For over a decade successive Housing Ministers and Secretaries of State have been assured by civil servants that leasehold legislation was balanced, and that self-regulation in the leasehold sector was working well.
That position abruptly ended earlier this year when Secretary of State Sajid Javid announced that the government now intended to crack down on unfair leasehold practices. This fundamental change of view was set out again on 18th October when he further announced a call for evidence on the regulation of managing agents.
Many have been kind enough to credit at this change of attitude to the long-standing work of LKP. However, history is being rewritten as we speak. Those who have been silent over the years have suddenly remembered they had somehow always led the call for change.
The call for evidence on the regulation of managing agents concludes on Wednesday 29th November, so please make sure you respond.
The online response can be made here:
Regulating Letting and Managing Agents – Call for Evidence Survey
Web survey powered by SurveyMonkey.com. Create your own online survey now with SurveyMonkey’s expert certified FREE templates.
The consultation can be found here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/653170/Property_agents_call_for_evidence.pdf
LKP has concerns that some of the sector’s darker siren voices have had an input to the consultation, but the general view from the sector seems very positive.
The History
LKP have been repeatedly warning officials and Minsters about the lack of proper regulation for many years. Regrettably, for most of this time this has fallen on deaf ears.
We have not been alone in demanding change. In 2012 the Greater London Authority looked at the leasehold sector and pointed to the need for regulation:
“This review has heard many stakeholders calling for tighter regulation – these include leaseholders and even the managing agent’s body ARMA”
The GLA noted that Housing Minister Grant Shapps had stated:
https://publications.parliament.uk/pa/cm201011/cmhansrd/cm110328/text/110328w0001.htm
“we have considered the issue of regulation in the leasehold management sector and believe that the current legislative framework can deliver that balance, if matched by an increasingly pro-active and positive approach by the professionals in the sector”
Grant Shapps has never been regarded as the most capable of Housing Ministers, but officials would have drafted his comments. At the time, the senior responsible official made clear to LKP her view was that the leasehold sector was balanced, there was no need for any further regulation and adequate protections were available to leaseholders. Our notes of meetings at the time show the officials view was that there was no requirement to make improvements to all those matters forming part of the sectors unfair practices.
In 2014, the Competition and Market Authority also looked at the sector. Again they seem to have been strongly persuaded by DCLG not to suggest formal regulation. The CMA report states:
“We were also mindful that in the short term recommendations for statutory regulation were unlikely to be accepted by Government and so would not be implemented.”
As has happened so often in the past the sector’s darker vested interests persuaded the CMA to ignore the evidence of failings in the sector and propose only a limited set of recommendations. Even some of these recommendations have yet to be implemented (e.g. s20 review) while others seem little more than tokenistic (e.g. a sheet of paper describing how to be a leaseholder). Others, such as the legislation to limit costs in the social sector, have almost totally failed.
We now know the officials have never had any evidence that self-regulation works. While they claimed at the time there was only “anecdotal” evidence of failure the truth is there had only ever been partial and anecdotal evidence that self-regulation might be a success.
The Leasehold and Commonhold Reform APPG has already clearly called for regulation of managing agents, and Mayor Khan makes clear this is a central pillar in his proposed housing strategy for London calling for the “statutory regulation of residential managing agents”.
By the summer of 2010 the government had made clear it was not going to regulate the sector. However, the sector itself did not agree with this view and was left with no option but to try to implement at least some form of self-regulation.
That self-regulation took two forms: regulation of managing agents and the regulation of accounting information. All we can say is that some agents have improved but others have not. For example, some follow the accounting standards agreed by the Institute of Chartered Accountants England and Wales in 2011 Tech 03/11. Others choose not to do so but do not face any penalty and the Tribunal has been almost supine in its lack of criticism of poor accounting practices.
The net result of accounting self-regulation is that we have standards which range from leaseholders waiting 5 years to get a vague and inaccurate summary of their expenditure unsigned by an accoutant, to others who now receive detailed records within 6 months of the year-end.
ARMA-Q has been the sector’s main attempt at self-regulation of managing agents and even that has now faced major problems. More than 20% of ARMA members have chosen to remove themselves from the self-regulation systems by ceasing to be ARMA members. Those who leave also face no particular penalty. They may even find it provides them with a commercial advantage. Since they pay no fees to ARMA and are not required to pay for an ARMA audit they will operate with marginally lower costs so can potentially out compete those who stay in the scheme.
By any form of measure the market is broken, as SoS Javid makes clear. The problem is it has been broken for years and someone should be asking the question: why have so many officials claimed to so many Ministers that it was not?
Conclusions
Leaseholders rightly criticise the trade bodies for not doing enough to control their members, but as ex Chancellor Geoffrey Howe said “It’s rather like sending our opening batsmen t
o the crease only for them to find that before the first ball is bowled, their bats have been broken by the team captain.”
The “Captains” in this case seems to be the civil servants, who have been telling Ministers for years that self-regulation works even though they have no evidence for such a claim. They also failed to give the self regulation system any powers to build a bat. Those who choose to be regulated face higher costs than those who sit outside the various regulatory systems. Those who need the most regulation choose to be the least regulated.
The claim, which has often been made in the past, is that statutory regulation adds to government costs. Again, there is no evidence this would be the case. In Australia the government makes a profit from licencing its agents.
We would ask, why has it taken so long for a Secretary of State to be told the truth that “Literally anyone can put on a suit, order some business cards, and call themselves a managing agent”.
Perhaps the Secretary of State will notice a pattern? Just as too many managing agents have been allowed to “cut corners in order to line their pockets”, the developers have been allowed to sell homes with onerous lease terms. To borrow some of Mr Javid’s words this might best be described as a “tosh up”
LKP had been raising both these issues for many years. When we last raised the matter of leasehold houses in a meeting with Minister Lewis in 2015 we were told that afterwards the civil servants strongly assured the Minister that there wasn’t a problem.
As well as focusing on the problems caused by civil servants, the spotlight should also fall on the government-funded body LEASE. They have been paid the equivalent of approximately £24 million over the years. Not only has LEASE stayed utterly silent for many years on the abuses in the sector, it actively promoted some of those abusive practices to landlords and agents over the last ten years.
In what appears to be a recent behind closed doors agreement we are told that as part of LEASE’s new role they will look to advise civil servants which issues of law that are in need of review. We are also told that LEASE has already claimed credit for the work behind the call for evidence on the regulation of managing agents.
LKP’s view is that LEASE became institutionally compromised many years ago. Despite now claiming to be “wholly on the side of the leaseholder” they were strangely ambivalent on the question of what should happen to ground rents in the recent govenment consultation. They were also inaccurate in their submission to the government consultation for improving the rights of Recognised Tenants Associations. Prior to this, they had claimed not to be able to comment on many issues. Despite this stance they lobbing the government in 2008 to not bring forward the regulations under s152-156 of the CLRA that would have helped to protect leaseholder funds.
“Whilst we acknowledge the substantial work carried out, the further consultation within the sector and the ingenuity of the solutions produced we have major reservations as to whether these proposals will significantly achieve the Government’s original intent.”
“LEASE is strongly opposed to adoption of different standards for the private and public sectors”
“We strongly recommend that S156 is not commenced”
“In light of this we put forward the view that s21 (3) (a) is not commenced.”
Having lawyers express a view on an accounting matter is never a great idea. Having a government-funded body supposedly there to support leaseholders which seems to have so actively lobby against them and yet constantly backed by officials seems wrong.
Related posts:
Leaseholders are apathetic, apart from the Dad’s Army figures running RTMs and RMCs, says the sector
Michelle Banks: silent over abuses, but ‘ARMA-Q will be good for leaseholders’
Fractures in ARMA’s efforts to regulate the leasehold property management sector
Justin Madders MP demands LEASE chair has ‘no business interests in the leasehold sector’
Retirement sector thought it would prompt leasehold reform, but leasehold houses and double ground rents were even worse …
I see Justin Madders is not expecting his bill to get its second reading.
Leasehold makes far too much easy profit – and unfettered profit is the English way. No political party wants to disturb the trough.
Do civil servants have to declare conflicts of interests if nobody else seems obliged to?
Paddy what evidence is there that Madders is not expecting a 2nd reading of his bill? What have I missed? Am I going mad?
Saw his tweet saying so.
Seems a private bill needs air time on the exact day notified for 2nd reading ? and he seemed to think the order of business that day would deny time.
I may be wrong but that was what Twitter said and Twitter never has fake news.
Seems a waste of time having ten minute rule bills if you get only one chance, but that’s democracy it seems. Opponents just have to talk you out of time…
Answer to the question at the head of this article, CORRUPTION.
Why are our leasehold laws still in existence, DITTO.
Not quite. Leasehold persists because as yet in England and Wales it is the only way of enforcing positive covenants. Don’t be fooled into thinking that Condominiums are without fault. Talk to Americans. The American equivalent of the Managing Agents, when acting for a Condo, called a Home Owners Association are just the same if not worse. When the real estate market crashed in the US, and there were mass foreclosures it fell on those who hadnt lost their home to lay out far higher service charges relating to those apartments which were in possession, whereas in the UK, notwithstanding that there some landlords who bring opprobrium on themselves there are others who are enormously helpful in lessees running their own management companies, and will even lend them money and expertise. LKP paints a black and white view of leasehold which is at odds with reality
Ted Fence, state your vested interest?
It is odd that some like to point us as somehow taking a monochrome view of the world especially when they want to promote the flawed arguments that have prevailed for decades.
There are ways to enforce covanants already although it would be better if the Law Commision proposals on this matter were to be introduced. The informed observer might wonder why the House Builder Federation somehow forgot about this piece of work in their submission to the government consultation when they argued that we need to keep their leasehold incomes
As for the straw argument, that somehow other systems also have some faults so why not continue with leasehold. It is a matter of proportion. It’s a bit like the arguments that were used about being allowed to smoke and not being made to wear seat belts.
As for landlords who are enormously helpful. Yes, it’s the sort of fib spread by those who work for many parts of the sector. Yes there will be one or two (and we’ve just posted a story of one landlords doing just that) but the truth is vast bulk are not helping “enormously” their performing their fiduciary duty and making a profit from the leaseholders pockets.
Our challenge to the sector is provide the evidence. So far, the claim that somehow selling leasehold is cheaper seem unsupported by the records. The idea that ground rents provide some form of benefit seems entirely specious. There is nobody even suggesting that service charges are not being artificially inflated on too many sites.
Rest assured LKP has never been about seeing the world in black and white its about making people more informed and making those who have hidden in darkened in rooms for too long explain themselves in the bright light of a public forum. .
How can leasehold be cheaper than freehold?
If you have a 125 year lease on a property you have to buy it again in 125 years. A freehold is not just for Christmas it is for life! Once you have bought it , it’s yours END OF!
Tchenguiz Brothers Productions proudly presents “Ted and Stephens Fantastic Adventures in Leasehold Land”. Directed by Roger Southam, and an all star cast including William Waldorf Astor, Sajid Javid, and a special guest appearance from Nicholas Van Hoogstraten.
I wonder if Van Hoogstraten is going to be ejected from Zimbabwe and all his properties and money sequestrated.
That would be good wouldn’t it ?
“Sequestrated”? I would far rather he joined the group of managing agents at Wembley Stadium and face being filleted and disembowelled.
Saw an interview with Nicholas on BBC’s “Hard Talk” a few years ago, he has undeniable charm and a self deprecating sense of humour. Qualities lacking in the freehold gangsters – there is nothing that redeems (no charm, nor humour, no qualifications) those involved in leasehold, and that goes for all involved from ministers, civil servants, freeholders, right through to the professionals.. The entire scene stinks to hire heaven, no amount of disingenuity disguises that fact.
I remember about 18 years ago, I contacted the Housing Department about our leasehold problem and the civil servant ( forget his name ) said they are not allowed to get involved in any personal problems and I should contact a solicitor. It means they do not collect feedback from the public and are never able to put forward any improvement.
The Housing Minister take advice from the senior civil servant who know nothing. and don’t take feedback from the public. This is why they come up with their meaningless advice that we have the best balance between freeholder and leaseholders who are actually getting ripped off. .
Admin, You say Grant Shapps “Has never been regarded as the most capable of Housing Minister’s”
To be fair, that is not a universal view of Grant Shapps abilities.
One large property management company (I can’t recall the name) believed to based in Luton, were so impressed with him they even made a donation to his constituency office!
I tend to remember him as the Housing Minister most capable in turning a blind eye to leasehold problems and used his Ministerial post to mis-represent the leasehold system as a balanced and best situation for leaseholders.
He did not show much respect for leaseholders who were kept down whilst he seemed to stand behind the freeholders .One of the most hated managing agents E&M was most active in demanding subletting global consent fees in 2010 and many cases were brought before the LVT but Grant Shapps as Housing Minister never showed any interest in what was happening to 4 million leaseholders..
Day one after the 2010 General Election, Grant Shapps was made Housing.Minisyer
Day 2 he made the following announcement.
It went very much like this
“That the leasehold reforms the previous Labour Government had in the pipelines were to be scrapped.
There would be no more red tape and Landlords and Management Conpanies would get no regulations.
The current system works perfectly well.”
I remember it well as at the time I had a lot of correspondence with him and the DCLG who were just as unhelpful, and I believe probably still are.
I shall be writing to Sajid Javid MP informing him of a certain agents claim against me for “ Defamation “ and “ Harassment “ for simply stating the facts.
I shall also tell him that i believe there to be an element of cynicism and hypocrisy in the Agents decision to sue me which I find deeply distasteful.
I am strong enough to fight these battles if I have to although I am. “ Lover not a fighter”. Many vulnerable aged leaseholders would possibly have signed a non binding gagging letter from the agents solicitor. JOB DONE!!
This persecution of leaseholders by rogue agents must be brought to an end and swiftly!!
Not for the first time, but I promise the last (I will mark it on my calendar). When are you going to court over defamation/harassment?
David the “ Part Hearing is due to be heard on 29 th November.
I have invited the Agent through their solicitor to widthdraw this vexatious claim and I will not pursue for costs to date- if this is not done then I am instructing lawyers and the Agent will have to pay their costs at the end of the day.
I have plenty of evidence to dispute the untrue claim of Defamation the fact that requesting information is harassment.
Better things to do with my time but I do love visiting the R. C. J as I see lots of chums there. I have been hand delivering all bundles ya see!
PS. I shall be requesting that the judge strikes the case out.
Okay 29th November it is., unless of course your adversary sensibly withdraws. From what you have written I gather your “hounding” them for accounts, bills, whatever, constitutes harassment in their minds. As for defamation, your defence is one cannot defame by accurately characterising someone..
Case dismissed, costs awarded to the delightful lady dragged to my court to face wholly unwarranted accusations. .
Look forward to hearing more on 30th November – best of luck.
Dear David,
That just about sums it up.
However there is another bizarre thread to this tale whereby the Claimaint will be asked to sign a sworn affidavit relating to “ Identity “.
It will be the only way to clear up a certain dichotomy.
It will be very interesting to see if the claimaint is prepared to do so and then be cross examined. We shall see….
To clarify- “ And then be cross examined by a QC ? Not me) even though I have the smarts!!!
Here is a reminder of what Baroness Hanman was saying not so long ago : not willing to commence legislation already passed in Parliament under the previous Government.
https://www.leaseholdknowledge.com/we-wont-protect-leaseholders-funds-because-that-was-the-last-governments-idea
She should be locked up in a Retirement Home and be given the leasehold treatment by Firstport.
I have just read the link and my gob is truly smacked!!
Is this woman still alive and kicking in the House of Lords? If yes then she needs to explain herself.
LKP can’t you offer her an interview ( without coffee) so we can hear what her views are now , on Leasehold / Thieving Managing Agents and the like.