tract nobody expects to be taken literally. It serves a purpose of looking the part to government I guess.
The common issues are, even before you get to charging:
No idea of the law – quite seriously and routinely experienced – you end up having to advise them.
Never read a lease, or if they do, can’t understand the clauses.
Can’t do book keeping. Constant, this one.
Advise legal action as a first resort (agents do not pay the legal bills).
Make stuff up in the apparent hope leaseholders won’t notice.
After six, three of which were under client contract, I have yet to be disavowed of the above.
And if leaseholders go to tribunal, the real games start being played. Have you ever noticed how bad service providers in any field spend longer making excuses or covering up than it would take to make a half decent effort in the first place?
It is truly shocking. And says all you need to know about leasehold.
I assume they get away with it because nobody can name them. Would blight values on sale.
Kim is right.
Not sure what you could do about it as they seem ALL contaminated after so many years regulation-free.
Meanwhile I let it all out here:
https//theleaseholdcaper.com
Our venal Managing Agent has ‘RICS’ so called ‘Status’. Not worth a candle.
It is simply outrageous that anyone can set up as a managing agent, and thereby be able to hold residential service charge funds that can amount to many thousands of pounds without any restriction on probity of the person. Thus you can have previously struck off solicitors holding residents funds..
Michael,
There you have it. It is indeed ” Simply outrageous” and therefore nothing less than ‘STATUTORY REGULATION OF MANAGING AGENTS WILL DO”.
Without wishing to seem over cynical I believe that the majority of Managing Agents cannot resist playing the Stradivarius……
Their days as a laughably called ‘ Self Regulating body’ are numbered. A large minority should be in the dock having been charged with Fraud. Harrasment and Intimidation.
ENOUGH IS ENOUGH!
The ground rent could be cancelled as suggested using a defined interest rate and if linked to inflation then a defined rate of inflation can be assumed .
With it being a defined calculation with defined variables there is no need in almost all cases to have a surveyor value it . Indeed the cancellation deed could also be done on line and smelt to the Land Registry and there would be no need for legal advice or mortgages consent all of which cranks up the costs
However increasing the term will need more care – I have proposed that this could be relegated to a simple exercise if the council tax bandings were used to define a value. It would not work on the highest banding and probably not for band G either but for vast swathes of England it would and certainly if the term was more than 60 years
So the whole exercise could be related to a mathematical formula where all the variables to be input can be done from a desktop
Solicitors and surveyors would raise objections for sure because they would not be required
I would suggest that either party can appeal against the figure generated but if they lose they should pay both sides costs
“Solicitors and surveyors would raise objections for sure because they would not be required” – now you are living in the (obscene) real world. One of the reasons that leasehold has been allowed to continue despite it being an obvious and clear wrong, is due to the number of professionals who feed of leasehold. I challenged your posts on another story because you appeared to be defending the indefensible (leasehold itself). your defence and apparent knowledge led me to believe you were a vested professional.
I think we need another word for professional, by the way – how about “twat”.
Abolition of leasehold “Can be done, must be done”. Apparently when slavery was abolished slave owners were paid compensation, slaves received nothing but their freedom. Are we to allow freeholders, who have engaged in morally criminal extortion, to be compensated (by receiving monies from leaseholders) just as the slave owners were compensated for their morally criminal abuse of human beings. Are we in the 21st century, why exactly shouldn’t the freeholds be gifted(?) to leaseholders?
What happens if you have already extended and have a peppercorn rent. Would you be exempt from paying compensation as in affect the freeholder has already been compensated. I agree however that the leaseholder shouldn’t have to pay a bean. How about the freeholder compensating me for a lease extension that would no longer exist. I like that idea very much.
In Ireland leasehold has effectively been abolished, with a maximum payment for existing freeholds set at 11 times the ground rent.
The Irish have been buying their country back for a long time (see http://downsurvey.tcd.ie/).
Excellent role model to follow. We should follow the Irish way and pay 11 times annual ground rent and abolish the leasehold annual ground rent. demand.. and abolish forfeiture.
I find it highly unlikely that the Freeholders will be compensated. In actual fact some of the more unscrupulous ones might find that they get arrested rather than a bung.
In actual fact, there may be some provision within the Human Rights Act whereby leaseholders who feel that have suffered harassment ,intimidation and extortion at the hands of their freeholder through its Managing Agent thereby disallowing them and their family the right to a peaceful private life, have a right to sue the offending Freeholder for a bit of compensation.
David McArthur,
I like to think that my head is pretty. ‘Screwed On’! This saga has been carrying on for almost 3yrs and before engaging a lawyer I wrote numerous replies to the
I believe questionable solicitors engaged by the Managing Agent for the Freehold Co of which I am a shareholder. This is a matter that should never have reached this stage and the directors of the company have been negligent beyond belief.
My lawyer is a smart chap and I think this issue is a little below his pay grade and rather like casting pearls before swine, However It’s all money in the bank.His.!!
Thing is David, as I mentioned before the s20 should be in progress by now and the Irony is that we should know how much the works will actually cost.
The surveyor appointed by the Managing Agent in 2014 to carry out a 15 yr Capital Expenditure Plan’ has admitted to me that his figures were “50% too high” and he wanted to revisit them.. I have a witness.
So his bottom is gonna be dragged into Court and he will have to explain himself.
Note. The ‘Major Works’ should cost no more than 32-35,000. Our venal agent has inflated the costs. They have got form. BOY have they got form.
I shall keep LKP site updated.
I will need a good scrub down when this grubby affair has been resolved and I hope the agent will feel like A Horse thats been ridden well and put away wet’!
STATUTORY REGULATION FOR MANAGING AGENTS.
The point that lessees remain quiet because of the potential impact on their property prices if they make a fuss/take legal action is spot-on. Landlord’s are in a win-win position. The financial value of their asset is never impacted. Manage the estate badly? Affects only the lessees. Hgh service charges? Ditto. High ground rents? Ditto. Crap managing agent? Ditto.
Whether you pay £200k or £2M for a flat’s leasehold, at the end of the day you are just renting a flat, and the landlord controls how you use your home.
We have 999 year leases and a peppercorn rent. But no say in the management of our estate, which has 250+ flats. it’s a mixed-use estate, which bars us from either enfranchisement or RTM.
Our quiet enjoyment was ruined by poor management, extortionate service charges and a landlord who likes to flex his muscles and remind us that it is HIS estate. Most recently the landlord has claimed the lease prevents us from allowing our visitors/guests etc from using our demised parking space. The same lease clause claimed to prohibit such use applies equally to our flats – ie, would also mean we are not allowed to have visitors come stay with us – or indeed anyone not a lessee, as the landlord refers to such people as ‘third parties’.
Yes of course it’s ridiculous, but it still requires the time and effort of lessees to assert their rights.
Even if you apply to the Tribunal and are succesful, the Tribunal does not have the power to enforce its own orders and the landlord is able to run rings around everyone and diminish the effect of the Order. And the legal costs rack up, and lessees run the risk of having to pay the landlords costs – but will never get their own back, even when sucessful.
Leasehold is so broken but because most lessees just put up with it unless it gets really REALLY bad, and someone has the time and energy to take on the landlord and negotiate the (under-resourced) Tribunal it goes largely unnoticed in the wider world. Everyone agrees leasehold houses are wrong – but seem to think there’s no option for flats. Goodness knows how the USA, Europe, the rest of the world have got round such an insurmountable problem without resorting to leasehold….
Hello Betty,
Leaseholders have a chance to effect real change. Fill in the consultation form and let’s force the government to regulate these “Gangsters”.
I completed the consultation form some time ago, but found it difficult to do so as most of the questions were not applicable to my experience, so much so that I wondered if there was any point carrying on. But there was a question right at the end that was a kind of ‘mopping up’ question.,
I imagine many flat leaseholders started the questionnaire and then thought ‘this is nothing to do with flat leasehold’ and gave up.
Question 21 ‘Future Issues’ is the one suspect you are referring to? LKP did make it clear that that is the Question relevant to flat leaseholders.
I suggest that for added pressure it is not a bad idea to write to the Rt Hon Sajid Javid MP and stress the absolute necessity for STATUTORY REGULATION FOR MANAGING AGENTS
.
REMOVAL OF FORFEITURE FROM THE STATUTE BOOK.
That is what I have done as well as complete the online consultation.
This is the first time in 10 yrs that Flat Leaseholders can effect real change. Let’s hope they take it.
I spent three years successfully suing my local authority landlord for disgracefully fraudulent behaviour. So don’t get me wrong, I am no great fan of leasehold – or rather, the systems that surround it.
Some of the other comments here give a clear account of what can go wrong with property management. This very much needs tighter regulation, I wholly agree, and we need much more straightforward access to justice in housing matters.
With the greatest respect, though, I have to say to Michael Epstein that your ideas about ‘feudal tenure’ seem eye-catching but incorrect. As do your assertions about leases being replaced elsewhere. They might have a different name, but the function of providing communal ownership and entitlement to services must always be similar, where such arrangements are allowed at all (as opposed to plain renting).
Pardon me for asking, but who are you, Michael Epstein? What is your involvement with property, and with Sebastian O’Kelly and Martin Boyd? This is not explained on the LKP website, although it publishes several articles from you.
Thank you for stimulation further debate on the subject. But I do think we need accuracy in our campaigning, or it will lose credibility.
Michael:
You write stimulating articles, thank you, but in my view the ‘feudal tenure’ idea is a common fallacy that tends to detract from our cause. Residential long leases are very much a modern invention as far as I am aware, and I have studied the thing in some depth.
I found it useful that Lease contracts are much like any other contract, since this gives access to (relatively) simple justice. Having the whole thing enshrined in legislation instead would therefore fill me with dread.
I read Law in my youth, and have had to maintain an interest, out of necessity. I successfully sued my local authority landlord from 2011-2014. I met Sebastian O’Kelly and Martin Boyd by attending one of their meetings during that time, and I follow the LKP news with keen interest.
Pardon me for asking, but what is your involvement in Leasehold? I cannot find this information on the LKP website, so do not quite see where you are coming from.
Sussex Lessee,
Glad you find my articles to be stimulating and equally pleased that my articles have aroused debate. For the record, I am Michael Epstein. Who is Sussex Lessee?
The article apparently was written by a Micheal Epstein, not Michael Epstein…
I also wondered about the author’s background/status. It’s a fair question to ask in respect of an article writer, whom one expects to be writing with some authority (unlike us Joe Soaps who merely write comments and don’t expect anyone to place any reliance on our ramblings!)(
Michael:
My name is not relevant at this stage, since I am not writing articles. I might, one day, but as Kim says, publicity is not always desired by one’s fellow lessees. By all means contact me privately through the LKP if you wish.
I am owner of a 999-year lease, granted by our local authority in the 1960s. The house is part of an unusual small development on what had been a problematic site, central to a quaint historic part of town.
The houses were designated ‘for resale’, so they were not social housing covered by Right-to-Buy legislation or protection.
They are all different one from another, facing different ways, on different levels, with garages, a driveway, flying freeholds, steps, a small square, alleyways and so forth. So shared ownership is not really a practical prospect – too many different interests; and garages (beneath three of the houses) have been sold on, to people who live elsewhere.
I am not a property or legal professional, but like many of us, have friends who are. With their help and support and through a great deal of research and careful thought, I managed to have a 2011 non-consensual sale of the freehold declared VOID, with a court order for long-overdue repairs to be carried out by the original lessor local authority, plus my costs. In all, this took nearly three years. I conducted my own case, not through choice, but to shorten the process.
From my experience, I tend to view leasehold problems largely as part of a wider failure in Consumer Protection. I realise that others have a broad variety of experiences, with so many different kinds of lease and housing; but I would recommend the contractual approach wherever possible, for various good reasons, most of them listed by experts elsewhere.
I could go on – I could write a book – but enough for now!
That’s me. How about you?
And I’m a leaseholder in a block of flats which is mixed-use, so cannot RTM or enfranchise.
Michael, are you a leaseholder, or a professional working in the sector? Or both?!