LEASE: we need to make a million pounds a year by 2020

The Leasehold Advisory Service conference 2016

The annual conference of the Leasehold Advisory Service saved until the last moment its most dramatic bombshell: by the year 2020 LEASE needs to be self-financing.

The Department of Communities and Local Government, on which LEASE is dependent, is facing 30 per cent cuts in budget.

This inevitably means a more energetically commercial approach to LEASE’s operations – the polar opposite of what LKP has been urging for years.

Can LEASE actually function under these circumstances?

Taxpayers fund LEASE in order to protect flat owners in the uniquely complex and poisonous leasehold system of residential tenure.

Somehow or other this role has become more elastic: to give advice on leasehold law to all comers. Another stretch: to advise commercial practitioners in the sector. Anther stretch: to sell services to the sector with seminars, webinars, specialist advice and conferences.

LKP deplores all this as the only reliable funding in the sector comes from the commercial operators.

Inevitably, this has a corrosive effect, as witnessed by the fact that until LKP mobilised public opinion and achieved political support for reform, the sector was very successfully hiding its nasties from public view.

And LEASE stayed silent.

The exploitative practices of leasehold don’t need repeating to LKP readers.

Can a government quango be meaningful if funded by commercial practitioners?

And why would it be any improvement on the private initiatives of organisations such as ALEP (Association of Leasehold Enfranchisement Practitioners)? This organisation already does provide advice on lease extensions and enfranchisement issues out of hours.

LEASE is in for a bumpy ride, it seems.

---

 

Low Paine threshold

Martin Paine, who with his wife Margaret Anne Kirmond, owns the freehold and manages Blythe Court near Birmingham – where ground rents can be £8,000 a year – was to have attended the LEASE annual conference.

Two representatives of Circle Residential Management were listed among the delegates, but there is some doubt whether they showed up at all. If they did, they did not linger.

---

 

Burns lights the blue touch-paper and retires ….

Just as well, perhaps, as one of the speakers this year was Louie Burns, MD of Leasehold Solutions, who bluntly exposed the scams in informal lease extensions.

Despite statutory provisions for legal lease extensions, many of the UK’s 4.1 million flat owners “are still being duped into informal deals by predatory freeholders, whose only goal is to extract as much money as possible”.

Louie Burns said: “At first glance informal lease extensions are designed to make it look like the leaseholder is getting a great deal, but nothing could be further from the truth. There are many dangers in accepting informal lease extensions, not least the actions taken by freeholders to hide the true cost of the agreement.

“Over the years I’ve seen every dirty trick under the sun from freeholders, whose only concern is to extract more money from flat owners.

“Freeholders often claim that an informal lease extension will save the leaseholder money, but by inserting clauses such as onerous ground rent schedules (which often double every decade), increased licence fees and service charges, and delaying tactics, not to mention the cost of the lease extension itself, leaseholders often end up paying £10,000s, if not £100,000s, more over the years than if they’d opted for the legal, statutory route.”

Leaseholders have a legal right to extend their lease by an additional 90 years and reduce the ground rent to zero if they have owned their flat for more than two years.

The law provides compensation to the freeholder when the lease is extended, using a calculation based on the ground rent, reversion fee and marriage value** (whereby the freeholder is entitled to half of the increase in the value of the property when a lease with less than 80 years remaining is extended).

Louie Burns continued: “With recent changes in legislation, such as the Disclosures Act 2014 and Consumer Rights Act 2015, the noose is tightening on the loop holes that enable informal lease arrangements, but many flat owners are still unaware of their rights and, when it comes to leasehold law, the devil is very much in the detail.

Thanks to the Disclosures Act 2014, agents and owners of property now have a very clear legal responsibility to report any facts that relate to their property, including informal lease arrangements; this is a significant shift from the traditional consumer law concept of ‘buyer beware’.

The Act puts the onus on the seller and their agents to disclose any information that is likely to have an impact on the value of a property or the buyer’s enjoyment of the property.

---

 

A surprise for Mr Gradgrind …

A panel session at the end of the conference threw some unexpected views into the pot.

In a rare display of unanimity, the panel, which included Sebastian O’Kelly, of LKP, Phillip Rainey QC, and Steve Michaux of housing association A2 Dominion, all agreed that the government’s policy to extend right to buy to housing association flats was deeply misconceived.

Sloane Square solicitor and chair Damian Greenish – with echoes of Prince Charles – then added that the Tory policy would drive out the social mix of Chelsea (precarious at best, one might think) with the social housing flogged off to the rich.

“Red” Steve Michaux went further still by saying that the housing crisis in London was so desperate that he favoured rent controls.

Nor can Mr Rainey be relied upon to be entirely uncritical of the sector that keeps his parsnips buttered.

In January last year he provided a brilliant manifesto for leasehold reform at the LKP Westminster round-table, which he emphasised should not be confused with his own personal views.

For those not paying attention, it would have come as a surprise that a few months later he promptly stuffed multi-block RTMs in the Court of Appeal. This has caused much lamentation among the LKP readership.

Mr Rainey frankly doubts whether there is any appetite to address leasehold’s iniquities with legislative reform.

But LKP made the point that just as affluent west London residents drove the leasehold changes of the 1990s, so a crisis in the new riverside and Docklands blocks in central London could spark something anew. More affluent people are living in newish flats than ever before, and LKP has contacts with a considerable number of them.

These issues at the end of the LEASE professional conference were heady stuff at an event where it is usually all affability and blandness along the lines of: “Mr Rachman, may I introduce Mr Gradgrind?”