Sir Peter Bottomley and Jim Fitzpatrick MPs – and trustees of the Leasehold Knowledge Partnership Sebastian O’Kelly and Martin Boyd – met the Financial Ombudsman this morning at Westminster.
We urged the Financial Ombudsman, which reports revenues of £264 million in 2016, to investigate insurance issues in leasehold and protect leaseholders’ funds, supposedly held in trust by property managers (usually employed by freeholders).
LKP raised the long standing issue that because leaseholders are not a contracted party in the insurance of apartment blocks – although they pay for it all – they cannot dispute issues concerning the policy.
Sixty to 70 per cent of freeholds are owned by large entities with extensive portfolios, which means they have considerable leverage in insurance matters.
Claims would be deeply unwelcome if they resulted in higher insurance premiums to be paid across the portfolio.
Martin Boyd spelled out the insurance scam possibilities here
An example of the difficulties here was revealed at Regent Court, a retirement site in Plymouth, where the roof was damaged beyond repair in a (mild) storm.
The insurers said it had pre-existing flaws and would not pay out; the freeholder Israel Moskovitz accepted this and the pensioners had to pay out £140,000 for a new roof.
In common with other retirement sites in Devon owned by the north London-based freehold owner, Regent Court opted for right to manage. They now control their own affairs.
The most egregious statement on the monetising possibilities of insurance in residential leasehold was made at a conference hosted by the Leasehold Advisory Service in 2010.
Here Gary Murphy, of Allsop’s, talked up the possibilities of freehold investment noting the insurance commissions: the best part of which being that leaseholders have to pay up but have no right to know what the commissions amount to.
The details can be read here, including Mr Murphy’s helpful slides talking up these income streams:
LKP welcomes privatisation of the Leasehold Advisory Service, but why wait until 2020?
A senior MP attending the meeting said:
“The Leasehold Advisory Service is a rubbish organisation that has spent its time training up people on how they can exploit leaseholders. ‘Yes, Minister” does not come close to it.’ ”
The other issue raised by LKP was to urge the Financial Ombudsman and Financial Conduct Authority to have some involvement in the oversight of leaseholder funds. T
LKP indicated to the Financial Ombudsman how large the leasehold sector is, and that it has been mistakenly underestimated by government for years.
Related posts:
‘Don’t make the pensioners of Regent Court take you to court AGAIN, Mr Moskovitz,’ urges Bottomley
Survey on leasehold flood insurance
Been ripped off over leasehold insurance? Take your complaint to the secret ombudsman, says Peverel
Time to ‘get political about leasehold’, says the Financial Times
Leasehold is a feudal, wasting asset with opportunities for exploitation, says the Financial Times in a devastating article
Justin Madders launches Bill to end the enfranchisement and lease extension racket
Oh sweet baby Jesus. A THOUSAND HALLELUJAHS ( and I am a atheist)
Best of luck with that, I have had dealings with the Financial Ombudsman. I will borrow the quote about LEASE from the senior MP, ” (The Financial Ombudsman) Is a rubbish (and corrupt) organisation”.
I too have had dealings with the Ombudsman to due with a well known Managing Agent.
Absolutely agree with the above comments and the quote.
After all they are paying for the membership and therefor work for them.
It was a waste of time not to mention all the stress for nothing.
I think the demand of commission from insurance companies by freeholders and their agents for placing buildings insurance policy is really an offence under the Fraud Act 2006 .Section 4 .
Fraud by abuse of position
(1)A person is in breach of this section if he—
(a)occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person,
(b)dishonestly abuses that position, and
(c)intends, by means of the abuse of that position—
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.
(2)A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.
There is also Fraud Act 2006 Section ( Failing to disclose information ) which may be relevant :
Fraud by failing to disclose information
A person is in breach of this section if he—
(a)dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and
(b)intends, by failing to disclose the information—
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.
A private property owner can demand a reduction in premium, but he cannot demand commission for insuring his own property because he is not trading as an insurance broker and entitle to receive commission under the policy.
When a freeholder company demands commission for placing buildings insurance paid by leaseholders’ service charges, both the freeholder and insurance company are acting in collusion to commit fraud against the leaseholders. Every freeholder company that insures the building and charges leaseholders a premium ( and has taken undisclosed commission without the prior agreement of the leaseholders ) .must be made to repay the full charge.
The landlord is entitled to recover only costs incurred . In most cases of building insurance the insurance company is charges an overall fee for a portfolio of properties and it is left to the broker to allocate a charge to each leasehold property.
The arrangement of building insurance is commonly between the freeholder and the insurance company.
The broker will cobble together a pseudo looking certificate which identifies a cost of building insurance and issue a demand for payment based on that document. However there is no evidence which identifies the actual cost incurred by the freeholder!
At a tribunal in Southend in 2008 the broker ( GHBC ) admitted that thy payed a freeholder ( Westleigh Properties / Marcus & Baum ) in return for appointing them as brokers.
The LVT panel held that the landlord was not legally entitled to keep that money which should be returned to the lessees.( Jollybird v ???)
Ghbc joined with Towergate which then ,I believe ceased trading, But many of the staff joined another broker which took over the insurance arrangements for Westleigh properies/ Marcus & Baum!
P Beech