Freehold owners face an existential legal onslaught as lawyers today launch a class action over hidden insurance commissions which leaseholders have unwittingly been paying for years.
The initiative has been launched by City solicitor Liam Spender, also an LKP trustee, who has been challenging insurance costs and other service charges in multiple actions at his site, Saint David’s Square in London’s Docklands.
He has been backed by his law firm Velitor, which has secured multimillion pound funding for the no win no fee claims from Balance Legal Capital LLP.
Leaseholders can read more and sign up at this website:
https://www.leaseholderaction.com
BBC TV’s report this morning can be seen here:
Millions of leaseholders have been paying insurance premiums for their buildings that have included hidden “commissions”, divvied up between landlords and insurance brokers. Because leaseholders are not a party to these insurance contracts that they have to pay for, they have no way of knowing the scale of the commissions involved, although landlords do have a feebly enforced obligation to tell them if asked.
After the Grenfell tragedy in 2017 and ongoing building safety crisis which has blighted so many lives, insurance costs have soared – and so have the hidden commissions.
Last February the Financial Conduct Authority (FCA) reported that between 2019 and 2022 £1.6 billion was paid out by leasehold homeowners in insurance premiums.
The FCA estimated the average “hidden” commission charged was 30% of the premium, and there was evidence some leaseholders were facing an uplift of up to 60%.
Mr Spender told BBC Radio 4’s Today programme this morning that on these figures the amounts of commission paid could exceed £480 million.
Velitor says charging secret commissions on insurance premiums is unlawful, as leaseholders were never told and therefore have not given “informed consent” to these additional charges. Velitor says that, as a result, these commissions remain the property of leaseholders.
Mr Spender successfully challenged a £100,000 insurance commission at Saint David’s Square, and Velitor estimates that the same issues may affect up to 900,000 flats owned by the largest freeholders.
Mr Spender said:
“I was able to expose and recoup the secret commissions through which freeholders took money from unknowing leaseholders.
“Through this group action, Velitor is now looking to help others recover secret commissions they may have paid.
“The plight of leaseholders and their unconscionable and unlawful treatment by some freeholders is nothing short of a national scandal. This legal action will be a significant step in addressing it.“
In November last year MPs were aghast to hear his account of the vulnerabilities faced by leaseholders in litigation against rip-off charges:
The class action claim will seek to reclaim hidden commissions, any resultant increases in Insurance Premium Tax (IPT) and interest going back at least six years. Mr Spender will seek to extend this period.
The claim is open to any leaseholder who owns, or has since 1997 owned, a leasehold flat in England and Wales.
To take part in the claim leaseholders must sign up here:
Leaseholder Action Home
Leaseholder Action is challenging insurance brokers and landlords for secret commissions, that have left leasehold flat owners out of pocket collectively to the tune of millions of pounds.
There is no charge for joining the claim and there is no risk to leaseholders. Leaseholders could receive between £1,500 and £3,500 for each flat, including IPT on the commission and compound interest. Velitor and their funders will receive a proportion of any damages awarded by the courts.
Giles Grover, a former property manager and leaseholder who is part of the influential End Our Cladding Scandal group, investigated the insurance commission at his Manchester block, which has the same type of cladding as Grenfell and, as a result, the building’s insurance premiums rose 500%.
“It is disgraceful that, while residents were dealing with unsafe cladding in the aftermath of the Grenfell tragedy, insurance brokers and freeholders were splitting hidden commissions on our building insurance.
“In just three years our insurance costs rose more than five times to over £440,000 a year. Charging high rates of commission on such huge sums for doing next to no work will have made them a packet.
“I would say they are nothing but freeloaders, profiting from the misfortune of others.”
Secret commissions will become unlawful as a result of the Leasehold and Freehold Reform Act 2024.
However, the Act is not yet in force and is not retrospective.
This proposed group action is currently the only way for leaseholders who were misled about secret commissions for years, before the change in the law, to recover their money.
By opting into the Velitor Law action claimants will agree to pay 40% of their damages to Velitor which will be shared with the funder.
Velitor and their barristers will be working at discounted hourly rates.
In addition, successful claimants will pay the funder £100 of their damages for expenses, rising by £10 for each year that the action is active. The claim is backed by “after the event” insurance to cover any costs risks. If the claim is not successful, then claimants will pay nothing.
The FCA concluded in their April 2023 report ‘Multi-occupancy buildings insurance – broker remuneration’:
‘One of our key findings in the broker market was evidence of some high commission rates and poor practices which were not consistent with driving fair value to the customer. We noted that our rules require that the prices paid represent fair value and that we were concerned that the levels of commission and practices of commission sharing did not always represent fair value for those bearing the costs of this insurance.’
Related posts:
Freeholders’ ‘cowboy’ insurance commissions at leaseholders’ expense attacked in The Times
Leaseholders pay up to 60% more for buildings insurance because of secret commissions, reports The Times
Financial Conduct Authority under pressure to force open secretive insurance commissions, so leaseholders can see what they are paying for
Insurance insiders call for an end to secretive leasehold insurance commissions following Canary Riverside ruling
FirstPort / E&J Estates face insurance challenge over ramping up rebuild costs
Government to go to war on ‘feudal’ leasehold … But no commitment to zero ground rents
We are leaseholders with one of the big Social Housing Landlord of the G15 Group.
We are told by a company director that they take no commission from the Insurance premiums..
We have no way of checking this.
Our premium has rocketed this year, apparently because many major insurance companies are refusing to take on social housing. So our landlord has had to move from its normal insurer Zurich who have provided cover for the whole company for many years to a smaller but much more expensive one.
Our landlord has provided us with the reasons for the increase, it appears we just have to accept the situation.
Michael,
We have registered for this no win no fee class action and have received an automated reply which says, in part, “We will notify you of your eligibility to join the claim and send further details once our checks are complete”
Do you remember the old saying “nothing ventured nothing gained”
Why do you have to accept the situation Michael?
Have you given thought to actually making your own enquiries and finding out the facts for your self?
Stephen
I have no way of checking if our landlord MTVH receives any commission.
In 2022 I queried this with them and received confirmation from a Director that they received no commission from the Insurance Company.
The current cost has rocketed and the new insurer is AXA and the broker is Arthur J Gallagher. It is likely that the broker takes commission, is that legal?
I have again written the a company director and asked again for confirmation that no commission is received from the insurance company, the broker or anyone else.
What more can I do about this, we are all very old, average age 85/90 years in a retirement home with extra care. We rely heavily on the landlord for services and do not want to cause problems if it is unjustified.
Michael,
If you sign up for that no win no fee class action the Proffesionals will notify you of your eligibility to join the claim, and send further details once their checks are made.
The insurance for our block is provided by A J Galligher.
Our managing agents have said ‘ We do receive a commission when placing the policy. We have always been completely transparent in declaring this.,
But in over 25 years I have never seen anything in the Service Charge accounts.
Can this class action include 50% shared owners of a housing association flat with a lease dating back to 2001? Grateful to know please.
The claim is open to any leaseholder who owns, or has since 1997 owned, a leasehold flat in England and Wales.
I would like to know why not before 1997?
Is LKP aware of the Canary Riverside insurance decision? The Tribunal ruled that leaseholders were overcharged more than £1M in secret insurance commissions.
They charge leaseholders 40% plus VAT on any commission clawed back so 48% plus they will be getting their own fees back if they win in court as well and then get a further £100 – it does seem to be rather one sided.
@Stephen, this is not correct. Any costs recovered will be set-off against the 40% and not paid in addition to the 40%.
Solicitors and counsel are working at discount, which will only be recovered if the claim succeeds.
Leaseholders participating in the claim will have all the work done for them by solicitors, counsel and experts to which they would otherwise not have access.
I am sure most leaseholders will see the value in that offering.
Dear Mr Spender,
I for one can see the obvious benefits of that welcome and generous offering, and have taken it up.
I would like to thank the Solicitors, Counsel and other experts who have volunteered to work at discount rates. That kind of comittement to duty is rare in my estimation.
So, our Buildings insurance is due in September… do we write (again) to the FH & tell them we have applied to be included in this Class action and see what they do? We have refused to pay in the past & they took us to court. I suppose this legal case will take time to build and present to a court & then will it become an “open” claim similar status to PPI ongoing giving people a chance to claim?
Someone mention AXA now being their insurance company..look forward to huge increase every year. They have been our insurers for years and the costs are astronomical and they add bogus charges like insurance hotline..
as my service charge says the freeholder can claim any costs of legal action through service charges wont this mean we could potentially see a huge increase in service charges as any freeholder hit by this lawsuit adds their legal costs to service charges?
whats the betting all those lost monies from commission will just be clawed back in some other bogus charges . I can see half a dozen h&s reports being added to my service charges going forward.
Thank you so much for doing this. We are with rogue agent RMG, who have so far failed to respond to my request for disclosure about any commissions.
Thomas,
Rogue agents (and their Masters) appear to be “rife” in this (currently) largely unregulated industry sector.
I am a Leaseholder and have signed up to this welcome initiative.
I fully understand why some Freeholders may be deeply concerned and even fearful of this class action, and may try to cast doubt or uncertainty over this excellent idea in an effort to minimise Leaseholder participation. I doubt that old hat worn out tactic will work.
Good!
Please put the end to this unfair feudal system called the leasehold UK.
Please stop any landlord -freeholder to resell works and service to leaseholders. It starts from insurance and ends cleaning, ground maintenance, electricity, ets. We live in 21st century free democratic world and yet UK holds on to slavery times systems. It is not right, it is not OK. Please free leaseholders!
With regard to this Class Action Claim could Liam please provide some more information.
1 Does one leaseholder signing up automatically get all other leaseholders living in the same complex involved. Or companywide if like in our case MTVH use AXA for all.
2 Are there any conditions in the small print that could end up with the leaseholders paying up if the claim failed..
3 Is the fee of 40% of monies recovered a fair one.
4 Who is in control of the Leaseholders Action Group.
5 Does Commission recovery include commission paid by the Insurer to the Broker and commission paid by the Broker to the Landlord.
6 We are a mixture of MTVH leaseholders and MTVH tenants all living in the same complex and covered by the same buildings insurance policy. The tenants also pay a service charge which will include a sum for the buildings insurance. Will they also benefit from this action.
Hi Michael,
On (1): Generally, each leaseholder needs to sign up individually. An exception to that is a director of a Resident Management Company or Right To Manage company that is billed for insurance by a landlord and passing on the cost via service charges can sign up on behalf of all leaseholders in any buildings it manages.
On (2): People will not be asked to pay anything if the claim does not succeed. Full details will be in the retainer letters to be sent in the near future.
On (3): The fee is payable only if the claim succeeds. The maximum fee is 40% of damages (plus VAT) plus £100 towards other expenses, rising by £10 each year.
The actual fee paid by any participating leaseholder will be lower. The fee will be zero if the claim does not succeed. The fee payable in the event the claim succeeds is likely to be lower than the maximum because any costs recovered from the landlords and insurance brokers will reduce the fee.
We believe both elements of the fee are fair, in line with market practice and commensurate with the risk taken by the funder, solicitors and counsel.
Fees range between 30% and 50% for this kind of claim (see, for example: https://www.moneysavingexpert.com/travel/diesel-emissions-group-legal-claims/). Our fee of 40% (plus VAT and plus £100 rising by £10 each year) is within the usual range of fees for this type of case.
Litigation of this nature is expensive. The fee includes the cost of After The Event insurance to cover any costs payable if the claim does not succeed. Such insurance is a common part of this type of claim.
Participating leaseholders will not have to pay anything up front. Nor will they pay anything if the claim does not succeed. The fee is only payable if the claim succeeds. In exchange for a share of their damages, leaseholders gain access to justice in the High Court using a legal team many would otherwise be unable to secure.
The funder is therefore taking all of the risk in paying for the claim, potentially over several years, and only being paid if the claim succeeds. If the claim does not succeed, the funder will not recover its outlay.
Solicitors and counsel are working at a discount. They take the risk that the discount will only be recovered if the claim succeeds. Velitor has also spent nearly 2 years using its own resources to develop the claim and secure funding. It will only recover that outlay if the claim succeeds.
On (4): Leaseholder Action is a marketing identity for the claim. The website is managed by CasePilots on behalf of Velitor. Velitor will be bringing the claim on behalf of eligible claimants.
On (5): The claim will seek to recover the full amount of commission charged by both landlords and their brokers, together with the Insurance Premium Tax on the commission and compound interest.
On (6): The leaseholders are potentially eligible. We would need more information about the tenants.
Please send any further information or questions to info@leaseholderaction.com
Liam
Thanks for taking the time to provide these answers, I shall be signing up.
Please be assured that I was never doubting your intention, but just asking for more information to give to our very elderly residents.
Having experienced what happened to our football club Notts County a few years ago it has made me more inquisitive.
We were taken over by a fraudster named Russell King who convinced the club he was a personal friend of the Bahraini Royal Family and owned the mining rights for uranium in North Korea worth £billions. Having signed Sven Eriksson and Jasper Schmeichel and offering a job to David Beckham and Roberto Mancini we found that he had put no money into the club and they could not even pay the milk bill. Let’s hope he never gets involved with leasehold.
I notice that my comments and Liams answers are being discussed on the About Firstport campaigning website, when there is an attempt to ridicule this Class Action.
Please be assured that I have no part in this having already been banned from commentating on that website because I challenged their abusive behaviour.
In years past the About Firstport website provided valuable information to many Peverel leaseholders who have now disappeared. Leaving just The Editor/Michael (one and the same), his abusive assistant and an ex nurse who does her best to keep his pecker up.
Michael,
Why don’t you simply register your interest with this class action and wait for the response, which might include answers to your enquirys ?
I welcome this initiative but somehow have the impression that you are casting doubt and confusion over the merits of this claim?
Stephen
I am a leaseholder in a mixed complex 36 tenants and 26 leaseholder, the landlord and managers are Metropolitan Thames Valley Housing, who told me two years ago that they received no commissions from the then insurance company Zurich Municipal. They changed to AXA this year with a broker called Gallaghers who I believe are a large American company.
The residents here are all very old and many are very sick and needing carers.
Most will have no understanding of leasehold problems, no knowledge of insurance commissions and never heard of Commonhold. They rely 100% on MTVH for their existence.
My problem is, should I be involving them in this Claim without asking some pertinent questions, unlike yourself where you stated on an alternative website that you signed up without hesitation. Maybe your situation is different.
The action I have taken so far is as follows.
1 I have written to MTVH and asked them to confirm again that that receive no money from AXA, Gallaghers or anyone else.
2 I have put some questions on this LKP website.
3 I have put a question on the Leasehold Action website..
If I receive no answers within the next few days I will most likely go ahead and sign up.
If the action is likely to take 5 years most of us here will not be around to see the result.
The freeholders lobby will try to make negative connotations of this lawsuit. Fight back, as you are and spread the news of this claim procedure far and wide. However, we must not forget the elderly in the under the contriol of Consensus Group and their shaninigans at these McCarthy Stone blocks. How can we make aware these services to those and under control of the nefarious individuals who control these management companies?
Just wondering about those £100 additional expenses, if that could be clarified, please:
Is it £100 year 1, £110 year 2, £120 year 3 etc.?
Or is it £100 year 1, £10 year 2, £10 year 3 etc,?
Thank you
It is £100 for year 1, £10 for year 2, £10 for year 3 and so on. If the case lasts 5 years then the charge will be £140.
I have a few questions about the Class Action:
1) Is the class action directed only at freeholders and insurance brokers or also at property managing agents who received insurance commissions?
2) Will the class action be also against the freeholders and/or property managing agents who have involved their own offshore re-insurance captives to extract money from leaseholders?
3) What if the majority of the RMC/RTM directors refuse to join the class action: is it enough for one director to join the class action to trigger all leaseholders into the class action? If the RMC/RTM board of directors refuses to join the action, can individual leaseholders join the action?
4) Is the situation any different to 3) above in case of Share of Freehold instead of RMC/RTM?
5) In case of a flat owned jointly, e.g. by husband and wife, is it enough if one joins also on behalf the spouse?
Hi Massimo,
Please direct questions to info(at)leaseholderaction.com
On (1) generally the claim is against the top 20 ground rent investors and their brokers. We may consider claims against other landlords. Generally we will only bring claims against managing agents where they are embedded in a three party lease.
On (2) yes, we are looking at recovering commission concealed using captive insurers.
On (3) Generally, no. One director can sign the engagement letter but the board must agree. We will ask that the director signing the engagement letter confirms that the board agrees.
Where the RMC is passing on costs of insurance it does not control then the RMC must join the claim. We are unable to accept individual leaseholders’ claims where the RMC does not sign up, unless the RMC is a managing agent party to the lease, or the RMC is still controlled by a developer.
On (4), Generally we will be unable to help share of freehold companies because they are likely to control their own insurance. Where they do not control the insurance we can help.
We may also be able to help recover commission received by a third party landlord before the freehold was acquired.
On (5) Yes, one leaseholder is sufficient.
Dear Liam,
thank you very much for your helpful answers, particularly on a Sunday, and thank you for starting this class action and all your hard work over the years to help leaseholders.
With my very best wishes.
Kind regards
Massimo
I would also like to thank Liam for all the work he has done to help Leaseholders.
I contacted my landlord Metropolitan Thames Valley Housing about 10 days ago, asking them to confirm if they or anyone else take commissions on our Insurance Policies.
Having heard nothing back from them I have decided to join the Class Action as have some of the other Leaseholders in our retirement complex.
I have decided to ignore the criticism and abuse being directed at the Class Action on another “campaigning” website where it’s two main protagonists appear to have become completely unhinged.